The Art of Lending on Art

It should be readily apparent that loaning millions of dollars against an asset (or assets) that is highly mobile, easily destroyed, and somewhat illiquid presents a number of business and legal issues that require careful consideration. (Indeed, another issue is that the title to work may be suspect.) This article will focus on certain fundamental issues involved in structuring and documenting transactions involving loans secured by fine art located within the U.S. The focus will be on loans to individuals and entities who buy art for collection purposes, and not loans to persons or entities who are “in the business of” buying and selling art, such as art dealers and galleries.