A Guide to Financing Art

According to Art Basel, between 2020 and 2021, the global art market grew by 29% with aggregate sales of art and antiques reaching an estimated $65.1billion. Values even surpassed the pre-pandemic levels of 2019. Sought after by art enthusiasts and investors alike, there has never been a better time to invest in art to add to your alternative portfolio.

Art financing is an increasingly attractive way to release valuable capital from your bluechip art collection. Here's the how and why, and the options available when it comes to art lending:

Using your art collection as collateral, art financing - AKA art-based lending - allows you to unlock the capital associated with your art. By borrowing against your collection, art financing lets you quickly realise liquidity without having to sell.

Art financing is no longer restricted to ultra-wealthy collectors seeking loans from private banks and auction houses. In recent years, a plethora of private specialised lending companies have made art financing more accessible for collectors at all levels - with a low minimum threshold and lower interest rates. Most firms offer around 50% of the appraised value of works, widening opportunities for other alternative investments.

You might consider an art-backed loan if:

1. You want to liquify quickly: If a lot of your finances are held in your private art collection, art financing allows you to borrow against the value of your collection. This is a favourable option for those who do not want to pursue the lengthy ordeal of selling, or commit to the permanent sale of their collection altogether.
2. You want to raise funds for another investment opportunity: Whether you want to invest in other artworks, property, fine wine, or something else, an art-backed loan is a viable way to raise funds for other alternative investments. With art financing, you can grow your collection without having to forfeit your existing works.
3. Your borrowing needs cannot be met by traditional banks: This applies primarily to galleries and dealers, whose finances often don't meet the lending criteria of banks.
4. You own artworks by bluechip artists with established markets: Bluechip art with a strong provenance and history of price appreciation - like Andy Warhol - traditionally pose a lower risk and can be borrowed against at many points in the economic cycle.
5. You anticipate further profit from your collection: During times of economic uncertainty, art financing can be a convenient option to leverage your art without selling up completely. Lenders might choose an art-backed loan to release capital while waiting for the best time to sell.

Your bluechip art collection can be a dynamic financial tool. Here are some of the types of art lending solutions you might consider:

1. Loan & Acquisition Finance: If a dealer or gallery to purchase more artworks but does not have the immediate capital to do so, many art lending companies offer a quick turnaround to receive capital quickly while receiving liquidity from assets. Likewise, if a collector is interested in guaranteeing a lot in an upcoming auction, an art loan can provide immediate capital to acquire a new work.
2. Sale & Consignment Advance: If a collector is interested in works available in an upcoming auction, but does not have funds at hand, lending allows collectors to leverage their art collection as collateral. This is a viable alternative to the unfavourable option of selling altogether.
3. Existing Loan Refinance: If a collector wants to refinance existing loans for better returns, art lending can be a good opportunity. After the collector repays their loan, they can sell their art collection that has significantly increased in value over time.

By using your art collection as a form of collateral, you afford yourself the opportunity to grow a valuable collection without selling any existing pieces. As the value of art is expected to increase over time, art financing can be a lucrative way to release valuable capital and further other alternative investments. More and more specialist lenders and banks are making it easier to leverage art to unlock liquidity quickly, and is attractive because of the ability to drive business across multiple divisions of the company sector.

For those with a strong bluechip art collection, art financing allows you to make the most of your investments as they continue to grow in value. If you're not prepared to commit to a full-time sale, art-backed loans are an opportunity to extend your capital while you make other investments, or wait for the right time to sell.

Once you decide to finance your art collection, there are various avenues to explore. Here are some of the key players in art lending:

1. Auction houses: Auction houses are increasingly offering art-backed loans tailored to the individual client's needs. Sotheby's Financial Services have a total portfolio of art loans of around $1billion. Sotheby's confirmed that this grew by 50% between 2021 and 2022 - a case in point that art finance is a growing and remunerative sector. Sotheby's are also in the process of offering clients the opportunity to use their art collections to securitise their personal loans. Likewise, Christie's Art Finance provide art-secured loans from $1million to $150million, offering loans of 40-60% against the value of the client's fine art and luxury goods collection.
2. Private banks: JPM, Citi, Bank of America, Credit Suisse and a host of other private banks offer art financing for Ultra High Net Worth Individuals. Many of these banks allow clients to keep every piece in their possession while finding liquidity and financial flexibility.
3. Private lenders: In recent years, private advisories have increased in volume who offer expert-led loans against art collections. These private lenders can increase the length of the loan to suit the client, and often take possession of the artwork until the loan has been repaid. Among this growing sector are: The Fine Art Group, Gurr Johns Capital, Athena, and Emigrant.
4. Art storage companies: More recently, art storage companies have begun to offer their clients loans backed by the artworks held in their facilities. Uovo - a state-of-the-art storage company, have extended their operations to art financing - a viable opportunity for clients who already have their works in storage.

There are a plethora of options available to bluechip art collectors when it comes to art financing. While many private banks and auction houses serve primarily Ultra High Net Worth collectors, certain lenders are offering opportunities to collectors who want to make smaller investments. Our partner Art Money - who have recently received investment from Christie's - allow avid collectors to spread the cost of their purchase across 10 months in 10 payments for artworks ranging from £1,000-£100,000. Art financing is becoming more accessible, giving collectors the opportunity to invest and grow a strong bluechip collection.