Art Financing

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Art as an asset class has seen increasing growth.

When the first Art and Finance report was published by Deloitte in 2011, one-third of wealth managers said they were aware of art as an asset class.  In 2014, only 53% of wealth managers believed art should be included as part of a wealth management service.  However, this jumped to 78% in 2016.  In 2021, 85% said the same.  Art market growth and higher valuation means more demand, and more wealth is being allocated to art as part of a holistic investment and wealth management strategy.

Art financing has gained popularity in recent years as the art market continues to grow, and artworks exhibit significant value appreciation. This specialized form of financing offers a range of benefits to art owners, investors, and collectors, allowing them to unlock the value of their art assets.

Forms of art financing

The common forms of art financing, include:

  1. Art-Backed Loans: Art-secured loans involve using an artwork as collateral to obtain a loan from a financial institution. The lender evaluates the value, provenance, and market demand of the artwork to determine the loan amount. Art-backed loans provide immediate access to funds while allowing the borrower to retain ownership of the artwork.
  2. Art Investment Funds: Art investment funds pool together capital from multiple investors and use it to purchase and manage a portfolio of artworks. Investors can then benefit from the potential appreciation of the art over time. These funds offer an opportunity to diversify investment portfolios and participate in the art market without the need for individual art ownership.
  3. Sales and Leaseback: In a sales and leaseback arrangement, an artwork is sold to a financial institution and immediately leased back to the original owner for a specified period. This allows the owner to obtain immediate funds while retaining possession and enjoying the artwork. At the end of the lease term, the artwork can be repurchased or sold.
  4. Auction Financing: Auction houses may offer financing options to potential buyers, allowing them to secure the necessary funds to participate in an auction. This allows bidders to compete confidently, knowing that they have the financial resources available to make a purchase.


Art financing can provide various benefits to art owners and investors. These include:

  1. Liquidity: Art financing allows art owners to access capital without needing to sell their artworks outright, providing liquidity and financial flexibility.
  2. Investment Diversification: Art investment funds allow investors to diversify their portfolios by including art assets, which can provide potential long-term returns.
  3. Opportunity for Growth: Art-backed loans can help individuals acquire new artworks that have the potential to appreciate in value over time.
  4. Tax and Estate Planning: Art financing can be a useful tool for managing tax liabilities and estate planning strategies related to valuable art collections.

Recent developments


A number of art registries already use blockchain to offer registration and certificates for art.  Using blockchain means that all the information about a work of art is entered on the chain, so ownership of the work can be tracked and its characteristics recorded in a form that cannot be modified.

NFT / Fractional Ownership

The most active and experimental area has been in investment in art, notably fractional ownership or tokenisation, allowing individuals to buy a small share of a work of art and trade it.  From a collector’s viewpoint, they could list a percentage of their work on a blockchain platform and investors then buy into that percentage enabling the collector to raise capital.

Unfortunately, this is still in the early stage of development, and the legal framework continues to be developed.

Key considerations for financiers in relation to loans secured on art

Valuation and title

Valuation is always problematic as the art world is very small and owners are concerned with confidentiality.  Ownership of the art needs to be traced from birth to its acquisition by the current owner.  This will also include checking that any necessary export licences were obtained on previous dealings with the art, and considering whether any will be required if the security has to be enforced.  Further, additional care would be needed if an art is subject to possible restitution claim.

Ancillary security

Financiers would usually seek rights against a seller or valuer. Where the borrower is purchasing the art, however, the seller seldom gives an outright guarantee of authenticity, and an auction house is likely to restrict its potential liability by the terms of the auction contract.

Type of security interest

Security over a work of art may be in the form of a mortgage, charge or pledge. 

  • A legal mortgage (often referred to in this context as a “chattel mortgage”) involves the transfer of legal ownership in the art to the lender, subject to the borrower’s right to re-transfer on repayment, and will be contained in a written agreement. The mortgage will be equitable where the borrower’s interest in the work of art is itself an equitable one, such as an interest under a trust.
  • A charge involves an agreement by the borrower to give the lender a proprietary interest in an asset as security for a liability. In most cases this is done very simply by the borrower executing a document by which the debtor is expressed to charge a particular asset as security for a particular debt.
  • Pledge.  A pledge is an altogether different form of security. It requires an actual or constructive delivery of possession of the work of art to the lender.

Key Takeaways

Art financing offers a range of options for individuals, collectors, and investors to leverage the value of their art assets. It provides opportunities for liquidity, asset growth, and investment diversification within the dynamic art market. However, it is essential to consider individual circumstances, seek professional advice, and conduct thorough due diligence to make well-informed decisions regarding art financing. 

To learn more about our services and how we can assist you in this space (whether you are an art owner, financier, auction house, or investor), please contact us.

  Alfred Leung, Partner (; 852 3468 7202)

YTL LLP is a law firm headquartered in Hong Kong, China.  This article is general in nature is not intended to constitute legal advice.