Tom McDermott, Chief Commercial Officer, Borro
Tom McDermott,
Chief Commercial Officer,

Great things come from adversity. The Great Recession took a serious toll on both businesses and consumers. Credit slowed, then seeped into traditional lending, eventually coming to a screeching standstill. Even those with stellar credit scores suffered in the dearth of lending sources. Prior to the meltdown, small businesses could obtain credit through loans guaranteed by the Small Business Administration, but that avenue came to a halt and squeezed businesses at a time when they most needed help. Beset by an arduous loan process that demanded punishing documentation, invasive credit requests and endless delays, borrowers needed an alternative solution.

Luxury Assets Financing

Launched in the UK in 2009, Borro provides liquidity to businesses and individuals secured by luxury assets. Common assets include: art and antiques, watches and jewelry, gold and precious metals, classic and exotic automobiles, fine wine and luxury handbags. More esoteric assets have included: a Harry Houdini collection, the leather motorcycle jacket Steve McQueen wore when filming Bullit, Beatles memorabilia; sports items, including the 1996 and 2004 Summer Olympics gold medals; and New York Giants Super Bowl rings and pendants.

Borro has arranged more than $180 million in loans against luxury assets and collectibles. In 2014, it closed a $112 million debt facility with Victory Park Capital to fund additional loans to customers. Borro’s success is driven by a track record of execution: delivering on its promise to deliver funds quickly, generally within 24 hours. A typical loan amount can be up to 70% of the asset’s appraised value. In most cases, the funds are transferred to the customer’s account immediately. However, artwork may take longer because of the lengthier appraisal process.

An Edge

Entrepreneurs and individuals find luxury assets lending particularly useful for several reasons. Unlike more traditional lending, a business owner may undertake as part of a strategic expansion, Borro’s loans are designed to fix an immediate problem or seize on a timely opportunity. Entrepreneurs and small business owners constantly grapple with cash-flow, or they may want to take advantage of a new opportunity that isn’t in this month’s budget. Luxury assets financing is a straightforward choice to provide capital and access to liquidity because the only factor that matters is the asset’s worth.

How it Works

Factors and ABL lenders can turn to luxury assets lending to bridge the gap between the amounts underwriters allow them to lend versus the amount of capital the borrower needs. The process is best demonstrated through specific examples:

Example A: A business owner needs cash to cover a shipment of inventory and turns to a factoring company seeking a loan against account receivables. Simultaneously, the owner is trying to qualify for a new mortgage but reached the limit with the factoring company. Using a credit card for funding can wreak havoc with the leverage ratio that affects the FICO score that determines a mortgage rate. That misstep could cost the business owner dearly in higher mortgage rates over a 30-year term. With luxury assets financing, the loan is between the company and the customer; credit reporting agencies are not involved. In addition, limited loan documentation is required. The application form can be completed in five minutes online and funds are processed immediately. In one case, a customer borrowed against a Ferrari. A flatbed truck driver picked it up, inspected it and confirmed its condition by cellphone to the appraiser. Funds were wired before the truck had even pulled out of the customer’s driveway.

Example B: An unexpected tax bill arrives. Working capital can fund operations when customers are slow to pay, or because the individual needs to make payroll. Outstanding debt can crush a bottom line, and collecting from past-due customers can be both time consuming and expensive. There’s no guarantee that the customer will pay within the owner’s time frame. Luxury assets lending solves the problem, and its quick turnaround time guarantees the cash when it’s needed.

Example C: An entrepreneur needs a bridge loan for machinery or other capital equipment until permanent financing can be arranged. Because luxury assets lending offers complete and total discretion, there’s no record of the transaction that could end up in the primary banker’s files.

Example D: A customer owns a health insurance consulting company, and needs $7,000 to cover some unforeseen business expenses. He pledges a Picasso pencil sketch, valued at $12,000 and receives a $7,000 loan immediately.

Example E: A customer starts a second small business and applies for a Small Business Loan. Told that it could take up to two months, she contacts Borro to discuss a loan against her $15,000 ring.


A set-up fee covers the costs of obtaining the appraisal, logistics, storage, insurance and other origination costs. The fee is assessed when the customer agrees to the loan, but may be partially offset by our loyalty reward program, extended to repeat customers. A borrower may make payments by wiring funds, writing a check or using a debit card. Borrowers must carefully consider the clearing process associated with each repayment form; if a loan becomes past due, interest charges can accrue.

Other Advantages

Other benefits of luxury assets lending include:

  • Fast response times – Once the appraisal is done, and we receive possession of the asset, funds are wired immediately.
  • Privacy – There are no credit and/or income checks.
  • Smart financial option – A luxury assets loan is a better option than a fire sale.
  • Simple process – A phone call, a short application, and an appraisal and possession transfer are all that are required.
  • No prepayment fees – The customer can repay the loan on a convenient frame.
  • Professional appraisers – Appraisers are highly credentialed and experienced with recognized auction houses.
  • Secure asset storage – All assets are stored for safekeeping at an insured, climate- controlled location.
  • High loan to value ratios – Loans usually are made for 70% of the asset’s appraised value.
  • Tax advantages – Loans avoid the tax liability associated with liquidating an appreciated asset. Borrowing costs vary from 1% to 4.99% in interest per month, depending on the loan product, size of the loan and the quality of the asset. Borro loans typically are on the books from six to 10 months. Although the standard term is six months, a customer may either prepay, without penalties, or extend the term beyond six months, as long as the borrower is current on the loan at the end of the initial term.
Global Network

In addition to luxury assets lending, Borro offers a sales advance program to give a client a front-end payment that is up to 70% of an asset’s value while it is being sold — a kind of down payment on the sale. A successful asset sale depends not only on getting a good price, but also having connections to a global network of contacts at major auction houses and private galleries that grant access to the major players who will pay the highest price.

A case in point: A customer had an expensive piece of jewelry he wanted to sell, and Borro made a $250,000 loan against it. Through connections at a private auction at Sotheby’s, the jewelry was successfully sold for $750,000. The customer received the difference, minus interest charges and a fee for serving as agent for the transaction.

Value Proposition

All in all, luxury asset lending offers a good value proposition for its target borrowers. Innovative products can solve liquidity issues for entrepreneurs and asset-rich customers. Small business is the economic engine for growth, and luxury assets lending can capitalize on this reality by being a better, smarter and faster option.

Tom McDermott is chief commercial officer of Borro Luxury Asset Lending.