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Sally HurmeSally Hurme (Part 2)
Claire Hillier
2nd November 2017 2/11/17
Episode 51: Understanding the World of Luxury Asset-Backed Lending, with Claire Hillier
Claire Hillier is the Managing Director of Commercial Lending at Borro. She is responsible for the end-to-end client experience, deal structuring and new lending across the group. Claire spends much of her time working with clients and partners tailoring lending solutions. Prior to joining Borro, Claire was Senior Channel Manager for Lloyds Banking Group's personal loans business, responsible for telephony lending performance at Lloyds, Bank of Scotland and Halifax. Claire has a strong client-facing background and has more than 14 years' experience working within financial services.
Welcome Claire!
Thank you, thank you so much!
I have to ask the first question, to me, that is the most obvious one. I understand something about your business, that you loan money to people who have, I would say, assets that are somewhat unconventional to use as collateral for loans. Am I on the right page?
Yeah, kind of. It's more conventional than you'd think these days, but yes, I lend against luxury assets, so assets such as cars, wine, diamonds, something that could be really described as a luxury asset is something that we would take as collateral for lending.
A luxury asset, is that what you call it?
Yeah, exactly.
And why is it, this is what I find so unusual, why is it that people who have acquired those kinds of assets would find it necessary to go outside of their normal lending relationships to come to someone like you to help them convert some of that to cash?
Yeah, it's true, and it's often a question I get asked by people, you know, "Why do wealthy people need to do this type of lending, and why don't they just go to their bank manager?" The reality is that very wealthy people have very very lumpy credit flow. So, you know, typically a lot of these people, yes, they own a huge amount of money, yes, they have extortionate incomes, but actually maybe they get paid once a year. Maybe they're running a number of businesses and they're constantly channeling funds into different businesses, and they've hit a bit of a wall in terms of income, and they've got things they need to pay out. Much of the lending that I do generally isn't for distress reasons, so it's not really for bills or living expenses, those sort of things, it typically tends to be opportunistic lending. So, people that are maybe buying more properties. Maybe people are buying another business, or doing some sort of business takeout, investing in things abroad. It tends to be for those sort of reasons. And my clients say to me, "Claire, look, I've got twenty million sitting in the bank that I could use for this, but if I use that for this, there's going to be some other things that I can't do, and I want to do it all." So, they're the kind of real reasons people need this.
So how do you determine someone's credit worthiness to borrow this kind of money? Is it a totally different set of criteria?
Absolutely. We are nothing like a traditional bank or traditional lender, so you know, a traditional lender would be really interested in your financial background. They'd be really interested in your cash flow, your ability to repay. We're very different to that. We're interested in the asset primarily. Our whole lending decision is based on the sale-ability of that asset, and how fast we can sell it, and what we can achieve in the event of a default. We are less interested in a client's background.
So it's more of the asset being used as collateral that represents the greater priority to you.
Absolutely, and there's obviously diligence that needs to happen, we need to make sure we're lending to the person that owns the asset, so right of title ownership, provenance is all just absolutely critical to us. And there may be some instances where we do ask for personal guarantees, and every dealer is very different. It depends on the risk associated with each transaction, but largely, the primary focus is always the asset, not the client.
Okay. So let me see if I understand this correctly. So that if it were, let's say, a yacht, that is easily determined what its value is, it's easily valued, but if you had something like a collection of, let's say, samovars or something, I'm just pulling that out of my head, how would you go about valuing something like that, that doesn't have a very liquid market?
Yeah, it's challenging, and the lending decisions I make are largely based on the resale value and how liquid the asset is. For example, if I've got a contemporary piece of art, I know all day long that the likelihood of selling that very very quickly, in the event of a default, is high, so it's very easy to value this type of asset. If I have rarer pieces, it's more challenging, and it's at that point we generally talk to the experts that we work with, so some of the auction houses, people that have worked in the auction house world, people that have real experience working with the type of asset I'll be looking at. And we'll work together to establish the open market value of that asset.
And what are the typical terms of the loan? Are they long-term or short-term?
It varies. Anything from two weeks right up to three years. And we have a multitude of different clients that do different things with us. The idea for this business was really around flexibility. And for a lot of very wealthy people, yes, they can get a line of credit from their bank, but maybe that's going to take eight weeks. So maybe they're just coming to me for eight weeks, whilst that longer solution is put in place for them. In terms of cost, what it's going to cost them, it can vary. It's probably most comparative to a bridging loan against a property, so anywhere from sort of one percent a month, up to around the two-and-a-half percent mark. So, you know, this is not a low-cost option, by any means, but it's comparative to other things in the market.
Yeah, as you said, it's more in a lot of these smaller terms situations, they're bridge loans, until they can get something else. So how many people know about this kind of lending? Is that something that comes from maybe their bankers might refer them to you?
Exactly. So really Borro's job for the last five years has been trying to educate people about what we do. We work with private banks, we work with wealth managers, real estate managers, brokers, art galleries, you name it, our mission is to get the word out about what we do. And all our business typically comes via referral. We do very little direct with the consumer, because our type of clients, generally, are not the type of client sitting Googling their own solutions. They have a team of people that are looking after them and helping them find their way out of a potentially sticky situation.
Do you find that the people you're talking about actually work with what we're calling here, I'm not sure it's the same, family offices?
Yeah, absolutely, family office is another big source of referral for us, more so in the UK than the U.S., interestingly. We work with a bunch of family offices in the UK that refer us regular deal flow. The U.S., less so. And again, I think that comes down to we've been a presence in the U.S. for less time, it's just about getting confidence. Ultimately, what we do requires so much trust. I'm taking people's prized possessions, I'm storing them, they're trusting me with their assets, it's trusting this business to look after their assets, and that requires almost a next-level amount of trust.
I can see that it requires a huge, huge amount of trust. But do you physically have to take possession of the asset?
We do. So we take possession of the asset on every loan borrowed, so there's no exceptions. And that asset is placed either into storage, or goes with an auction house, or museum, depending on what the client is looking to do ultimately. But yes, we look after every single asset.
So would it make sense then for someone who feels like maybe, I'm just going to go back to that example of the yacht…they'd say "All right, this yacht is getting very expensive for me to maintain, I have staff, I have loading, I mean, dock fees, I have all kinds of stuff that I have to deal with here. If I give it to you as collateral, you're going to take it out of the dock, and you're going to store it some place, which saves me a lot of money just by doing that." And so I could see that some people might think, "Hey this may not be a bad idea" because it's cheaper to pay your 1% or 2.5% a month than to leave it where it is. So do people do that?
I sure do, mainly on classic cars. So I have people that have luxury classic cars in storage. Now nobody drives a luxury classic car typically, they're buying them as investments. If you spend a million dollars on a classic car, you're generally not driving it around. And it's very, very expensive to store these cars. I mean, anywhere from sort of, I don't know, five, six hundred dollars upwards and if you want to go into de-humidified storage, specialist storage and have all the bells and whistles, then it's going to cost a lot of money. And because we have relationships with all these providers, and we store excessive amounts of collateral that we have, you know, great value facilities. So I do have people that come to me and say, "Claire, it's cheaper for me to loan, you know, $50,000 against my car that's worth $200,000, and you know, I don't have to think about anything else, you just covered it all for me."
Yeah, that's pretty nice.
Yeah, it's just, it's sensible. And it's great for me, you know, because once you have that relationship with the client, they almost, they create themselves almost like an overdraft facility of collateral, just sitting there, that they can draw upon as and when they need to, so you know, those type of relationships are great for us and also great for clients.
That's really neat, I never thought of it that way, but yeah. So what is the relationship between the loan-to-value, when you do a loan?
So it really does vary. The loan-to-value is decided based upon risk, and that really comes down to what we think could happen in the event of a default. So typically, cars sit around the 50 percent mark, art and antiques will be anywhere from 40 to 60 percent. Jewelry and watches is a little bit higher, sort of 70 percent, and that's just simply because they're the most liquid asset, unless we're talking, you know, a ruby or rare stone running into the millions. So there's a real range of LTVs, and as I said to you earlier, our lending decisions are very much based on how easily we can sell the asset in the event of a default.
And so does jewelry have higher loan-to-value?
Exactly, so jewelry and watches is around 70 percent, diamonds 70 percent, but what's really key is it's 70 percent of the open market value. That's probably the toughest thing about our jobs here at Borro and our appraisers' jobs, is explaining the difference between the retail and the open market value. It's strange, because in some asset classes, people really understand it. You know, if you buy a new car, for example, you know that if you drive it away, you've probably lost $10,000 on it. People find it really hard to grasp that they've purchased a Rolex, for example, for $25,000, and I think maybe on the open market it's worth eight or nine. That's the toughest, because they see them in shops advertised for the retail value, then they're like, "But why isn't my watch worth that?" You know? So that's the toughest thing about what we do, that and helping people understand.
Yeah, what the value is. So how do you, this is just a thought I had when you were talking to me about some of the people that you are associated with, how do you screen for people that may actually be, shall we say, criminal elements, and that you are actually, you don't know that this is the case, but you are actually funding some kind of insurrections or something else by loaning money to these people? Is there any other, besides the asset itself, is there any other type of screening process that you use to find out who it is that you are loaning the money to?
Absolutely. So we run a bunch of checks on every client that we work with to ensure they're not politically exposed persons, there's no criminal background, so many different things, and the extent to which we do that depends on the loan size. We also have to ask about loan purpose, so why do they need the funds. Now, we don't track the funds' journey, as in, we don't ask for proof for what they've spent the money on, but funds have to paid into a bank account in their name, so there's no exceptions there. So you know, we couldn't have some man off the street coming in and loaning and wiring to a fund in Russia, for example. So, there's just so many different things that we have to do. The other thing we have to do is every asset we lend to gains, we have to file a usee fee, to say that we've lent on the asset. The process varies by state, because the process in New York is very different to the process in California, there are different rules and regulations around what we can/can't do, should/shouldn't do, but yeah, there's a lot more to it than "Give me your asset, here's your money."
Yeah, okay. Well I'm just thinking that we have the Patriot Act that went in after 9/11 here, and so for anyone that we bring on as clients in this advisory firm that I'm involved with, we have a whole bunch of paperwork that we have to create, and proof of citizenship, etcetera, etcetera. So I'm just wondering if you have the same kind of stringent regulations, let's just say, across Europe than we do here? And that brings me to another question: how many countries do you operate in?
So currently, we only operate in the state of New York, the state of California, and the UK. Now, in the UK it's a little bit different. We can lend against other assets in Europe, providing the assets are brought to the UK. So in the UK, it's all about, "Is the asset in the country?" And in which case the UK law's enforceable. And the U.S. obviously is very different, because there's so many different rules and regulations per state, and things you can and can't do. What we can do is if it's an online loan, and we're lending to someone, let's say we lend to someone in Texas, for example. If the asset is brought to the state of New York and stored in the state of New York, contracts are all accepted online by the client, so again, we can operate with a client based in that area as well.
Okay, and do you have any plans to expand beyond the UK and those two states in the United States?
Absolutely! I'm looking at Miami at the moment. I'm looking at Texas, at Dallas potentially. There's so many different areas, I think there's real opportunity in the U.S. to do something. In Canada, as well, is another interesting option. And then obviously, there's the more Middle Eastern market, places like Hong Kong, for example, where they're huge consumers of luxury assets.
Hong Kong.
Oh, Hong Kong, yeah.
Yeah. I think the key for us is, though, we've got a lot to do to get to where we want to be, just where we are in the U.S. at the moment. I mean, you know, it's a completely different ball game to the United Kingdom, in that the UK's small. Everyone knows who we are in the UK. The U.S., still we're meeting people, four years after launching, that have just never heard of us or our type of lending. And you just sort of go, "Gosh, you know, we've got so much work to do," even just here in New York, to ensure that people know this type of lending is a viable option and can be considered.
Do you have any competition for this, Claire?
Yeah, there are competitors out there, mainly in the art lending market, though. So the art lending market in New York is becoming really, really popular, and there's a bunch of people that have stepped into that space that are definitely competitors, that operate in a slightly different space to us. Because I'd say our sweet spot is that sort of $250,000 to a million dollars range, that's the area we like to sit in. Most of the competitors sit in a much higher range, so you take someone like Athena, for example, who we know well, you know, they're lending into the sort of millions of dollars ranges every day, they're not really interested in anything less than that. And there's a bunch of other lenders that do the same, that are just interested in those big-ticket, single-asset transactions. So we're really the opposite.
Are you the only lender in Borro, or are there other lenders besides yourself?
So the way we're set up is, I run the business in the UK and the U.S. in terms of new business. I have a team of people that all close loans on a daily basis in the UK and the U.S., so they're the ones dealing directly with the clients, they're the ones moving the assets around, you know. How many employees do I have? Thirty-five employees in both countries currently.
And you started this business from scratch, right?
So the business wasn't started by me, actually. The business was started by a guy called Paul Aitken, way back eight, nine years ago. And he actually started it on the back of the crash, the Lehman Brothers crash, and the credit crunch in the UK. And he was sitting in his house one day, and he thought, "Where do rich people go when they need money? What do they do?" Because, you know, they can't just stroll into their bank and say, 'Hey, can I borrow a hundred thousand dollars, please?' You know, it's more challenging, there's more red tape, there's more questions that need to be asked.
Have you found, in dealing with a lot of these, I'd say, wealthy people, I might call it high net-worth people, do you find that you are getting any kind of resistance in this field because you're a woman?
That's a really interesting question, actually. I think people are surprised that I'm a woman. So when you think of luxury asset lending, or worse, the p word, the pawnbroker word as we call it, you don't think of me. You think of typically a man, and often when I turn up to clients' properties, they're very, very surprised that I'm running the business, and a lot of questions follow. But I wouldn't say that I ever get resisted, in fact, I would say if anything, being a female amongst a whole field of men is advantageous, and I can open doors just simply because it's a bit different.
I would think so. I was just curious though, when you started with the other organizations you were with, the corporate world. How did you get into this area when you were there? Were you doing this kind of lending with Lloyds?
Not at all. My background with Lloyds was very consumer-based, so, you know, very much about people that earned 30, 40, 50 thousand pounds a year, rather than millions of pounds a year, so completely different world. It was interesting, a recruiter called me, having seen my profile somewhere, and told me about this business. And I said, "There's absolutely no way I'm leaving the corporate world to go and work for a pawnbroker, just not ever is that going to happen." And I was quite rude about the business. And the recruiter said to me at the time, "Claire, have a look at this company. It's really interesting. They've got a lot of plans, just take a look." So I did, and the more I looked into it, the more I thought, "This might be really interesting. What a unique business." And obviously, the corporate world is great for setting you up for the future, in terms of giving you stability, setting your foundations as a professional in business, but what it's not good at is giving you the real opportunity to muck in and grow your career really, really quickly, which is more of what a startup gives you. So yeah, I just kind of knew it was the right thing for me and just took the jump and joined Borro.
Well I think it's exciting, I mean, I'm sure, I have to tell you a story that I think is really quite interesting, because it's so outside of my world. But 2009, I believe it was—this is right after the crash in our country and across the world, I guess it was—I decided that there was such incredible opportunities in foreign travel at that point, because everybody wanted people to fly somewhere because the travel business was in such bad shape. So I took an offer on one of these river boat trips, and we went from, I guess we started in Monte Carlo, and then went by bus to a particular spot where we were waiting to board the ship. But while we were waiting for the buses to pick us up, we were sitting in the Fairmont Hotel in Monte Cristo, why'd I say Monte Cristo, that's not where it is. I don't know why that came to my head! But anyway, we were sitting there in this very luxurious place, the Mediterranean Sea was in front of us, and we were killing some time sitting there, having some drinks, late afternoon. And I was next to two men who were having a conversation, and there was no one else in the entire room at that time, so it was obvious you could hear everything they were speaking about. And this one gentleman, who was apparently a yacht broker, the gentleman he was speaking to was interested in buying a yacht. And I remember sitting there listening to that, and feeling that I had just been lifted out of my own world and into a completely different world that I would have absolutely no idea how things worked. And I remember saying to my husband, I said, "You know what, when I grow up, I want to be a yacht broker." But what I'm thinking is, when I'm reading what you do and how you do it, it would seem to me that you are constantly working within that crowd. Those are the people that you deal with, and I just wonder how dramatically different is that world than the world that you were in when you were working with Lloyds and doing traditional funding? And is it fun? Is it something that you really enjoy doing, bigger and better than what it was before, or is it a fantasy? You know, everybody thinks that somebody else is doing something that's so much bigger and better than them, so that's kind of the "grass is greener" kind of thing. Is that really how your world is? Do you really enjoy what you're doing, are these people dealing in just a lot more zeroes at the end?
Absolutely. I mean, honestly it's like night and day from working in a banking, corporate environment. You know, working at a startup is not without its challenges, which I'll come on to later, but when I think about what I do daily or the assets I get to work with, the types of people I get to meet. I mean, honestly, if I told you some of the people that we have on our loan book, which clearly I never could, because confidentiality is key, it would blow your mind, some of the people that need loans from us, just because you know again, that this type of lending isn't something that's easy to come by, there aren't many phones to ring to get it, so you know, if there's someone well-known in the world that needs money, actually chances are, we know about it and they've come to us. So that's really interesting. The assets we see are amazing. I had no idea about art, about luxury assets, before I started working in this business. I knew about numbers, I knew about finance, I knew about loans and credit cards. I did not know about Aston Martins and Rolls Royces, and how pink diamonds are really desirable at auction, I didn't know any of these things. And now, my knowledge is there. And I think if you're the sort of person that is quite aspirational and loves luxury assets and, you know, likes that world, it's a really, really interesting role.
I will bet that not two days are the same.
They really are not. I could get a call now from someone in, I don't know, LA, someone really well-known in LA that needs to raise half a million dollars against an art collection, and I would be on a plane tomorrow morning at 5:30 a.m. with one of my appraisers going to meet them, we'd be shipping the assets back tomorrow afternoon. So we really, really have to run around to get things done for people, because that's what they expect and that's why we exist. And I always say the difference…you have some companies that are not used to dealing with high net worth individuals that work up to that space, I would say that it's a real difficult space to play in, because their expectations are tenfold of a basic consumer, you know? They expect to be able to call you at 1 a.m. If they send you an email, then you respond to them now, not in four hours' time. That's got its challenges, because obviously you've got to work out that balance, and you've got to work out how you have a life as well as being really successful in the workplace.
And how do you do that? How do you set the barriers, or saying, "After a certain time, you can't call me," how do you do it? How do you manage your life so that you do have a life?
I mean, it's tough, it is really tough, particularly as we're trying to grow and expand our business and you want to give exemplary service. I think that I'm very bad at that. If a client calls me at midnight, I'm taking the call. If a client wants to, you know, in China wants to speak at 4 a.m. my time, I'm going to take the call. That said, the more established in the market we become, the more I believe like we're delivering and achieving something, the easier that becomes. So I think it's about finding a balance. But you know what? I'm thirty-three years old. I've got no children, I got divorced last year, so I'm as free as they come in terms of being able to do whatever I want, whenever I want. So I'm quite happy to dedicate my life to this business, providing that I've something to show for it at the end of it.
Yeah, you're the perfect person for this job then, at this particular moment in your life.
I absolutely am, that's for sure. But you know, it's interesting, I have a team of people that are just like me, just as driven, just as keen to succeed, and that really understand that high net worth individuals expect something else. I think that's important, and hiring people for that reason is tough, because you're looking for that mold, almost. You're looking for those people that just get it.
Yeah, and I guess there are people that probably can't be looking at a 9-to-5 job either, five days a week.
Absolutely, that wouldn't be the job for those people, in my view. And you know, I think you've got to provide flexibility, particularly provide flexibility to other women, and you know, two of my best guys on the sales team in New York have both got children, they make it work, you know? They do some time at home, they do some time in the office, and we provide flexibility because they're really valuable and they're great at their job, so I want them to be able to be mothers as well as do a good job at work, and I want them to be able to have it all. You know, just because I'm a workaholic and I don't have a family, it doesn't mean I disregard those people… I think that's really important in the workplace. It shouldn't be frowned upon if you need to go home at 4 p.m. and pick your kids up from baseball, for example, you know.
Well, bravo to you for seeing that, because there are so many high-driven businesses where it's a compromise. You either are that way, or you forget the family, or you have a family and you can't be this other way. So I think it's wonderful that you recognize that and promote that, especially with the women.
Yeah, it's so important, it is so important and it will continue to be a key part of basically running a successful business for me. I think it just ought to be considered. Why should women compromise just because they want to have it all? I mean, it's just not right.
Well, you're talking to the choir here, sister. All right, well, let's just tell everybody how can they reach you, Claire, if they have some questions or they have some interests in what you're doing, how would they reach you?
Well, there's two ways. They can call my cell, I'll happily give out my cell, I'm always up for a chat. My mobile number is 917-858-3627. Or they can email me directly, it's claire.hillier@borro.com. And Borro has no W.
I'm glad you said that, because I was going to say it too. Everybody wants to throw that W on.
They do! They just can't grasp there's no W!
Well, thank you so much, I really appreciate it, and I hope that my listeners have gotten something really important out of this today, because it's a very different and interesting way of learning about finances as well. Claire, I don't know if we talked about this, but what is the amount of money or asset, the minimum amount you need in order to do a loan, to consider a loan?
So our minimum loan amount in the U.S. is $5000, in the UK it's 5000 pounds, so really, for that, you need an asset worth between sort of eight and ten thousand. And we'll go up to 10 million dollars of lending, providing there's a multitude of assets to secure that lending.
Okay, great! Well thank you again, thank you very much. Until the next time then, thanks to all of my peeps here who are listening, and remember, money is not the enemy, your ignorance of it is. Thank you and goodbye!
How to contact Claire:
Email: claire.hillier@borro.com
Tags: asset lending, borro, finance, financial, lending, luxury, luxury assets, money, UK, women and money