Fine Art as Collateral

WeatlhBriefing reports on the growth of fine art being used as security against loans.  The report states lenders are seeing more oil paintings by 20th century artists being used as collateral for loans.

The growth in fine art as collateral against loans shows the continued advancement of art as an asset class and the acceptance by lenders and bankers of the underlying value and financial stability of fine art.

WealthBriefing reports

The latest trend to hit the asset-backed finance sector is loaning against fine art, says London-based personal asset lender, borro. According to its findings, the art market saw a record breaking year at auction in 2012 with an increase of 48 per cent in clients borrowing against fine art from the previous year.

borro’s customers seem to favour modern British art above all else, said the firm, with the loan value in fine art increasing by 28 per cent from the first to second half of last year. More and more valuable pieces are coming through the doors, such as a Turner watercolour valued at approximately £54,300 ($83,200) and a Henry Moore sculpture worth £50,000.

But an appetite for other categories is also to be expected, Paul Aitken, chief executive officer of borro told this publication. “We are seeing works by impressionist artists and contemporary artists which includes abstract impressionism and have continued to see a fair amount of Warhols and prints. However, we are currently seeing more and more enquiries and loans which primarily relate to oil paintings by artists of the 20th century,” he said.

“In a climate where loans from traditional sources are few and far between, we are seeing clients using high value fine art to unlock necessary finance. Obviously, prized pieces are hard to part with, in investment terms and from a sentimental perspective, so temporarily borrowing against them for quick liquidity is a savvy solution,” said Aitken. Art pieces are generally loaned for four to five months.

Various reasons have triggered this emerging trend, said the firm, from clients needing to pay for holidays and school fees to facilitating business transactions and funding property surveys.

As a sector, fine art now represents 29 per cent of borro’s overall loan book, and Aitken expects this increase to continue. “Since our launch in 2008, we have seen an annual percentage growth of 139 per cent in the value of loans against art year on year. We expect this trend to continue at least at this growth rate in 2013 as we’ve been getting more loans in the £250,000-£1 million bracket to sit alongside our core £10,000-£100,000 loans. In the last two weeks alone we have seen a massive surge in large fine art enquiries and are working on over £10 million worth of enquiries against fine art,” he said.

Source: WealthBriefing