The rare beauty of fine art contributes to its intrinsic value and the reluctance of many collectors and art professionals to make hasty sales of their fine art assets when facing a liquidity shortage. Fortunately, collateral loans provide an attractive alternative to selling by enabling individuals and galleries to use their fine art assets as loan collateral.

Indeed, the interest in using fine art assets to boost liquidity is growing, and already quite high. As measured by the 2019 Deloitte Art and Finance Report, 69 percent of collectors said they would be interested in using their art collection (or parts of it) as loan collateral. With fine art well established as an alternative asset class that generally holds or appreciates in value, it should come as no surprise that art-secured lending is a popular financial strategy among the fine art asset owning community.

The process is simple and straightforward, though there are several important requirements that owners of fine art need to be aware of when seeking to borrow against the value of their holdings. Here are five important things to know about the process:

  • number-one Documentation is critical. As with many valuable assets intended as loan collateral, prospective borrowers must be able to provide proof of ownership. In addition, detailed provenance documentation concerning the asset’s sale history is important in determining the assets authenticity and in many cases its valuation. Gather this information prior to conducting any meetings with lenders – they will need to review and evaluate it prior to closing any transaction. luxury watch, you can secure a loan or line of credit with Borro.
  • number-2 Art market conditions influence loan terms. Unlike conventional loans, collateral loans primarily focus on the resale value of the fine art asset being used as collateral. So while there are no credit scores, income verifications or bank account balances involved, the overall state of the art market as well as the current demand for a particular art genre or specific artist at the time a loan is being sought are definite factors that influence loan terms such as loan size and interest rates, and at times they can be highly volatile.
  • number-3 Condition matters. The condition that the fine art asset is in materially affects its market value and therefore the loan terms associated with borrowing against it. While there are many factors associated with the valuation of a fine art asset, the condition it is in is among the most important.
  • number-four Lenders generally hold the asset(s) until the loan is repaid in full. When fine art (and other) luxury assets are used as loan collateral, they are held by the lender in a secure vault appropriate for works of fine art. The assets are also fully insured by the lender from the time they assume possession until the time they are returned to the owner after the loan is repaid.
  • number-5 The process is fast, efficient and confidential. Five, six, and seven figure collateral loans close in only a few days, with minimal paperwork. Transactions are completely confidential between borrower and lender.

Borro is a leading lender to fine art owners, providing loans and lines of credit from $25,000 to over $5,000,000 collateralized with fine art assets including Post-War and Contemporary Art, Prints/Multiples, American Art, Impressionist Art and Modern Art.

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