Asset finance firms
usually help businesses to acquire assets, but companies with
experience lending against tangibles can also offer refinancing.
While this usually involves vital equipment such as plant,
machinery or vehicles, there is a growing interest in lending
secured on art.
worthless, a masterpiece which nourishes the soul – or just a
pretty painting? The value of such a subjective thing as art seems
impossible to determine.
For some business owners,
however, the worth of art can be translated into cold, hard capital
and an increasing number of companies are emerging to help that
value be realised.
UK asset finance firm Liberty
Leasing is one such company, having just concluded its first
refinancing deal leveraged on a work of art.
Allan Clegg, a director with
Liberty Leasing, said their first art deal was a “toe in the water”
as the company tests the feasibility of short-term lending on
Liberty has lent 50% of the
value of a piece of art owned by a high net worth client over a two
year period during which Liberty will retain the asset.
An interest in art outside of
business prompted Liberty’s directors to look at the deal and they
were encouraged by what they perceived as a stable and appreciative
“Art should always have a
fairly stable value to a certain extent,” said Clegg. “It doesn’t
tend to lose value.
“The artwork we are talking
about isn’t going to go down in value. It’s a relatively modern
work of art which is easily valued by a trained valuer.”
While Clegg is confident the
deal will be a success, lending on art will not become a core
activity for the Southampton-based company.
“It is never going to become
a core product, because that is not what we are about, but for the
right customer in the right circumstances it is an option we can
A company for which the
business of turning art into capital is a core activity is Borro,
an asset-based lender that has grown on the back of a scramble for
quick capital among UK business owners.
Borro provides finance on
personal assets over a short period, typically between four and six
months, valued between a few thousand pounds and a few million,
according to chief executive Paul Aitken.
Aitken founded the company in
2008 (“after Northern Rock but before Lehman Brothers”, he said)
because he could see credit was going to be tightened.
obvious there was going to be a credit squeeze for a long period of
time,” he said. “It’s probably going to be longer than I imagined
Aitken saw wealth management
funds and private banks which had previously lent to high net worth
individuals on the back of personal assets, such as fine art, stop
lending, like any other credit line, and saw a gap in the
specialist lending market.
London, said Aitken, had
prestige pawnbrokers able to lend on these sorts of assets but they
were conservative lenders and geographically limited.
Aitken saw an opportunity to
open up short-term lending on art, prestige cars and jewellery
nationwide and started what is essentially an online pawnbroker
with expert valuers able to lend on assets across the country.
Since then he has seen business soar.
“Short-term lending on this
kind of asset is growing massively,” said Aitken.
Around 20% of Borro’s loan
book is now secured on art, including a £1m (€1.15m) deal on a fine
art collection brokered this summer, and the company has lent
against Picasso sketches, works by Banksy, Damien Hirst, Jack
Vettriano and Henry Moore.
Core customers for Borro are
self-employed and small business owners, said Aitken: “People who
struggle to get access to mainstream forms of credit because they
struggle to demonstrate ongoing income but have an opportunity they
want to realise – a deal or investment,” he added.
Liberty Leasing’s Allan Clegg
agreed and said the attraction for customers is getting access to
capital for a new project or business development at a time when
banks aren’t able to help.
“We know banks aren’t lending
quite as freely as they used to and we have clients that are quite
asset rich but not cash rich and they can’t get a facility and the
bank,” said Clegg. “To clients it is a quick way of raising capital
and a painless way too.”
Painless, said Clegg, because
in order to get the funds all a client need do is transfer the
asset to the care of Liberty, who hold it in suitable storage,
fully insured, for the duration of the deal.
“The client just won’t have
the art to look at for a period of time but,” said Clegg, “it is
not an essential piece of business equipment.”
Art may not be a business
essential for everyone but investing in the growing value of art is
on the rise.
Having declined just as every
other market did in 2008 and 2009, last year the value of the
global art market recovered to above its 2008 level, growing 52% to
£43bn worldwide, according to Dr Clare Andrews of art market
research and consultancy firm Art Economics.
The prices paid for art have
risen too over the past year and half, with art dealer and
auctioneer Christie’s reporting a 53% rise in its annual global
sales figure in 2010 to £3.3bn – the highest annual sales total in
Sales figures at Christie’s,
although affected by rare, highly valuable pieces coming to market,
including works by Picasso, Warhol and Rothko, have continued to
grow in the first half of 2011, increasing 24% in Europe alone to
Alexandra Buxton, Christie’s
spokeswoman, said the art market has become much more global over
the past ten years and with that has come a commensurate increase
in the value of art sold by Christie’s.
“Prices are increasing
because of supply and demand and very valuable pieces of art,
‘masterpieces’, coming to market,” said Buxton.
Buxton stressed Christie’s
does not advise on investment in art, but said: “People buy works
of art for a multitude of reasons; sometimes out of love, sometimes
for investment purposes, sometimes because it completes a
collection they have been building up.
“It is true to say over a
course of time art is deemed to be a very stable source of value
and there are occasions, particularly in the current environment,
when people are looking to invest in works of art because they are
a tangible asset people can enjoy and love and cherish.”
Beyond the investment
potential and the capital it can release, for one further company
art can have an intrinsic value to businesses.
Working with more than 60
artists and with a diverse clientele, including finance firms and
manufacturers, Ginger White leases art to hang on the office
Set up five years ago, Ginger
White rent artwork out to businesses for use in their premises just
like any other piece of office furniture and business has been
doing well since the financial crisis cut the cash available to
firms for corporate art.
picked up,” said Ziadul Kabir, marketing and sales manager at
“During the financial crisis
we did quite well because businesses didn’t necessarily want to buy
huge paintings so they had a look at what we do instead and are now
renting artwork rather than buying.”
Kabir said, while art may be
thought of as business luxury, displaying art work is important for
impressing clients and creating an attractive working
“A business might not have
the money to buy a piece of artwork but need to decorate the office
just the same,” said Kabir.
He added Ginger White’s
model, where clients can choose to buy pieces they like and rotate
the art when they want a change, has the additional benefit of
bringing artists to admirers they might never have been introduced
Kabir said some customers are
so keen they lease the work of their favourite artists for their
houses and holiday homes.
Finance on art may not yet be core business but there is
capital value beyond the canvas, paint and the pleasure of looking
and, as Aitken put it, if you can pick it up and move it – you can
lend money on it.