Part I of this Article introduces the reader to the typical types of loans that banks make, includes an in-depth description of a secured loan, and finishes with a discussion of the due diligence requirements of banks. Part II identifies the unique complexities posed by art when it is used as collateral, comparing and contrasting the banks’ process when approving a loan secured by commonly-used assets versus a loan secured by art. Part III discusses the banks’ growing willingness to approve art-backed loans, and identifies the safeguards built into such deals. Part IV introduces the sub-prime lenders of the art market, discussing pawn shop regulations and loans made by “luxury pawn shops” and “art dealers.” Part V compares and contrasts bank loans and “art lender” loans with an emphasis on defaulting borrowers. Part VI discusses the effects of art-backed loans in general, predicting that such practices may lead to a significant drop in the price of art in the market, placing more works in private collections, and thereby decreasing the amount of art available for viewing to the general public. Finally, Part VII briefly concludes.
Recommended CitationValerie Medelyan, The Art of a Loan: “When the Loan Sharks Meet Damien Hirst’s ‘$12-Million Stuffed Shark’”, 35 Pace L. Rev. 643 (2014)
Available at: http://digitalcommons.pace.edu/plr/vol35/iss2/4