A New Option to Borrow Against the Porsche

A specialized lender is offering expanded options to affluent individuals who want to borrow against treasures such as jewelry, art, antiques, wine collections and valuable cars.

Borro, a “luxury-asset-based lender”—like a high-end pawnbroker—entered the U.S. market three years ago making short-term “bridge” loans. For example, someone might finance a child’s private-school tuition by borrowing against an antique car until an expected annual bonus comes through. Loans so far have ranged from about $5,000 to $4 million in size.

The London-based company this month began offering loans in the U.S. with terms from 18 months to three years, for up to $10 million, for high-net-worth borrowers who want to extract cash from their possessions to invest in other opportunities. The minimum loan is $100,000.

Borro says it lends up to 70% of the value of the items, with funds available in 24 hours. But that easy cash doesn’t come cheap.

The new term loans have fixed rates, which are set between 0.99% and 2.49% a month—equivalent to annualized charges of 11.88% to 29.88%. The rate depends on the size of the loan and the assets being used as collateral.

The bridge loans, which might be for six months, cost 2.49% to 3.99% a month—or an annualized 29.88% to 47.88%.

Paul Aitken, Borro’s founder and chief executive, says private bankers and financial advisers who refer business to the company had asked for the longer-term loans on behalf of clients who are comfortable with leverage. “They are typically on the higher end of the risk spectrum,” Mr. Aitken says, and want to tap cash from their luxury holdings to invest in real estate or other opportunities.

Borro has an office in New York and borrowers can also apply online or by phone.  The company holds the collateral until the loan and interest are repaid, and it says items are stored in secure storage facilities that are specialized for the asset type. If the loan is not repaid, Borro sells the item.

Since coming to the U.S., Borro has lent $200 million, about 90% of it in loans of six months or less, Mr. Aitken says. The borrowing process is quicker than a bank loan because there aren’t any credit checks.

Read the full article at The Wall Street Journal

About the Author:

Jay wrote about luxury asset trends for Borro Private Finance