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Time and tide wait for no man - and never is this more true than when a time-sensitive investment opportunity presents itself.
The problem is that most high net worth investors don’t keep a lot of their wealth as cash. Instead they have a diversified portfolio likely containing a wide range of both liquid and illiquid assets.
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This presents a challenge when there’s a need for ready money. It could be for a range of reasons: a large payment such as school fees may be due, funds for a business cash crunch, or for an absolute bargain has just gone on the market.
Many brokers know their client is "good for" a loan but how a bank views it can be quite different. Banks lend almost exclusively against property with very little regard for other valuable assets. So if they don’t recognise the value of your client's alternative investments as valid collateral for a loan, they may be stuck selling them to raise the funds they need.
But that's easier said than done. There are two problems with this:
1. Speed
Selling valuable items can take many months as it involves extensive appraisals as well as identifying target buyers. Certain categories of asset are only auctioned a couple of times a year. The size of the Australian market also makes it much harder to find buyers for more unusual collectibles. Generally the auction process takes three months, with another couple of months before you receive payment.
2. Value
The quicker you sell, the lower the price you’ll get. The last thing you want is to fire sale an asset that could go for several times the amount if you are able to wait and sell it properly for its true value.
One way you can unlock the value in your client's alternative asset immediately is with a sale advance loan. These loans let you access a substantial portion of an item's value straight away - within 24 hours even - and the rest later on. It’s ideal for those who want to sell high value assets such as collectibles, heirloom jewellery or luxury boats and cars.
Liquidity has always been a problem for alternative assets. But now there’s no need to feel "locked in" for the medium-to-longer term. Instead, maximise your immediate liquidity as well as your final sales price. As it's a short term loan the overall cost in interest is low, and far less than the value lost through a too-quick sale.
Steven Beinart, co-founder Assetline
Steven Beinart is the co-founder of personal asset lending specialist Assetline. He has over twenty years of international senior management and board experience in the facility services, healthcare and personal care Industries
