How to borrow in order to acquire an art collection
Is it possible to take out a bank loan to buy works of art? The answer is yes, but this type of loan is made sparingly and for a select group of clients whose creditworthiness appeals to the bank. Technically, this type of loan does not differ from other large consumer loans. It is offered, however, only by private banking departments, which cater to every investment need their clients may have. As private banking managers told Kathimerini, loans for the purchase of works of art are not usual, either in Greece or abroad. «They are costly, in that they go through a complicated process that burdens both the clients and the bank,» a manager said. Since such loans are limited to private banking clients, it means that their portfolio is worth a minimum of 50,000 euros. Such a loan can be taken out only from the bank which manages the portfolio. These loans are not provided to clients who want to buy a single work of art to add to their collection or simply decorate their home, but only to those who wish to purchase a collection of works. These loans are strictly individual, not corporate. Moreover, the works of art must be insured by an insurance firm which is either a subsidiary of the bank or is approved by the bank. The second option is only awarded in exceptional cases. Furthermore, the works can only be insured only when they have been purchased at an auction. Another stipulation for the approval of such a loan is the estimation of the works. This is done by the bank’s own experts. An estimation report by an outside expert is almost never approved by the bank. A manager at Alpha Bank’s Art Advisory Department said that most of their clients invest in works of art with their own capital from their portfolio’s reserves. Loans are quite rare. This type of loan is offered by just three banks in Greece, through their private banking departments. These are Alpha Bank – which set up its Art Advisory Department just a month and a half ago – EFG Eurobank Ergasias and Citibank. This, however, does not preclude clients who wish to buy a work of art from asking for a regular consumer loan in any commercial bank. The specialized loan is taken usually by people active in buying and selling works of art and who face temporary liquidity problems. The loan is short term (no more than five years, although in special cases it can be extended to eight). The interest rate is variable and is set at Euribor plus a 2-3 percent spread. The amount ranges from 150,000 to 1.5 million euros. The loan covers only up to 60 percent of the collection’s value.
