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Sometimes the perfect investment is right there – but you haven’t got the ready cash until it’s too late.
Banks understand this, of course, when it comes to property, as they don’t make you save up for 30 years to buy a house. Own it now, pay it off later. The asset – the house – becomes the collateral. The same with a car loan.
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But what if you could do this with other types of investment? Margin lending is one well-known method for investing in shares, where you borrow money to buy stocks, using them as security.
The problem, as many a burnt stockmarket investor has found to their peril, is that these loans can be very risky and you can face huge losses if the market falls. You could also get an unexpected margin call if your lender decides to lower the maximum LVR for one of your investments. Worse, you could even end up owing more than your original investment was worth.
Invest now, pay later
When it comes to alternative assets, such as high-value collectibles, it’s always been pay to play. If you don’t have the cash available when the perfect item goes under the hammer, you lose out.
Given that certain categories of asset are only auctioned a couple of times a year, it can be very hard for collectors to get the timing right. What if school fees are due just as a major auction of Charles Blackman takes place?
Now there’s an answer. Acquisition finance is a new form of funding that lets investors in art, antiques, jewellery, sports memorabilia and stamps access money fast and easily when buying valuable items. It recognises that what you are buy has considerable worth and should retain a portion of that worth.
Certain categories of asset are only auctioned a couple of times a year so collectors run the risk of losing out if they don't have the cash available at the right time.
The no-risk loan
So how does it work? When you want to bid at auction, you can access a pre-approved line of credit for up to 40 per cent of the low auction estimate on each lot. The lender will settle directly with the auction house for the loan portion of the purchase price and store the asset securely for you.
We believe acquisition finance is long overdue in the Australian market. Auction houses see it as something that will help stimulate investment and restore confidence in the Australian art market as well as other collectible categories.
Steven Beinart, co-founder, Assetline
Steven Beinart is the co-founder of personal asset lending specialist Assetline. He has over 20 years of international senior management and board experience in the facility services, healthcare and personal care Industries.
