Art Financing Companies
Leasing paintings and fine art to companies in the UK
We are pleased to have just completed a £47,520.00+VAT lease for a company based in the UK that has bought seven paintings from three different artists. If you are looking to lease paintings and / or fine art, please read this case study. It serves as a quick guide to how it works.
Why did our London based customer lease the paintings?
Our customer is a director of a company based in London. He clearly has an interest in art and is taking a view that the value of the artists paintings will rise over the coming years. The strategy is to build a portfolio of about £250,000 of paintings this year.
His business is successful, it is making a good profit and generating strong cash flow. We do not know for sure, but we do feel confident this particular customer could have easily paid for the paintings in cash from either his business or personal finance.
So why did he use leasing to finance the purchase of the paintings?
The main reason is that he is looking to hold onto his cash for other purposes in his business. He knows that over time, the value of his investment will / should increase. He is taking the position that it is cheaper to buy the paintings now than to wait a few years buying other paintings from the same artist when there might be a price increase. The cost of the lease interest – hopefully – will be lower than the increase in value of the paintings.
His first acquisition is seven paintings from three different artists. He views this as an initial investment and is looking to replicate this idea again, potentially up to another four times this year.
How much are the fine art lease repayments?
In this case, our client looked to finance the paintings over a two-year period. The monthly repayments are £2,262.52+VAT per month. To put this into perspective, he could have leased over a five-year term where the monthly repayments would have then been under £980.00+VAT per month. A £250,000.00+VAT investment would work out at circa £4,900.00+VAT per month.
Financing for fine art and paintings from a UK gallery
So far, we have only focused on the benefits to the end user customer. However, the supplier of the fine art and paintings in the UK – the gallery – thinks this is brilliant. The gallery presents the art and does all the negotiation on price. They invoice a bank as opposed to the client directly and gets paid within 48 hours. It is fantastic for cash flow.
We believe the real benefit is not the speed of invoice payment, but the increase in order values. This client – and we do not know if this is the case – might have had only £25,000.00 to spend for example. When you introduce the concept of fine art leasing, the client is focused on the monthly repayments, not the capital amount. So, it could be the case you take what might have been a £25,000.00 order and turn it into a £50,000.00 order.
Now take this a step further, what happens when this particular artist has a few more paintings for sale, say costing you £10,000.00, the gallery owner, can call the customer and focus his mind on a £200.00 per month investment as opposed to asking for the full investment upfront.
Call me, Scott Rogers on 01494 611456 or email email@example.com for more information.