As the recession deepens and the economic slowdown continues there are signs that even the very wealthy art collectors and antique jewelry owners are feeling the credit crunch and finding alternative ways to borrow money for working capital. Due to the many bailouts of banks and financial institutions and the continued tightening of credit, wealthy collectors have lost their cash flow to purchase bargain collectibles that have become available on the auction market. Within the past 6 months many one of a kind pieces of art have either been put up for sale or used as collateral to borrow against by their owners. Many times the cash advance borrowed against the collateral is used to buy other fine art or to invest in other valuable collectible assets like antiques, coins or jewelry.
The benefit to an owner of these expensive works of art is they are allowed to keep possession of the collectible pieces and can display them where they wish after they are registered and appraised. Different than regular banks, there are specialized art lenders who make the terms and arrangements for this type of loan and are familiar with works of art. In case of default the art lender has the rights and the means to readily sell or auction off the property at a private or public auction.
With the continued drop of stock prices and slump in the stock market, many investors are looking for other areas to invest in like the arts or collectibles as these unique pieces maintain a higher value than other types of assets through tough economic times. The same type of collateral borrowing is common for antiques, coins and fine jewelry but the difference of lending against smaller items as these is that the creditor usually holds possession until the debt is paid back. Although many of these fine arts are not yet for sale, it is certain as the economic slowdown continues, many will be forced to sell off these one of a kind treasured assets.
The recent rise in collateral lending is not limited to private owners strapped for cash. Museums, corporations and foundations are also using their individual art inventory or entire collections as collateral for lines of credit to use for operating cash. Banks or art lenders will lend about 45-60 percent of the value of the art and charge an interest fee on the outstanding balance. Recently some of the elite high end auction houses like Sotheby’s and Christie’s have acquired very large collections of art and antiques to put up for auction like an Yves Saint Laurent art collection worth an estimated $600million. With many high end auction houses in New York City area we are sure to see many more unique pieces of art and antiques in the auction store windows.