Wine collectors in need of immediate cash don’t have to put their precious bottles on the secondary market. They can follow in the footsteps of art collectors who have fueled a US$30 billion global business in art finance and take out a loan backed by their wine.
A handful of specialty finance companies have made it possible for collectors to do this for a little more than a decade, including WineCredit in the U.K. and Suros Capital funded by Crestline Investors, an alternative asset manager in Fort Worth, Texas.
One of the newest entrants is Jera, an online lending platform that officially opened its doors in January to offer short-term loans to collectors, restaurants, and other hospitality services that have wine collections. The tech-driven platform is a unit of London-based Coterie Holdings, which owns or has a stake in a number of fine-wine businesses in the U.K., including the merchant Lay & Wheeler and the importer, Hallgarten & Novum Wines.
“People can borrow against properties and borrow against art pieces, why not fine wine?” says Lily Feng, Jera’s co-founder.
Jera estimates there is £6 billion (US$7.6 billion) worth of wine in storage globally, from bonded warehouses in London to individual cellars. Collectors may hold on to these bottles until their Burgundy or Bordeaux wine reaches its peak drinking years, or until the wine appreciates above current market levels.
Until then, “there’s not a lot of liquidity options available for big collectors,” Feng says.
As with art, a loan allows a collector to “unlock” the capital sitting in their wine so that value can be used for something else. Although Michael Saunders, CEO of Coterie, says it’s not their business to ask what the funds are for, he’s found there are various reasons wealthy individuals might need capital.
A collector who is part of a divorcing couple, for instance, might prefer to take a loan out on his or her wine to raise funds “without selling an asset that they absolutely adore,” Saunders says. “Often it has been for people who want to come into some more wine, but don’t want to apply more of their capital to do that.”
Restaurants and hospitality businesses can also tap their cellars for cash. One restaurateur recently learned he could take out a loan with Jera to get the capital he needed to refurbish his restaurant without selling any of the “beautiful collection of Burgundy” that he built up over many years, Saunders says.
Market fluctuations also drive collectors to seek out loans. A global economic slowdown driven by higher interest rates, inflation, and geopolitics, has contributed to lowering prices for many top-quality wines below peaks reached in 2022. Some collectors are unwilling to sell prized bottles at a discount to what they believe they are worth, Feng says.
“Taking a loan out seems to make a lot more sense to them,” she says. “They don’t have to part way with their wine. They can still get that liquidity and capital they need for other purposes.”
How the Loans Work
Jera formally opened its doors after Coterie bought it earlier this year, but Feng and her team began exploring the idea of wine loans in 2022 before a “soft launch” last year. The platform, which has already made loans totaling £15 million, uses an in-house “pricing engine,” that draws on 20 years of historical market data provided by Liv-ex, a London-based global marketplace for fine wine, to determine the value of a collection, Feng says.
The pricing engine can forecast future appreciation outcomes for each bottle in a collection. It does this for a master list of 700 to 800 wines with secondary-market values, and can separately research other bottles a collector might have, she says. The master list can change as wines go in and out of favor; the inclusion of annual price changes allows Jera to get a sense of where individual wine prices are headed.
“The market does fluctuate and people’s appreciation of certain wines does change over time,” Fenger says. “That’s all built in and it’s why tracking the historical data is very important to us.”
Bottle condition and provenance—where the wine was bought and then stored—are also big factors in appraising a collection. A wine on the master list that’s in pristine condition, was purchased from a reputable merchant, and has been in secured storage ever since, will warrant a higher loan-to-value ratio than a less popular wine with a stained label sitting in someone’s cellar.
On average, Jera’s loan-to-value ratios range from 50% to 60%, meaning an individual with a collection valued at £150,000 would be able to take out a loan of £75,000 to £90,000 (the minimum size is about £60,000). The loan terms typically range from one to three years, although they are often paid off (without a prepayment penalty) earlier than that, Feng says.
As with art, the interest rates on these asset-based loans are pretty high—typically 11% to 12% for individuals taking out loans with wine as collateral, although Jera constantly reviews them to make sure they are in line with the wider market.
The interest rates on loans made to restaurants or hospitality businesses depends on risk analysis that also considers a company’s financial performance, Feng says.
Before Jera finalizes a loan term, the collection has to be physically shipped to Coterie Vaults, a 10 million bottle fine-wine storage facility in Suffolk, England, so it can be inspected, she says. That process includes documentation of every bottle with 360-degree high-resolution photos. If a collector or business decides to take out the loan after receiving a final appraisal, the bottles stay at Coterie. This way, “we know the wine will be in the right condition during the duration of the loan,” Feng says.
If a collector decides not to take out the loan after the appraisal, they still use the condition report should they decide to sell their wine instead. “The way we evaluate is based on how the secondary market would actually evaluate the wine,” Feng says.
