5 Questions with Art Lending Expert Shelley Berube
Feb 16, 2021
We had the pleasure of sitting down with Shelley Berube, Executive Vice President at Luxury Asset Capital. She is responsible for leading all day-to-day operations at the New York City office including sales, building client relations, maximizing the company’s operating performance and helping to achieve the company’s financial goals. Wow! Sounds busy! Thankfully she took time to answer some questions we had about art lending.
So, just how big of a business is art lending?
Fine art is well established as an alternative asset class that often holds or appreciates in value. This is why collectors frequently use it as loan collateral. While there are several options out there for obtaining loans using art as collateral, they generally have five and six-figure minimum loan sizes. We determined that high minimum loan sizes were a significant impediment for many to obtain a collateral loan, so we lowered the minimums for both our standard short-term loan and line of credit offerings to $25,000. This is one of the lowest minimums on the market today. In doing this, we are making it possible for many more owners of fine art to tap the equity of their holdings to help finance the acquisition of additional works of art, other luxury assets, a business, or large, unexpected personal expenses.
Why would a collector consider an art loan over a traditional bank loan and what are the risks involved?
Traditional financing sources, such as banks, usually do not consider alternative assets such as art when putting them into their “underwriting box.” They focus on debt to income ratio; they focus on liquidity statements; they want to see your W2s, if you own a business, what your credit score is, etc. They try to fit you into their tight underwriting box and make you a fit for their borrowing criteria- if you don't fit, you get denied the loan.
All the while, collectors and individuals have extremely valuable assets in their possession which, in most cases, continue to grow in value. We have built our business on considering these valuable, alternative assets. Working with us is significantly simpler because we focus on just the value of the assets we're talking about, and not all disclosure of paperwork, the red tape, the regulations that traditional financing options require.
We do not require and credit checking or personal guarantees which allows our process to be simple, fast and discreet. As we do not require any of the above, the only risk for the client would be if they were to default on the loan.
What are the main reasons collectors take out loans against their art?
This varies by clients but the three biggest reasons are:
- They don’t want to sell - the work might be something passed down from a family member, part of a collection, or a piece that they know will continue to grow in value over time.
- Speed - Time sensitive transactions are something that we are very familiar with and we focus on executing our loans in a very little time frame to ensure our clients meet their deadlines.
- Discretion - Our process is very professional and private. Allowing clients to meet their financial needs securely.
Describe your typical art-collector client, what requests they come to you with and how you help them
This also really varies client by client. Clients come to us to address situations and meet opportunities, including starting up or running businesses, purchasing new works, expanding their existing collections or dealing with unexpected expenses. Borro also allows them to capitalize on the value of their fine art without the wait, and, more importantly, without the need to sell.
Most recently, we have had a lot of clients looking to leverage their existing collection to be able to have the liquidity to purchase new works.
What does the lending process look like?
Our loan process is easy and fast. The general process is the following:
- We will collect preliminary information on the work or collection in order to conduct an initial evaluation.
- Once the initial evaluation process is finalized, rates and terms will be agreed and collection will be arranged.
- When the work has been inspected, in our possession and any final evaluation processes are completed, we will issue the contract and payment once accepted.
- The client will be responsible for making their minimum monthly payments. Our contract has no prepayment penalties which allows our clients to be in control of the length they borrow for.
- Upon repayment of the loan in full, the work will be returned back to the client!
Bonus Question! What international art destination do you want to visit most?
What a great question! I’d say Florence, Italy. Being able to explore works, architecture and history from the Renaissance would be a dream come true!
Learn more from Shelley by watching the free webinar, UNLOCKING THE EQUITY IN FINE ART WITHOUT SELLING. She explores how you can use your existing inventory to raise funds without having to liquidate your assets.
Courtney Christensen, Christopher Barnekow, Kathleen Guzman, Alasdair Nichol