Art, especially works by established artists, is more than an appreciating asset. Art as collateral can unlock immediate liquidity without having to relinquish ownership of a treasured piece.
The key is to find an asset-based loan provider that’s registered, accredited and completely trustworthy. That’s the only way of being assured a fair exchange based on the appraised value of the work.
When dealing with a reputable finance company like LoanAgainst, you have the peace of mind knowing the art is insured and securely stored for the full term of the loan.
Artwork as a financial asset
Art has long been regarded as a hedge against economic downturns. It allows investors to diversify their portfolios while offering aesthetic value.
According to The Luxury Playbook, fine art has delivered an average annual return of 10.6% over the past 50 years, outperforming many traditional investments.
Despite a marked slump in sales over the past few years, major art dealers are forecasting a turnaround, especially in the high-end blue-chip market segment. This bodes well for individuals who intend using art to secure funds.
Using art as collateral
Leveraging art as collateral is a simple process. The funder offers a loan amount based on the appraised value of the artwork.
If the offer is acceptable, the work is handed over, a loan agreement is concluded, and the money is transferred into your bank account.
Once the loan plus interest is repaid, the artwork is returned. It can be used to raise funds again in the future.
Worldwide growth in art-backed collateral loans
Due to growing demand, art-backed loans are no longer the exclusive domain of specialist lenders like LoanAgainst.
In many countries, banks are increasingly processing applications secured by individual artworks and collections.
Even auction house Sotheby’s is getting in on the action, with an estimated US$1 billion portfolio of art loans.
Pawnbrokers and asset-based loan providers are seeing surging demand. One American pawn shop specialising in art-backed lending has experienced 14,000% growth over the past five years.
In the US, the art-lending market had an estimated value of US$28 billion in 2021. Since then, the sector has exploded worldwide.
Factors, including fear driven by economic uncertainty, are ramping up the appeal of secured loans.
That’s especially true for individuals who want greater liquidity without having to part with what could be a notably appreciating asset.
Why consider a collateral loan against artwork?
A collateral loan against art is unrestricted. Funds can be used for any purpose – managing short-term cash flow, funding new art acquisitions or financing lucrative investment opportunities, with the goal of achieving strategic asset allocation.
The movable-asset loan industry has succeeded in making previously difficult or slow-to-move assets, like valuable artworks, much more “liquid” than they were.
The upshot is fast, convenient access to funds without the hassle of having to market or sell these assets.
What determines the value of loans against art?
Artwork used as loan collateral is independently appraised to arrive at a marketable cash value on the secondary art market.
Factors like the artist, medium, provenance and historical sales of similar works are all considered when arriving at a fair price.
The lender offers the owner a percentage of the appraised value of the artwork in the form of loan.
Using art as collateral in South Africa
If you need funds in a hurry, and own art by recognised artists, LoanAgainst can help.
We’re an online asset-based lending platform, and a division of a fully accredited and regulated finance provider in South Africa.
Our lending services and interest rates comply with NCA guidelines. Our fee structure and loan terms are completely transparent.
Call us on 079 726 4690, send us a WhatsApp or apply for an art collateral loan online now. We operate in Cape Town, Johannesburg, Durban and Port Elizabeth.
