What is art lending?

23 April 2023

Art loans can be difficult to source, unless you know the right companies in the sector. If you own a piece of fine art, it can be a financial asset as well as an object of pleasure. You can raise capital without selling your artwork, thanks to art lending. 

An art loan is a type of loan that allows you to borrow money using your art collection as collateral. Art loans can be obtained from banks, art finance companies, or specialised lenders, and the loan amount is typically based on the value of your art or art collection. Usually, art lending companies will loan between 30-60% of your assets value, so if the artwork is worth £1m, you can expect a loan of between £300,000 and £600,000 depending on several factors, which we’ll highlight below.

The cost of lending against your art collection will depend on several factors, including the value of your collection, the artist, provenance,  the lender you choose, and the terms of the loan agreement. Generally, art loans can have interest rates ranging from 3% to 30% per year, with some lenders charging additional fees for services such as valuation, storage, and insurance. COIN do not charge any extra for these services 

It’s important to carefully consider the terms and conditions of any art loan before accepting it. Make sure you understand the interest rate, repayment schedule, fees, and other requirements before signing any loan agreement. You should also seek advice from a financial advisor or art advisor to ensure that an art loan is the best option for your financial needs.

What kind of art is used as collateral for loans?

Art loans can be secured using a wide range of artworks, including paintings, sculptures, photographs, and even rare books or manuscripts. However, not all types of art are accepted as collateral by lenders. Generally, lenders prefer artworks that have a well-established market demand and a high degree of liquidity, meaning that they can be easily sold in case the borrower defaults on the loan.

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Some of the most commonly accepted types of art for collateral include modern and contemporary art, impressionist and post-impressionist works, old masters, and fine jewellery. Lenders may also consider works by well-known artists or pieces that have been exhibited in prestigious museums or galleries.

The value of the artwork used as collateral will depend on several factors, including its condition, provenance, rarity, and market demand. Lenders may require an independent appraisal of the artwork to determine its value and may also require that the artwork is stored in a secure, climate-controlled facility for the duration of the loan.

Can I use a Banksy or Warhol as an art loan?

Yes, a Banksy or Warhol artwork can potentially be used as collateral for an art loan, depending on its value and market demand. Banksy and Warhol are both well-known artists with a strong market following, and their works have sold for millions of dollars at auction. It is important that the lender is presented with the correct information in order to achieve the best price possible, this will include invoices, purchase receipts and provenance. 

However, it’s important to note that not all Banksy or Warhol artworks are equal in value or liquidity. The value of a Banksy or Warhol artwork will depend on several factors, including its size, condition, provenance, and rarity. Lenders may also consider factors such as the artwork’s exhibition history, current market demand, and recent auction prices. It’s is important, that all Banksy works are verified and authenticated by Pest Control, who are the official authenticators of all works associated with the artist. 

If you are considering using a Banksy or Warhol artwork as collateral for an art loan, it’s important to have the artwork independently appraised by a qualified appraiser who specialises in contemporary or modern art. You should also research different lenders and their loan terms to find the best option for your needs. Keep in mind that the terms of an art loan can vary widely between lenders, and it’s important to carefully consider the interest rate, repayment s`chedule, fees, and other requirements before accepting any loan agreement.

What’s the best way to get lending against my art?

The best way to get an art loan depends on your individual circumstances and needs. However, there are some general steps you can take to increase your chances of obtaining an art loan on favourable terms:

  1. Determine the value of your art collection: Before applying for an art loan, it’s important to have an accurate assessment of the value of your art collection. You can get an appraisal from a qualified appraiser who specializes in the type of art you own. Check out valuers such as Dooers Appraisals or Gurrjohns

  2. Research art loan providers: Not all lenders offer art loans, and those that do may have different loan terms and requirements. Research lenders and their loan terms to find one that offers favourable rates and conditions. Sothebys Art Finance or TPC Art Finance are great companies in the sector for £1m plus loans. 

  3. Prepare your loan application: Art loan applications typically require detailed information about your art collection, including provenance, condition, and current market demand. You may also need to provide financial information, such as your credit score and income. 

  4. Choose your collateral carefully: Lenders may have specific requirements for the type and value of art they will accept as collateral. Choose art that has a proven track record of selling for high prices and has a liquid market. If you are looking for art lending and have a collection, consider works that you are OK with the lender storing for a the duration of the loan.

  5. Understand the loan terms: Carefully review the loan agreement to understand the interest rate, repayment schedule, fees, and other requirements before accepting the loan.

  6. Consult with professionals: Consider seeking advice from a financial advisor, art advisor, or attorney who specializes in art loans to help you navigate the loan process and find the best loan for your needs. Reading industry wide publications such as the Antiques Trade Gazette and The Art Newspaper can also help with sourcing professionals from across the art market.

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