Investors who want cash without selling their stocks usually turn to a margin loan from their broker. On smaller balances, that loan can cost more than 12% a year. Spout, a lending protocol built on Solana, wants to take the interest out of the equation entirely, and it now has fresh funding to pursue the idea.
The company has raised a $2 million strategic round from Draper Dragon, Anchorage Digital, Flow Traders, Taisu Ventures, Vessel Capital, Solayer, 2Square Capital and Bering Waters Ventures, with strategic backing from Solana Labs.
What Borrowing Against Stocks Costs Today
Spout’s case starts with the price of a conventional margin loan. At Charles Schwab and Fidelity, anyone with less than $25,000 on margin currently pays 12.075% a year, according to the brokers’ published rate tables (Schwab, Fidelity). Spout puts the equivalent rate at 12.25% at Vanguard and 12.70% at E*TRADE. Because rates fall as balances rise, the smallest borrowers end up paying the most.
The gap over the cost of money is wide. Schwab’s base margin rate sits at 10.25%, while the effective federal funds rate was 3.88% in early October, according to Federal Reserve data.
Spout also points to what happens to customers’ shares in the meantime. Brokers can earn revenue by lending securities out and pass on only part of it. Robinhood, for example, gives customers who opt into lending “up to 15% of the gross revenue generated by Robinhood when it lends out securities,” while Interactive Brokers pays 50%, according to Spout’s figures. The result, Spout argues, is that investors pay to borrow against their own portfolios while those portfolios earn money for someone else.
Wealthier investors have long had access to something better. For decades, private banks have let clients borrow against their portfolios, usually at 4% to 6%, Spout says. Access, however, depends on relationship minimums that most individual investors never reach.
How Spout Takes the Interest Out
On the borrower’s side, the model is simple. Borrowers deposit tokenized shares of US companies and draw USDC against them at a fixed 50% loan-to-value (LTV) ratio. No interest accrues, however long the loan stays open.
Lenders who supply the USDC are still paid, just not by the borrower. Each week, the protocol sells covered call options on the deposited shares, with strike prices set far out of the money. A covered call is an options contract that gives the buyer the right to purchase shares at a fixed strike price in exchange for an upfront premium; “far out of the money” means the strike is set well above where the stock currently trades. Lenders earn from the premium those options bring in, not from interest added to the loan.
Spout describes this as an inversion of the usual arrangement. The income a stock portfolio can generate goes back to its owner in the form of an interest-free loan, rather than to whichever institution is holding the shares.
Built for Long-Term Holders
Spout argues that removing interest creates a different product, not just a cheaper version of an existing one. Conventional margin loans charge interest by the day. That suits short-term traders who are in and out of a position within days. Over several years, though, the interest bill keeps growing and can outpace the portfolio’s own gains. In practice, that has made leverage on equities a short-term tool.
With no interest to pay, Spout is aiming at investors who plan to hold for years but occasionally need liquidity, for example to pay tuition, a tax bill or rent, without having to sell shares that have gone up in value.
A Long List of Backers
Beyond the funds, the round drew angel investors from both crypto and traditional finance. They include Solana Labs co-founders Anatoly Yakovenko and Raj Gokal; Giancarlo, who also advises the company; Injective co-founder and CEO Eric Chen; Superstate co-founder Dean Swennumson; Perena founder Anna Yuan, who previously led stablecoin work at the Solana Foundation; and Paul Taylor, formerly of BlackRock Private Equity.
Spout’s advisory bench also includes Saiprasad Raut, Worldpay’s (FIS) former chief technology advisor for crypto, and Neil Amhis, an ex-Natixis and BNP Paribas quant who now heads research at Zann Capital and advises Spout on quantitative strategy.
Spout itself is not yet on mainnet. A beta version is running on Solana’s devnet test network at beta.spout.finance, and the company says a private beta will open soon.
“We are democratising prime brokerage, and there is a great deal still to build,” the company said.
