While the practice of art lending — using a work of art as loan collateral to extend credit — has roots in the earliest development of the modern art market, it has grown significantly in recent decades. As collectors increasingly manage their art collections from an investment perspective, they are increasingly open to art lending as a tool to re-deploy capital across their balance sheets.
The expanded interest in loans secured by fine art coincides with the emergence of independent, institutional art finance companies, such as Athena Art Finance, which specializes in financing solutions for the global art world. Athena recently participated at Invaluable’s 2019 Global Auction House Summit and joined in discussion on the importance of the use of data in decision-making and risk management in the lending process.
Athena uses art market pricing data analysis primarily as a risk-management tool, relying on data sets to help evaluate price and liquidity trends among artists. This type of analysis assists Athena in determining which artists’ works are eligible as collateral and how much credit can be extended to a given artwork. Moreover, the rise of platforms such as Lobus — whose mission is to provide both qualitative and quantitative assessment of an artwork’s value within the context of an artist’s career — can help further enrich the data analysis performed by Athena and facilitates overall confidence in its risk decisions.
On the heels of the Summit, we sat down with Athena’s Managing Directors Naomi Baigell and Nigel Glenday to better understand the who, what, when, and where of art lending, the factors that art finance organizations consider when lending against art, as well as other essential tips for those contemplating borrowing against a work of art in their collection.