What is Asset Backed?

Following on from an introduction to asset-backed lending *, we felt it necessary to give a bit more insight into exactly what asset-backed lending refers to, how these investments work and the associated process with reference to The Barbican Group. There is also some insight into why this form of lending could be an alternative to a regular cash ISA.


Asset-backed lending refers to a form of lending that involves assets being used to provide security over an investment. This can be in the form of land, properties or inventory. The added security with asset-backed lending involves the potential for an asset to be taken by the borrower, with the help of a security trustee, as a form of repayment. With assets used as collateral, this is a major reason as to why firms may decide to invest through asset-backed lending. The potential terms of asset-based lending depend on the type and value of assets offered as security.

*The fact that the bond is asset-backed would not guarantee that all capital would be repaid. This also means that there is a liquidity risk and there is likely to be a delay in repaying your capital should you request it.

**Investment in bonds through an ISA is likely to be harder to transfer/sell than if you were using an investment ISA. You should review this before making any decision and read the risk section fully before proceeding any further.

Asset-backed lending, as aforementioned works with the help of a security trustee. This can be any entity that ensures that all security interests are held for both parties. The security trustee guides the whole process, ensuring that all interests are held.

With reference to Barbican the process starts with a customer being given a dedicated account manager, who guides the customer through the application phase and beyond. An investment is delivered through an ISA manager into Barbican Bond Co 1 Limited, which is the first series of mini-bond issued by a subsidiary of The Barbican Group. Upon three years the bond matures and the initial investment, as well as a upto 21% return, is delivered back to the customer’s account.

There are many supposed benefits of investing through ISAs in asset-backed bonds. Just some of the benefits can be seen below:

  • An asset-backed investment can give an investor some peace of mind that their investment is backed by something tangible such as land, property and inventory, therefore, helping to mitigate the associated risk.
  • If for any reason the loan can’t be repaid, the borrower, with the help of the security trustee, could take the asset as a form of repayment
  • There is a potential to receive a high rate of return, with some asset-backed bonds reaching upto 7% return pa.
  • In relation to the Barbican bond, asset-backed means Barbican Bond Co 1 is created with investor funds and the funds raised are used by Barbican Bond Co 1 Ltd to onward lend, those funds are then ultimately secured against properties and other revenue streams.
  • Funds will be asset-backed from day one, with the asset value predicted to increase throughout the investment.
  • With the Barbican you’re provided with a dedicated account manager to help you along the way

Capital at Risk: Please be aware when investing that your capital is at risk and the value of your investment can go down as well as up. You may get back less than you invested.

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