Personal finance comes to the art market

An art industry marketing and publishing company, 10 group, has entered the personal finance market, launching an interest-free loan for art buyers.

A 10 group subsidiary, Art Money, has secured an Australian Credit Licence and funding from a number of private investors. Art Money is working with 25 commercial galleries in Sydney, with more in the pipeline. It plans to go national next year.

Art Money will lend up to A$18,000. The buyer pays a deposit to the art dealer and then makes nine repayments of equal amounts over nine months. There are no interest or establishment costs.

It will also pre-approve a buyer who wants to go out with a budget and buy artwork.

On the other side of the transaction, Art Money gives the dealer an upfront payment at an agreed discount to the sale price of the work. Art Money has not disclosed the discount.

10 group chief executive Paul Becker said he had talks with finance companies about using existing no-interest store finance products, such as FlexiGroup's Certegy loan, but decided to go it alone once he was confident he could source loan finance from private investors.

10 group's activities include publishing the Art Gallery of New South Wales member magazine 'Look', managing Sydney Art Month, and operating the online platform Raven, which provides listings of gallery shows, reviews and access to artworks.

Becker said he had been looking at whether there was scope for an art market finance product for a few years. He decided to do something about it when the City of Sydney published a cultural policy that raised the prospect of emulating a Tasmanian scheme, Collect Art, where the Tasmanian Government funds a loan scheme to encourage the purchase of artworks by Tasmanian artists.

Becker said: "We went to the City of Sydney with the idea that it would work better as a privately funded scheme. They agreed and gave us some seed funding to get it started."

Becker said it was common practice for commercial galleries to give their customers payment terms (a form of lay-by) or discounts to secure sales. However, these practices are "art world secrets" that the wider community does not take advantage of.

"These practices are done on an ad hoc basis. Our deal means that the gallery gets paid upfront, we take over the administration and we take over the risk that the buyer will not complete the payments. Another advantage is that it is a more transparent and marketable process," Becker said.

Art Money is using Veda to provide identity verification and credit scoring. Becker will not reveal the minimum credit score required to get approval.

He said he was confident Art Money could manage the credit risk. A government-backed United Kingdom scheme called Own Art has been operating successfully for ten years and the Tasmanian scheme has had no defaults.