When global economic and political instability is on the rise and the stock market is stumbling, people are often in need of a pool of short-term capital, whether its for seizing a new investment opportunity, to pay children’s university fees or for a myriad of other reasons. There is the old saying: “asset rich but cash poor”. Many people can relate to having been in that very situation at one point or another. It is a bit awkward to discuss with peers and everyone assumes that they are the only ones in that predicament. Not true at all (in fact that is Myth #1 debunked!).
The service we provide is very simple: we allow you to tap temporarily into the hidden value held in your own luxury assets. Many collectibles and luxury assets have skyrocketed in value. For instance, ArtTactic Global Art Market Outlook 2018 found that fine-art auction totals soared 72% in the past year. Companies like Birch Gold Group, which specialize in the investment purchase of precious metals, are growing faster than ever before.
So, it is clear that people are locking up their investments in some of these non-traditional assets such as fine art, diamonds, and precious metals. However, few high net worth people (including the wealth managers they depend on) know what to do in the event of short-term liquidity issues and a need to access to immediate cash. Add to all of that: the variety of myths about borrowing against luxury assets:
Myth #1: Luxury-asset lending is for the broke and desperate, not me.
You are not the only one who has (at least for short periods of time) tied up everything you own in assets. You are not the only one who has “timing” issues i.e. you need cash quicker than it will become available by another expected means. You are not the only one who would like to quickly and discreetly access short term cash in a no fuss manner. The majority of our clients are successful high-net worth individuals looking to access short term cash for a need or opportunity. It is just that simple.
Myth #2: Is this like a pawn shop?
We could not be more opposite, in every aspect of our operation. We are appointment based in a secure and professional office building. You will not run into people in a line or waiting room. Every part of the loan transaction is based upon utmost confidentiality.
Myth #3: Fine art is the only collectible that can be used in a luxury- asset backed loan.
That may still be true at some banks and alternative lenders, but the industry has broadened its horizons in recent years. We lend against a variety of luxury assets including diamonds, jewellery, precious metals, fine art, and performance cars/supercars/collectible cars. Please connect with us to discuss if your asset can be appropriately used as collateral.
Myth #4: It takes too long to secure a loan against luxury assets.
This is untrue. We need to take prudent steps to ensure that your asset can adequately collateralize your loan. This can often be accomplished in 3-5 days. Remember, bank loans can take weeks and require endless paperwork about your credit situation, employment, income, debts etc.…We require none of that.
Myth #5: An asset-backed loan would be prohibitively expensive.
This is untrue. Please consider our rates as compared to traditional bank loans and also as compared to secondary lenders (who provide high interest loans against real property). A traditional bank loan is based primarily on your credit rating and cash flow. Secondary real estate lenders have massively high interest rates and a bundle of hidden fees, that recur every couple of years. Our loan process does not focus on you, your cash flow, your income, or your private family financial details. We focus 100% on the asset and whether it holds enough value to collateralize your loan.
Myth #6: I should just sell my luxury asset, if I need quick cash.
We should suggest the answer on many occasions is a resounding “no”. If you need immediately liquidity, you would also be selling that asset in a distress situation and you might be inclined (or perhaps forced) to accept much less than market value. There are tax and other implications to a sale. Using an auction house to maximize value will likely takes months and then there are the auction fees/commissions. For family heirlooms or other sentimental assets, the decision to sell might be emotional and difficult.
In an article in the Financial Times from last year (see link below), Lucy Warwick-Ching opens up the exclusive world of luxury-based lending, a finance system already used and enjoyed by the ultra-wealthy to close property deals, make quick investments or pay tax. Experts note that "It tends to be clients with irregular cash flow who have access to bank debt and this luxury asset lending is the top-up, flexible portion of their debt."
Lucy further describes that "Wealthy individuals like luxury asset lenders because they promise discretion, expert valuations and a tailored service, and claim to be able to offer high-end loans within hours. They also tend not to run credit checks and so leave no credit footprint."
High-end mortgage brokers tell us that they are continuing to see a demand for luxury-asset based loans from their high net worth clients, who simply have cash tied up in other ventures but require a short to mid-term infusion. Borrow Bridge Funds fills this growing niche and offers an invaluable service to our clients.