The U.K.-based Paul Aitken was working in tech start-ups during the market crash in the fall of 2008. The resulting credit crunch inspired him to found Borro, an Internet-based lender offering up to $2 million against personal assets like art, watches, wine, and jewelry. He spoke with Sarah P. Hanson about how going small is paying off.
What spurred you to create this service?
In 2008 it was clear that consumers needed alternative ways of accessing financial liquidity. There are plenty of people who have luxury assets worth from a few thousand up to a few hundred thousand dollars who really didn’t have any way to gain cash from those assets aside from selling them outright. I saw there was an opportunity to take what was in essence the old pawnbroking model and put a new spin on it.
Your service was featured in a 2011 documentary about pawnbroking. Is that your background?
That was too bold. They kind of framed us as a high-end pawnbroker. Before this I hadn’t done anything related to finance in my life. For 11 or 12 years I was focused on operations and marketing strategy at tech start-ups.
So what does Borro offer those with moderately valuable art or collectibles?
The high-end version is what the private banks do. If you’ve got a million dollars in art they’ll happily write you a line of credit on it, but what about the people who only want $5,000 to $250,000? Our average loan is about $10,000. The interest rate depends on the size of the loan and varies between a flat rate of 2.99 and 3.99 percent per month.
How else does your service differ from securing a loan from a bank?
Speed. We can write loans very, very quickly. For jewelry and watches, it’s same-day; if it’s a car, the next day; if it’s fine art or decorative arts, it takes more time to research, so 72 hours.
What other categories besides art do you lend against?
Lots of collectibles—things like sports, music memorabilia. The most fascinating thing we’ve lent against, to me, was the Beatles’ first record contract. I’ve seen an Oscar statuette coming in for a loan, Grammys, guitars used by famous rock musicians, Super Bowl rings.
So you have a team of experts who will evaluate a potential asset to put a value on it. Would you also accept outside valuations by a certified appraiser?
Sometimes we get third-party appraisals to support our view. Clearly we can’t have expertise in all areas, so we do look to partner with experts. We do a variety of things. For example, last November I presented at the Appraisers Association of America’s annual conference in New York. We work with a number of those types.
What happens to the asset once the loan is made?
We take possession. We use storage partners like Cadogan Tate for fine art. We’ve got a company that specializes in cars, and a firm called Malca-Amit does our watches and jewelry logistics. We are looking after the goods in the same ways the auction houses do.
Are you seeing more interest in this type of loan? Who are your clients?
We lent $25 million in 2012 and $50 million in 2013, doubling year on year. We’re in the U.K. and the U.S., and I think we’ve got our hands full. We work with quite a lot of dealers who are using it as a sort of currency when they have an opportunity to acquire.
What’s next for the company as it grows?
We’ve got some new consignment loan products that are just starting to get some traction. We can advance money ahead of an item’s being sold at auction. Most of the houses offer that at a certain level for big clients, but we’re happy to write those loans for smaller clients. We launched it only last fall, but in six weeks we got about $2 million worth of these sale-advance loans, so that’s been a pretty good start.
And if the item fails to sell?
We would have advanced only 50 to 60 percent, so we would find an alternative route for selling the item, working with the auction house and the private channels that they have.
Why has Borro become an attractive way to secure a loan?
I think first and foremost it is the speed component. There is no credit risk, your house isn’t at risk. And you don’t have to sell—a lot of people don’t want to sell. If you have a piece that’s going up in value but you’re in a tight situation, often people don’t want to go there.
A version of this article originally appeared in the February 2014 issue of Art + Auction.