Ever since the first artists painted the first buffalos on the walls of caves, the art world has probably been rife with cheating and chicanery, fraud and forgeries. Hardly a week goes by without news of a major gallery selling fakes, a dealer stealing from the artists, or a museum de-accessioning a beloved piece that has been deemed dubious.
The field of art financing is an especially tricky one, a truly slippery slope. Galleries often support their artists through a variety of informal agreements. Usually, these are productive and satisfactory for all concerned. But occasionally these relationships end in pain, recriminations and lawsuits.
But today, art is Big Business. With pieces selling often in the range of $100-plus million, skilled financing has become a key element in the market. Financing art requires the highest levels of expertise and fiduciary responsibility.
Medallion Financial Corporation, established seventy years ago, is a publicly traded Nasdaq corporation that initially made its mark in the niche financing of taxi medallions in New York City. Recently, they decided to take on the financing of art. Medallion has been in business for seventy years. Its president, Andrew Murstein, notes: ““This is another great niche for Medallion Financial Corp. We have built our business by uncovering areas that banks have not focused on, where we can get above average returns and have minimal risk.”
Convinced that their timing was right and that art financing would prove to be a productive area for Medallion, Murstein lured Shelly Fischer away from Sotheby’s in October of 2012. Fisher, who had been at Sotheby’s since the late 1980’s, is among a handful of experts in what is still a fairly arcane field. Medallion is involved in financing art deals in the region of $500,000 to $5 million, for terms of three years. They only finance art that is owned, either by the artist themselves or galleries or dealers or about to be purchased. They do not lend on consigned art. They use outside appraisers, thus ensuring that the loans they make are fully collateralized. Fischer observes, “The search for unique investment opportunities, a sudden need for funding such as a divorce, debt, or estate taxes, or difficult economic market conditions can lead borrowers to seek financing based upon new or existing art assets.”
She notes that the area of art financing has grown rapidly in the last thirty years and has become a genuine growth are for investors. With a constant influx of new international players, from China, Russia and South America, the stage is set for increasing growth in the field.