Art and Capital – Art Banking, Art Loans and Art Finance

bank teller Art and Capital   Art Banking, Art Loans and Art FinanceDuring the art market boom of the late 80′s when art became an accepted and viable form of investment, a need was created for people to be able to borrow against the artworks that they were investing in which resulted in a number of finance companies offering art loans. Art loans catered to three types of clients, those that wanted to leverage their existing art collection to fund new purchases, those that needed cash to cover debt, and art dealers who required funds to acquire new stock For those interested in the tax implications of art investment, some lenders offer loans similar to reverse mortgages where borrowers receive monthly payments against the value of their art instead of selling the work outright and being charged capital-gains tax.

The correction of the art market in the early 90′s caused a significant reduction in the number of people taking out loans against their art and consequently a reduction in the number of institutions offering art loans. The recent revival of the art market has seen a rapid growth in the art loan industry with auction houses, hedge funds, specialty lenders and banks all competing for people’s business.

Unlike the property market where value is relatively easy to determine and the factors that effect value are quantifiable, the value of fine art is much harder to determine and relies on many different factors which are difficult to measure thus making it much more risky for the lenders to provide loans against fine art. In order to reduce the potential risk, many lenders require what are essentially margin-call provisions which is where the lender reserves the right to reappraise the collateral, and if the value has dropped, to ask for more collateral or partial payback of the loan. Many lenders will also not advance any more than 50% of the value of the artwork which is another safety precaution that allows for any potential reduction in the value of the artwork during the loan period.

Burrowing money against art is definitely not the cheapest way of raising funds with interest rates as high as 18% and most lenders charging 3-4 points above the prime interest rate so you might want to think twice before using that Picasso to fund the villa in S you’ve had your eye on for so long. For those that would find such a service useful I have included links below for the four biggest players in the art finance industry, tell ‘em the Art Market Blog sent you!!

Fine Art Capital
http://www.fineartcapital.com

First Republic Bank
http://www.firstrepublic.com

Art Capital Group
http://www.artcapitalgroup.com

Sotheby’s Financial Services
http://www.sothebys.com/services/financial/index.html

nice nick Art and Capital   Art Banking, Art Loans and Art Finance**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

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  • http://www.loansdot.co.uk/uk-loans/Marketing-Advice stewart

    When gold goes up Art comes down. Gold is almost at its highest.
    That masterpeice will always be worth something

    • BF

      I’m curious to know what you base this statement upon; I would genuinely like to see the data.

  • http://www.artforprofits.com artforprofits

    I think that art is becoming such a separate and popular form of investment that the price of gold will not have an effect on the value of the art market.

    Nicholas Forrest
    artmarketblog.com

  • Adam

    Nick,

    I have been fascinated by such financial companies that specialize in lending against art. In your post you discuss the risk that these lenders take on by making these type of loans. Do you think this market will be a stable one in the long-term future?

  • Adam

    To elaborate, do these types of companies still do well when the art market isn’t at or near an all-time high, like it is now?

  • http://www.artforprofits.com artforprofits

    HI Adam,

    These companies do not do well when things go sour in the art market which was evident during the early 90′s art market decline when many of these art lenders went out of business very quickly.

    Nicholas Forrest
    artmarketblog.com

  • http://www.gevezeclub.com Fikra Merkezi

    VERY BEATIFULL THANKS

  • http://www.countrywide-refi.com Tina Anderson

    How is the value of fine art determined these days, with the industry changing so much this decade?

  • http://www.voy.com/215582 avenged bat sevenfold

    sevenfold day avenged

  • http://www.websitecontent.com Finance Articles

    Hi Nicholas! Good post! I’m an artwork lover and obviously that’s the main reason why this post captivates me. I would appreciate it much if you can state some factors that effect the value of the artwork.

    Thanks,
    Joanne

  • neel

    hi i wanted to know what internal factors make value for the uk art market

    • http://www.montagefinance.com Victor Jeffreys II

      Hi Neel.

      For the most part, high net worth individuals, institutions, and family offices that collect art do so internationally. I am not certain that there are factors specific to the UK market–if someone has thoughts otherwise, I would be interested in reading them.

      Factors that are generally considered in evaluating works of art as an asset class are: provenance, condition of work, auction records (both the artist’s and the work’s), major collections holding an artist’s work, third party appraisals and insurance.

      I hope this helps.

  • http://onlinebanking123.com Mark

    Online banking has certainly come a long way in the past ten years. With so many features and benefits, it’s no wonder so many people these days are turning to online banking as a way of managing their finances. Nice posting, so informative. Thanks.

  • Marcel Deuber

    Are there any financial institutions in Germany that grant art loans?

  • http://www.artmarketblog.com artforprofits

    Dear Marcel,

    I am no aware of anywhere in Germany that offers loans specifically to purchase art. If I come across any I will let you know

    Regards,
    Nicholas Forrest

  • MARYSOL MARTIN

    Hi Nicholas,

    You have a most interesting website!

    Will you PLEASE be able to direct me to a financial services company, that will lend me KING CASH on a FABULOUS, well executed Chinese carving/sculpture made out of (opaque) RUBY CORUNDUM. I’m also in need of a new appraiser, who will re-appraise this 5,690 cts. gemstone/object of art.
    Looking forward to hear soon from you.
    *MARYSOL*
    I could pay the loan within 6 to 12 months.

    • http://www.montagefinance.com Victor Jeffreys II

      Dear Marysol.

      Our firm focuses on asset based lending using fine art as collateral. Please feel free to call me (info on website) to discuss your needs and our services.

      Humbly,
      Victor

  • MARYSOL MARTIN

    Hi Nick,

    Exactly what factors that affect the opaque ruby corundum Chinese carving/sculpture are you asking for?

    Best!

    *MARYSOL*

  • http://www.pcinternetbanking.com bank online

    thanks so much for the info ! It’s appreciated. Great job on the blog, keep it up !

  • http://www.petroz.com jules petroz

    Invest your money in Art.
    Buy a Vincent van Gogh or an Edouard Manet today.

    http://how-to-invest-your-money.blogspot.com/

  • http://www.art-report.com Art Report

    well I work for a company that rates art, what I can tell you if you want to buy art, take a look here, and please do not compare gold or old masters with contemporary art.
    It is more stock exchange, here you rate the artist, not the art work itself ;)
    And by the way there are geman banks that do give real art loans, – we provide them with reports on artists

    • http://www.montagefinance.com Victor Jeffreys II

      What is the name of your company?

  • Sam badiani

    I really appreciate this website. Does anybody know any banks or institutions that will lend against photography negatives. Well known photographer and 40 years worth of work on celebrities and notable historical figures.

    • http://www.montagefinance.com Victor Jeffreys II

      Dear Sam.

      Our firm focuses on asset based lending using fine art as collateral. Please feel free to contact us (all of our information is on the website) to discuss your needs.

      humbly,
      Victor

  • http://www.fineartbanking.com/ ArtBanking

    Great article Nick, would love to see a follow up, the art finance market has changed dramatically. Art lending and financing continues to grow. Art is becoming a viable passion investment for those HNWIs.  

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