Collectors Universe Offers Gem Loans

Collectors Universe, a publicly-traded company that specializes in certifying rare and collectible items, is offering loans to trade and public with gemstones as collateral.

The loans are handled through a subsidiary of Collectors Universe called Collectors Finance Corp. (CFC), which was established in March 2005. In the past, CFC made loans against collectibles like rare coins or sports cards; the gemstone loan program was introduced to the trade in March.

Loans are only offered on loose gemstones that are certified by one of Collectors Universe’s laboratories – the Gem Certification and Assurance Lab (GCAL) and American Gemological Laboratories (AGL). Because neither laboratory does value appraisals, any gemstone being put up for collateral will be appraised by a third party. The minimum loan amount is $10,000, and the maximum is 35 to 80 percent of the market value of the item being put up for collateral.

“[The percentage] varies based upon the liquidity of the market for the collectible,” said Mike Lewis, president of CFC. “When you see 80 percent, that’s for gold bullion coins, because it’s a highly liquid market. For gemstones or diamonds, you’re looking at an advance in the 60 percent range.”

If approved, CFC will extend the business or individual a line of credit for that amount. At the end of a year, CFC will re-evaluate the borrower’s credit status, and if everything is in order, they will allow the borrower continue to take money up to that amount indefinitely. If not, the line of credit will be terminated and the loan must be repaid.

The gemstones put up for collateral will be held in trust First State Depository. As part of a newly-signed deal with First State, CFC will pay the usual depository fees and insurance rather than requiring the borrower to do so. CFC will also allow borrowers to change the items that are used for collateral.

“Because the majority of our business with dealers [of collectible items], we work hard to accommodate the dealers,” said Lewis. “As the inventory in their shop changes, they may want to sell some items in collateral, and may offer others in their place. We work very hard to be responsive in terms of turnaround.”

Posted: March 22, 2007

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