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How is Fine Wine as Loan Collateral?

Investing in fine wine is a risky business, but it can grant you a loan

People used to think that nothing could be more valuable than investing in gold? Well, that’s until they discovered the benefits of investing in wine. Even though both fine wine and gold have been in a serious competition, the situation between these two concepts has become clear now. Fine wine is one of the market’s most appreciated investments, since the global demand for wine is constantly on the rise. Can wine be considered a loan collateral? Yes it can actually.

Red wine
Passion might drive you into wine investments, but treat it like any other risky investment - with a cool head

Worthy wine can grant you a loan

Believe it or not fine wine can grant you a loan. There are financial institutions in the US that are willing to grant loans to borrowers in exchange for fine wine. Needless to say, it’s risky now that scams are everywhere. Believe it or not, the biggest risk of wine investments is that the field is exposed to liquidity problems. There are several rare bottles that can command increased market values, but they’re insignificant as long as people aren’t willing to pay for what they deserve. The most important thing related to wine funds is the fact that they come with an exit strategy. A wine collector should have an innate ability to sell and make others fall in love with his wine.

What can slow down a wine investment?

Riesling
Fine white wine Riesling Schoenenbourg 2004 comes from Alsace wine region in France.
Wine cannot be valued that easily, especially if we were to talk about expensive wines. Their value is related to how much a buyer is willing to spend and not on an objective indicator. What’s more, experts from all over the world agree that trying to establish whether a wine fund will achieve success is similar to the process of rolling the dice: you never know what you get, but the enthusiasm is so big that you cannot help it.

In spite of the risks, increasingly more people are willing to invest a small part of their fortune in wine. Why? Because wine is valuable; wine collectors can earn a lot of money from buying and selling part of their collection. However, there are several voices who say that investing in wine can be very risky. A wine investor should afford to lose money, since wines are perishable especially if they aren’t kept in an adequate environment.

Profits and investments

Wine specialists agree that more and more people have started to invest in wine since 1994, when America, London and Hong Kong became the main markets. However, the situation has changed since then, and China has joined the list of serious wine markets. According to recent data, more than 13,000 lots of wine were purchased in the U.S, their worth being more than $40 million. This means that there are plenty of active wine investors nowadays, and they all agree that only the right bottle of wine can bring you the profits that you’ve been dreaming of.

A wine investor shouldn’t be interested in short-term profits, because wine gets better with age. Besides, wine investments are similar to art investments, because everything that matters is the beauty of the achievement, which lies in the eye of the person who watches it. It’s obvious that you only open a wine bottle because you want to impress your guests, but imagine how would that wine taste in five or maybe even in 10 years, when you could sell it for a larger amount of money.

Wine
Investment wines should only be purchased sparingly, from people who have experience in this risky field

Quality wine investments

If you want to invest in wine, you are advised to turn your attention to wines you would drink. Make sure that all the storage conditions are adequate, since this is one of the most important aspects that guarantee for the quality of your wine. Try to ensure that you have gathered all the needed information about storage conditions and don’t forget to pay attention to provenance.

Never purchase a wine whose provenance and authenticity is uncertain, because it is one of the least inspired decisions you can make. Plus, try to purchase only from people who have some experience in this field and don’t let them talk you into spending impressive amounts of money on wine. Analyze the market and do some research on your own in order to avoid buying something that you’re simply passionate about.

For example, Canadians enjoy no less than 220 million wine bottles annually, and all of them are produced by their own wine industry. Wine investments have become extremely appreciated nowadays on a global level, even though the greatest wine consumer in the world is the U.S. However, China is expected to exceed the U.S. by 2023, when it will probably become the biggest wine market in the world.

Articles on Wine Investment

  • Investing in Wine Australia - As one of the top produces of high quality wines, Australian is a lucrative market for wine investment, offering a novel way to invest.
  • Investing in Wines - Although wine investment is as risky as any other investment, well-informed investors find this an attractive investment option. 
  • Wine as Loan Collateral - Can it be done? As incredible as it sounds, fine wines can be used as a loan collateral with some of financial institutions in the US. 


"Money is not an invention of the State. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the State."

Carl Menger - the founder of the Austrian school of economics