Approval Process 

The process of borrowing is straightforward. Your advisor, in tandem with an Asha Purti Loans fine art credit executive, will assess your overall financial profile to help identify opportunities for you to borrow against your art. A proposal will then be provided to you outlining a borrowing structure for your consideration. 

From there, a professional appraiser will be engaged to determine the value of your collection that will be used for borrowing. The loan amount is generally limited to 50% of the appraised value. Because the value of art fluctuates, the art used as collateral will be appraised annually, while remaining on your walls.

The loan, once approved, will be documented and closed with all the requisite information such as a bill of sale, insurance certificates, appraisal, and so forth. The funds will then be disbursed so you may execute against your opportunity.

Not every collector and collection qualifies for art lending. Typically, a borrower must have a collection with an overall value of minimum of Rs.1 lac or more. Also, collections usually must have diversified holdings among artists and time periods, although we have selectively made art loans based on one particularly strong piece of art. Our customary proposition is to lend against a diversified collection rather than one piece of art.

Loan Advantages 

You might use the funds to acquire additional artwork or to take advantage of another opportunity. Borrowing against a potentially appreciating asset (like a lot of fine art, recently) for other assets which may also appreciate can have financial advantages such as positive leverage to achieve asset diversification. What you may pay in interest on an art-related loan is generally less than the fees for an unsecured loan.

Such loans can also be preferable to selling artwork at an inopportune time — for example, when you are exhibiting your collection. You may also have a deep aesthetic or emotional connection to certain pieces and would not wish to put them up for auction. On top of that, with a loan rather than a sale, you may avoid having to deal with taxes on art sales, which are not afforded the same favorable tax treatment as other asset classes.

You maintain ownership of the collateralized artwork and usually will still be able to display the pieces as you normally would. They can hang on your walls or, with appropriate insurance, guarantees, and other agreements in place, may be lent for display in a gallery or museum.