Wealthy Borrowers Use Luxury Assets as Collateral for Quick Loans

Wealthy borrowers are using luxury assets, including rare watches, handbags, and art collections, as collateral for short-term loans. These loans provide quick access to cash without the need for traditional bank paperwork or personal guarantees. Lenders fund the loans often within a day, and if not repaid, they sell the pledged items.

Luxury Asset Capital, based in Denver, operates with offices in New York, Los Angeles, and Florida. The firm, founded in 2016, has lent more than $1 billion over the past decade. It reported revenue of $65 million last year and achieved profitability in its first year.

The company's online platform, Borro, handles loans up to $5 million, with average loans between $15,000 and $20,000. Borrowers pledge items such as Rolex and Patek watches, Hermès Birkin and Kelly bags, diamonds, jewelry, and fine art. Loan-to-value ratios range from 40% to 65%, depending on the asset's liquidity.

One borrower used an eight-carat diamond ring valued at over $600,000 as collateral to cover a margin call and later repaid the loan to retrieve the item. Another client pledged an Emmy award for a loan. A client in Beverly Hills borrowed $30,000 against a custom Hermès Mini Birkin bag valued at $33,000 to finance property renovations.

A London-based business owner has borrowed multiple times against diamond-encrusted Birkin bags and Van Cleef & Arpels jewelry to fund business operations, receiving funds within hours after shipping items.

Loans typically last 30 to 120 days, with options to extend or renew. Interest rates are in the low single digits per month, plus costs for insurance and storage. The firm reports a repeat borrowing rate of about 74%. Compared to traditional banks, which often limit lending to securities or real estate and cap art loans at 50% of value, luxury asset lenders accept a wider range of items, including Super Bowl rings and samurai swords.

The firm partners with auction houses like Christie’s and Sotheby’s to sell unredeemed collateral. Dewey Burke, founder and CEO of Luxury Asset Capital, stated that many clients are unaware they can use luxury assets for loans. He noted that one watch client uses loans to cycle through purchases while on waitlists at Rolex and Patek.

Luxury asset lending has historical roots, such as the Medici family's practices in 14th-century Florence. Today, the sector has grown, with Luxury Asset Capital's loan book expanding 25-fold over the past decade. The firm serves clients in all 50 states through its online and physical locations.