Whisky Distilleries Use Casks of Whisky as Loan Collateral
Whisky Distilleries and banks are securing loans with casks of whisky. Japanese lending companies and spirit distillers are adding new collateral to loans.
Change is the only constant in our daily lives, and it is no different in the financial sector. Banks and financial institutions use a universal business model of secured loans. This has been around since the earliest civilization where land and other stable collaterals were used to back investments.
However, these institutions are not without jeopardy as inflation and the demand and supply factors can impact the value of collaterals. To this end, most institutions rely on real estate, fixed deposits, and buildings. Another recent option is the use of casks of whisky.
Interestingly, it does make financial sense. Casks of whiskies start at an extremely low value during the maturing process. At the end of the process, the value increases. This makes it equal to, or even better than real estate. Its worth is guaranteed to increase.
Recently, Japanese distillery, Tsuzaki, secured a $680,000 loan with casks of whisky. The issuing bank, Sumitomo Mitsui Finance and Leasing, has been pitching the new concept to the local market and has garnered some success.
Casks of Whisky is Old School Collateral
According to Nikkei Asia, casks of whisky have become a strong collateral option.
“Casks of whisky are different. Initially unsuitable for consumption, they initially have little value. But over time they gain value, qualifying them as collateral for long-term financing“
Nonetheless, this is not new to the financial world. In the early 1900s, tons of US banks granted loans using casks of whisky or barrels of whiskies as collaterals. In his 1918 address to the US Congress, Percy H. Johnston, vice president of the Chemical National Bank of New York, highlighted that $500 million in bank loans were backed by spirits. Whisky Advocate
Casks of whisky will continue to be a valuable asset that can be used to secure long-term loans.