The current value of loans to galleries and dealers is estimated to be between $1.4bn-2.1bn, or around 10% of the global art-secured lending market, according to the TEFAF Art Dealer Finance 2018 report. The report estimates the overall market at between $17bn-20bn.
The report found that less than 10% of the value of dealers’ inventories are financed by debt and nearly 90% would like better access to acquisition finance. Most dealers currently rely on retained earnings or co-investment from private investors to fund their businesses.
Compiled by art market research firm ArtTactic, the report surveyed 142 of the dealers and galleries participating in the TEFAF art fairs.
Anders Petterson, founder and managing director of ArtTactic, said: “We hope this report will become a resource for galleries and dealers to raise awareness of what finance options are available. For the providers of finance, it will give some insight into how art dealers are currently financing their activities, and… the challenges that are currently stopping the market from reaching its full potential."
Dealers have shied away from finance due to the perceived risks and 36%
of the art dealers surveyed said the risks of using loans against their inventory is "high to very high" due to the unpredictability of sales.
The report, launched to coincide with the TEFAF New York Spring fair, also highlighted the significant difference in size between the art lending markets in the US and the UK. It estimated that more than 90% of global art-secured lending to art dealers is underwritten in the US.
This is in part due to the US art-based lending market benefiting from a more advantageous legal framework. The Uniform Commercial Code allows borrowers to keep possession of the artworks while the loan is still outstanding.
Read more on the TEFAF Art Dealer Finance 2018 here.