There’s an indisputable fact in the secured asset loans business: art is big – seriously big - as a collaterisable asset. Back in August, during a huge selloff in global equities, many collectors sought liquidity by using their art works as security for loans. As Bloomberg reported at the time, this was unprecedented: ten years ago, no one anticipated that global equities and the art market would become so closely intertwined. Since then art prices have soared and people in the art market are responding immediately to corrections in the stock market.
Figures from the European Fine Art Foundation showed that last year, the art market surpassed its pre-recession (2007) high of 48 billion euros, hitting 51.2 billion euros in global sales. Skate’s most recent art market report found that the art-loans book was on course to expand by $10 billion this year – at least twice the level of the art-lending market when it was last reviewed by Skate’s in 2011.
And yet there’s a problem, which many art dealers in search of secured asset loans will be all too familiar with. The art loans market is distinctly two tier. Yes, it’s true that investment banks like JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., have all entered the art finance sector and are offering loans using art as collateral. In 2014, Winston Group conducted twice the number of appraisals for loans using art as collateral as in the previous year. But overwhelmingly, they’re lending to Big Clients – high net worth individuals with immensely valuable art collections who are increasingly realising that they can make their art work as an asset they get liquidity from, often at exceptionally low rates of interest, whether they want to buy a business, purchase more art or pay off other loans.
But for the vast majority of smaller art dealers, this option isn’t available. Unless you’re that rare breed of dealer who’s done extraordinarily well and owns a huge balance sheet of other assets besides art inventory, you probably won’t get such a warm welcome from private banks. You may even find that these institutions require you to have the ability to pay off the loan from another source, besides the art collateralising the loan.
From the outset, peer-to-peer lender platform Unbolted has bucked this trend. We believe that every art dealer and collector should be able to access the same kind of secured asset loan borrowing facilities that only the privileged few are currently able to reach. We’re highly aware that credit checks can be a barrier to a freelancing art dealer’s success. So we don’t use them. Ever. If you’re a UK resident with a bank account and can provide documentation to prove it, that’s all we need.
Our partners (Lyons and Turnbull and Fellows) both have dedicated specialist teams for valuing Fine Art and Antique assets. We outsourcer this role to experts because we can then guarantee a robust and accurate valuation, allowing us in turn to calculate realistic loan to value ratios for our borrowers and our pool of lenders.
With Unbolted, any art dealer in search of liquidity can obtain a loan, provided they can place a valuable art asset with us as security until the loan matures.
