Art Loans Offer the Best of Both Worlds
It’s no surprise to any art lover that art can be a significant investment. According to a 2016 report by consultancy firm Knight Frank, more investors are allocating resources to the “collectibles” category, which includes art. However, creating liquidity can be a concern for many collectors. Art is a store of value— an asset that can be enjoyed and monetized. The question now becomes, how can you best access your art equity? In other terms, how do you turn your art into readily available dollars?
Until recently, if you required a measure of liquidity, you had to sell works of art. The art market is not liquid on a daily basis and values may fluctuate widely depending on supply, demand and trends. Transaction costs can be high and if the work has appreciated, tax is also a consideration.
Now, for the first time in Canada, there is an alternative option to selling work should a collector desire liquidity. LONO Fine Asset Lending offers loans based on the value of works of art. If you have a piece that you don’t want to part with, LONO will offer you up to 50% of the appraised value of the work. Loans can be termed on 12, 18 or 24-month periods, and the interest rates are typically 1.5–1.85% per month for smaller loans. These rates are less than the credit card rates, and the rates decline for larger loans.
Art loans are relatively new in Canada. In the US and Europe, several banks and smaller lenders offer a range of lending options to allow clients to borrow against their art collections. What’s particularly notable about LONO’S approach, in contrast to some of the larger international banks, is that LONO secures the loan against the art itself. If you do wish to sell your work, LONO also provides Pre-sale Loans so you can receive funds upfront while you wait for the right price. LONO requires a minimum artwork valuation of $20,000 and loans at a maximum of $1,000,000.
For those who meet the criteria, LONO offers a welcome solution to a long standing problem: retaining the work of art that you love and accessing the cash value in the short term. Perhaps it’s even an answer to a much older adage: having your cake, and eating it, too.