Art loans can offer liquidity to your collection
Posted by artradar on November 4, 2009
ART LENDING INDUSTRY: ARTTACTIC PODCAST REVIEW
On October 13th, ArtTactic published there latest edition of the ongoing podcast series dedicated to art market topics. The new podcast titled “Art Lending Industry“ is an interview with Andrew Rose, the president of Art Finance Partners based in New York City. Highlights from the interview include detailed information about the array of available loans through Art Finance Partners, Rose’s opinions about how the recession has affected art lending, and a status update on the current state of the art market.
Types of Loans
“Bridge Loan to Sale”– Advance in funds against and art asset that will be sold. Used to get cash before sale transaction happens. The duration is typically 12-18 months with renewal provision.
“Acquisition Financing”- Upfront loan given to buy artwork, paid back overtime. Similar to real estate loan/mortgage.
“Working capital line”– Used by dealer or collector to finance inventory or collecting needs. The duration is 12 months with the option to renew.
The advantages to employing art loans to your personal art investment strategy are two fold. They offer liquidity between auction cycles (bridge loan to sale), and allow you to defer payment which frees up capital increasing yearly collection budgets (acquisition financing).
How the recession has affected art lending
When asked how the recession has affected art lending, Rose’s response was upbeat.
“Every business is facing the same liquidity crisis at the moment.” He continued to state, “we are seeing a fair amount of demand. Surprisingly in this market we haven’t seen the for-selling that one may have expected in this recession.”
How are artworks valued and has the current recession depreciated these values
Art Finance Partners utilizes basic valuation strategies when determining the value of the artworks lent upon. Their strategy consists of referencing established auction prices for comparable artworks through online databases like ArtNet or AskArt. In the case of a rare artwork, they consult their database of private sales, or get the opinion of an appraiser or art dealer.
Art Valuation Facts:
Loan to value ratio: 40-50%
General value of artworks down 20-30%; ultra contemporary artworks down 50%
Andrew Rose ends the interview stressing that good quality artworks sell well. Although trends and tastes change, Rose reiterates: “there will always be demand for very good quality international artwork on the international market.”
- Mei Moses art index founder plans Chinese version, optimistic about Chinese art– March 2009
- Three recession strategies for selling art in Shanghai – Shanghai Daily– April 2009
- New auction houses with new strategies open in Singapore art market– October 2009