Borro Private Finance was featured in an article focused on art based lending in The Art Newspaper, learn more below.
The rapid growth in the number of loan providers, from private banks to specialist lenders, could transform the art market’s relationship with the financial markets.
Warhol or a Wool hanging on your wall may give you great pleasure, but it used to be that art gave you no monetary return—unless you sold it.
No longer. Today that work of art can remain on your wall and at the same time give you cash in hand, allowing you to buy more art, inject some money into your business, cover a guarantee at auction or pay off an urgent tax demand.
Borrowing against art poses specific problems because of its portability, its heterogeneous nature and difficulty in establishing a reliable price. And yet, according to a report published last year by Deloitte and ArtTactic, in 2017 the global total of loans outstanding against art was eye-popping: between $17bn and $20bn.
“Perhaps the biggest driver of growth in this field has been a mindset shift by collectors who once viewed their art purely as a hobby or aesthetic pursuit and now view it as a strategic asset,” writes Evan Beard, a national art services executive at US Trust, in the first Tefaf Art Finance Report, published earlier this year. US Trust has a stunning $6.7bn out in loans secured against art, and other private banks such as Citi or JP Morgan have loan books that also run into the billions of dollars.
“You will probably find that many of the US-based names in Artnews’s top 200 collectors list have borrowed against their art holdings,” Beard says.
While precise figures are difficult to obtain, according to a number of players in the market the vast bulk—in excess of 80%—of the art-secured lending business is in the US.
And it is a buoyant sector: “Our client base in the US is strong and growing,” says Suzanne Gyorgy, the head of Citi Private Bank’s Art Advisory and Finance. “Most notable is the increase in the size of the art loans. Ten to 15 years ago, typical art loan facilities were in the tens of millions; today it’s increasingly common to offer art loans facilities in the hundreds of millions.” And while the US is strong, Gyorgy says, “Business is growing dramatically in Asia and Latin America as well.”
“Americans are so much more accustomed to borrowing,” says Barbara Chu, a partner at Emigrant Fine Art Finance, the art lending arm of Emigrant Bank: “And there are cultural biases against borrowing in some countries; people are generally averse to debt in the UK and Germany.” She adds: “Our financing offers another option for people to monetise their offshore assets.”