It has been revealed that art dealers have especially suffered from the financial downturn and are turning to lenders in an attempt to keep ahead of the game in the the art world.

Famous artists and high-end art collectors are joining the long list of victims who have become crippled from the pressures of the recession.

As a result, many have resorted to pawning their most valuable works in exchange for much needed cash.

With the stock market plummeting and banks tightening their lending patterns, dusty abstract work and post modernist pieces have had a shock of reality, and have been taken down from their high walls and have been used as collateral to pay off debts.

Many art financial companies have stated that selling art and homes to raise money has become a popular practice.

Meghan Carleton, a banker at Art Finance Partners stated: “There's a lot of leverage in the market and part of the reason is that people have already taken out their mortgage on their home, so they look at other asset classes -what's on their walls - as something they can use.”

Art Finance, which keeps the properties housed at its warehouse, provides loans and charges interest rates from 12 to 18%. Each loan is issued for up to 50% of the work’s values.

Since October, Carleton commented that the company has seen a 50% rise in business, as both old and new clients with work head to storm their offices with art, antiques and collectables.

Contrary to societal belief, it is not only the poor who are suffering with the economic crash. Art galleries and photographers alike have all had to sell pieces to raise funds.

One example is a famous photographer, who took a loan worth over £10 million from Art Capital in December 2006, using her own famous photos and a string of homes as collateral.

However, there are fears that she has contacted the wrong people to help pay off her debt. By defaulting on the debt, she could lose her life’s work. She has already missed one payment.

“I think [she] got involved with people I would call more predatorial in their lending practices than others,” said an Art Capital competitor.

Bankruptcy fears

Debt councillors have stated that there is a fear in very rich consumers, that one day they will lose everything and face a hole of debt.

“The sense of denial that there is a problem in handling money is higher among higher-indebtors. They have a greater sense of entitlement. They may consider themselves as the blessed ones or the specially gifted,” said debt counsellor Jerrold Mundis, who has advised celebrities.

An example of this is one cash-strapped widow, whose late husband was the heir to the massive Hearst Corporation media conglomerate, and pawned some of her most valuable artworks in an ultimately failed bid to keep her 52-room mansion.

However, it is not all doom and gloom. Some people have been exploiting the downturn and profiting from it:

“A large amount of people we have been working with have been borrowing money to take advantage of the marketplace and the current economic downturn,” said Ray Parker Gaylord, from ArtLoan Financial Services.

One client borrowed his stamp collection to buy bank stocks when they were cheap shares, he later made a profit when he sold the shares at a higher value when the market went up.

That’s one way to stamp out debt!