Art finance

As the art market has grown, so has the art finance industry.  An array of new financial products and services designed specifically for art dealers and collectors have entered the market. These include:

    • Acquisition Loans: used by collectors and art-world professionals to assist in purchasing items either privately or at auction
    • Auction Guarantees: guarantees against works that have been consigned for sale
    • Bridge Loans: a means to unlock liquidity in the short term whilst waiting for a sale transaction
    • Factoring: short-term agreements lasting up to three months where the lender effectively advances payment to the gallery for unpaid invoices
    • Credit Lines: the borrower puts up enough art collateral to establish a 'drawdown facility' that can be used at their discretion
    • Working Capital Loans: the borrower uses existing art stock or their collection as collateral and may use the proceeds for any purpose

The specialist art lending sector alone is doing over $13 billion of business per year. Specialist art lenders have become pillars of the art world providing a new source of liquidity to galleries, dealers and collectors who do not have access to the ultra high net worth private banking sector, with working capital, trade finance, bridging, acquisition and personal loan facilities, ranging in size from the low thousands to the high tens of millions of dollars – often secured only against portfolios of fine art. Minimum price guarantees, offered to sellers either 'in-house' by the auction houses, usually as bait to secure the consignment of the item, or by third parties who are effectively betting on the success of the sale, have become the norm in contemporary, modern and impressionist auctions, featuring in more than 40 per cent of the lots of evening sales. The various financial services available to dealers, galleries and collectors are explained in more detail in this section.

Acquisition loans

Finance to help facilitate the acquisition of specific target artworks which then become the primary collateral

Auction guarantees

Secures a seller absolute certainty of achieving a minimum sale price for an artwork being offered at auction

Bridge loans

Designed to provide short-term liquidity to a seller in advance of a planned auction or private treaty sale

Credit lines

A flexible pre-agreed facility that can be drawn down on when required and secured against art

Factoring

Obtaining immediate liquidity when sums owed are delayed or contractually only due at a much later date

Working capital loans

Can be used by dealers and galleries for any purpose and can be secured by existing inventory