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High-Class Personal Asset Lender Fills a Lending Void

Thursday, 24 October 2013

When Heather Robinson needed money to start a sports-apparel line, she turned to an unusual lender, offering a prized possession as collateral: a bronze nude torso sculpture.

Ms. Robinson, who directs a Washington nonprofit, brought the 16-inch statue last month to a New York firm called Borro Inc., which immediately wired her $15,000. The interest rate: 3.99% a month, or as much as 23.9% for the six-month loan term.

Borro and other collateral lenders—essentially high-end pawnshops—are a small but fast expanding part of the shadow-lending system. Since 2008, as commercial banks have cut lending to small businesses, such alternative lenders have helped fill the void.

In some states, collateral lenders can charge interest rates exceeding 200% annually because the business isn't bound by traditional banking laws. On the upside for borrowers, there isn't a credit check and little paperwork.

So some entrepreneurs are hauling treasured possessions—Baccarat chandeliers, Picassos,
Maseratis, even Houdini's handcuffs—to Borro and others to bankroll businesses historically financed by conventional loans, credit cards or not at all.

In Ms. Robinson's case, Borro was familiar with her Elizabeth Catlett sculpture: She had pledged it before to fund charitable events.

Borro is the largest of this new breed of collateral lenders, having lent nearly $100 million since opening in England in 2009.

Read the full article at The Wall Street Journal