Overview on Art Finance

art-gallery-art-finance-and-yieldstreet

New to Art Finance? Read below to learn more.

What is art finance?

Art Finance is debt-based lending with art as the collateral backing the loan. This is similar to real estate investments on the Yieldstreet platform—investors looking to acquire new real estate will use a property as collateral to help them get a loan.

Art finance as an industry

The Deloitte Art & Finance report gives a number of key insights into the history and potential future of Art Finance. It suggested that about $1.62T worth of art is held privately, and that number is expected to continue to increase. With 88% of wealth managers suggesting that art acquisition should be part of a wealth management strategy, the art market is growing—especially in the US, UK, and now China. And Art Finance is just scratching the surface—the industry has an estimated value between $17–$20B according to the report.

Further, Art Finance is uniquely positioned as an asset with typically low stock market correlation—smart investments in art often weather market downturns well. Blue-chip works by universally appreciated modern artists with strong provenance such as Jackson Pollock or Roy Lichtenstein have a high value and can retain a surprising amount of value, remaining stable during a downturn.

art-finance-overview

Who borrows?

There are three main types of borrowers within art finance: collectors, art dealers, and corporate clients.

Collectors who use art as collateral can have many reasons. For some, it’s a matter of leveraging a current piece to acquire more pieces, paying off the loan over time. Others are looking for sheer liquidity. Collectors are unique. Often art pieces aren’t seen as just an investment, but as an expression of a passion, and can serve as a multi-generational asset.

Another borrower type is art dealers. Banks typically have narrow criteria for issuing loans. A dealer’s lumpy cash-flows and asset/liability mismatches mean they often don’t fit into that narrow criteria. This is where a data analytics approach can help evaluate assets and risks, allowing a more flexible borrower profile.

And lastly, borrowers can also be corporate clients, or trusts and estates, and their borrowing activities can essentially provide them with liquidity.

Invest in Art Today

Collateral requirements

There are specific criteria for the types of art pieces that can be used as collateral. We generally look for blue-chip art from established artists with established provenance. The targeted maximum loan-to value ratio of 50%. The artwork is evaluated by in-house or independent appraisers. These criteria aim to confirm the value of the collateral and to make sure the loan is protected.

This communication and the information contained in this article are provided for general informational purposes only and should neither be construed nor intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Any link to a third-party website (or article contained therein) is not an endorsement, authorization or representation of our affiliation with that third party (or article). We do not exercise control over third-party websites, and we are not responsible or liable for the accuracy, legality, appropriateness or any other aspect of such website (or article contained therein).
How helpful is this content?

Share this article:

Join a community of 350,000+ members

  • Gain access to unique offerings previously reserved for the ultra-wealthy

  • Customize your portfolio for income, growth, or a balance of both

  • Get started today and earn an average IRR of over 8%

What investors are saying about Yieldstreet

Apr 2022

The due diligence, risk management, and product education materials are thorough, excellent, and easy to use and understand.

Manoj J
Member since 2019
Apr 2022

Excellent and unique selections that I can't find elsewhere.

Jonathan S
Member since 2019
Apr 2022

The platform delivers in a very concise manner. Easy to get a clear understanding at a glance from the web or mobile app.

Tim S
Member since 2021
The testimonials presented on this page have been provided by actual investors in Yieldstreet funds without compensation. Yieldstreet has selected the testimonials, and certain testimonials have been edited to remove personally identifiable information and for brevity. Testimonials were not selected based on objective or random criteria, but rather were selected based on Yieldstreet's understanding of its relationship with the providers of the testimonials. The uncompensated testimonials presented here may not be representative of other investors' experiences, and there can be no guarantee that investors will experience future performance or success consistent with the testimonials presented.

The Yield

Our weekly podcast providing ideas about how to make money work for you and bring you closer to your dreams.

Since inception, over $2.5B has been invested on Yieldstreet

Join today for free to access alternative investment opportunities.