We are set up to provide financing against fine art, sculptures and artifacts.
Properly formatted fine art financing requires that the piece be authenticated, complete with attribution (to the hand of the artist, and not a student). Many historically significant artists taught their pupils by having them re-create original masterpieces, thus launching into the marketplace several “original” works, but only one can have true attribution.
We can provide financing against Old Masters, assuming each piece is well documented, has exhibit history, and solid (well-known) provenance.
As true with lending against any asset, should a borrower default, lenders must be able to liquidate the asset in an efficient manner in order to be reimbursed the capital loaned to the borrower. This is often very tricky. It is extremely difficult to gauge exactly what a specific painting or sculpture would go for in the market place, at auction or private sale. The valuation placed on a painting or sculpture is always based on the current expected fair market value which would be rendered by an auction-based liquidation. There are many unknowns in this dynamic, especially since the piece may not be sold for years into loan term, where the buyer’s market might have changed. Also, it’s difficult to market the piece during the loan term as there are confidentiality requirements for the piece and its owner. Often times, this leaves the lender in a reactionary position should there be a loan default, where the buyer’s marketplace must be built at the last minute. These issues cause lenders to render conservative valuation proposals in order to hedge against a potential loss.
We utilize credit facilities and art-based lending hedge funds to provide financing for asset owners. Our financiers are extremely established, and have extensive marketplace knowledge in order to navigate through these difficult variables. The result is solid financing proposals for each borrower.
The most important variable for any asset-backed loan is the protection of the asset. If the piece or sculpture is in a properly insured and protected environment, complete with appropriate atmospheric conditions, and if our Financier’s Compliance and insurer stipulates that the current safe-keeping facility is acceptable, then the asset may remain there. Should this be the case, then the custodial relationship at that facility must provide our financier with perfect custody/securitization of the asset at all times during the loan term.
Should the current facility not be acceptable, Compliance will offer different acceptable facilities to the borrower for consideration, to the mutual agreement of the parties.
We do not require any up-front fees to provide financing. However, after a loan is approved, there are instances when our financiers will require a due diligence fee in order to inspect and authenticate the asset, including the ordering of an appraisal. This is requested on a case-by-case basis, and not always required. Should there be an up-front fee, the financier will alert us to the requirement, explaining in detail what the use of funds will be, and how much is due.
Once a Term Sheet is signed, the loan should fund within 21 days.
The major component of security is the asset and its value. However, it is required that a borrower demonstrate how they intend to service the obligation of the loan. This is more a documented condition of the loan, and not a due diligence item.
Yes. This is actually a unique program and service we provide for our borrowers called the Loan to Sale (LTS) Program. Often times, asset owners would like to liquidate their asset. Without a buyer’s market, this is often difficult to do. We are able to market the asset to our buyers (we have multiple buyer consortiums) during the loan term. The borrower approves the sale (price) and when the painting is sold, the outstanding debt against the painting gets retired, and the borrower (seller) receives the net proceeds. This program works best when an asset owner needs immediate capital—the loan serves as an “initial lump-sum liquidity event” against the future sale of the asset, and the borrower doesn’t have to go through the difficult and time-consuming effort of marketing and selling the asset on their own.
Client-centricity. We understand our clients before we begin working on their loan. We want our borrowers to feel comfortable about their transaction and satisfied with the financing proposal, so we take our time to craft a unique financing approach for each client. We are also very transparent and have no issues disclosing all information to our clients along the way.
All financing is full recourse to the asset and potentially to the borrower, depending on the transaction type.
We are set up to provide financing against cut and polished diamonds.
Properly formatted diamond financing requires that the asset be authenticated, preferably with a GIA certificate. Any non-GIA certified diamonds may require additional due diligence. Each diamond must carry a bill of sale/acquisition documentation confirming how the diamond came into possession of the asset owner.
As true with lending against any asset, should a borrower default, lenders must be able to liquidate the asset in an efficient manner in order to be reimbursed the capital loaned to the borrower. This is often very tricky. It is extremely difficult to gauge exactly what a diamond may go for in the market place, at auction or private sale. It is a very seasonal business. The valuation placed on a diamond is always based on the current expected fair market value which would be rendered by either an auction house estimate of value or specific published index/report. There are many unknowns in this dynamic, especially since the piece may not be sold for months or years within the loan term, where the buyer’s market might have changed. Also, it’s difficult to market the piece during the loan term as there are confidentiality requirements for the piece and its owner. Often times, this leaves the lender in a reactionary position should there be a loan default, where the buyer’s marketplace must be built at the last minute. These issues cause lenders to render conservative valuation proposals in order to hedge against a potential loss.
We utilize credit facilities and asset-based lending hedge funds to provide financing for asset owners. Our financiers are extremely knowledgeable, and have substantial marketplace knowledge in order to navigate through these difficult variables. The result is solid financing proposals for each borrower.
The most important variable for any asset-backed loan is the protection of the asset. If the diamond is in a properly insured and protected environment (such as Malca Amit, Brinks or Ferrari), complete with appropriate conditions, and if our Financier’s Compliance and insurer stipulates that the current safe-keeping facility is acceptable, then the asset may remain there. Should this be the case, then the custodial relationship at that facility must provide our financier with perfect custody/securitization of the asset at all times during the loan term.
Should the current facility not be acceptable, Compliance will offer different acceptable facilities to the borrower for consideration, to the agreement of the parties.
We do not require any up-front fees to provide financing. However, after a loan is approved, there are instances where our financiers will require a due diligence fee in order to inspect and authenticate the asset, including the ordering of an appraisal. This may be required, and is considered only on a case-by-case basis. Should there be an up-front fee, the financier will alert us to the requirement, explaining in detail what the use of funds will be, and how much is due.
Once a Term Sheet is signed, the loan should fund within 21 days.
The major component of security is the asset and its value. However, it is required that a borrower demonstrate how they intend to service the obligation of the loan. This is more a documented condition of the loan, and not a due diligence item. In certain instances, financiers may consider maintaining an interest reserve for the duration of the loan.
Yes. This is actually a unique service we provide for our borrowers. Often times, asset owners would like to liquidate their asset. The borrower is able to market the asset to their buyers during the loan term, and either retire the outstanding debt with the sale proceeds or replace the collateral with a different (approved) asset.
Client-centricity. We understand our clients before we begin working on their loan. We want our borrowers to feel comfortable about their transaction and satisfied with the financing proposal, so we take our time to craft a unique financing approach for each client. We are also very transparent, and have no issues disclosing all information to our clients along the way. We can also provide financing to specific borrowers in a “line of credit” format, provided we are very comfortable with the borrower and his business model.
All financing is full recourse to the asset and potentially to the borrower, depending on the transaction type.
We have developed a program to provide income against the accepted value of a diamond, allowing the asset owner to receive income over five (5) years versus having to repay a loan.