Editor's note: An earlier version of this article incorrectly identified art advisor Katharina von Reden as Katharina Garrelt.

Wall Street's meltdown hit Tim Williamson just a few days after the collapse of Lehman Brothers in September. The Philadelphia-based financial adviser had been dabbling in the art market over the past few years, and like other budding collectors, he sometimes turned to private banks to borrow funds to build his collection. The loans were often backed by the art itself, with banks charging monthly interest rates of 1 to 2 percent, Williamson says.

But as the world was gripped by financial crisis, Williamson's bank balked at lending him the roughly $500,000 he sought ahead of the important fall auction season.

"It caught me a little off guard," says the 49-year-old, whose collection of 20 or so artworks includes paintings by American artists such as Richard Tuttle and Julian Schnabel. "It became clear right then and there that these banks were really tightening up."

The Mei Moses Fine Art Index, a well-known gauge for art prices, showed prices for all art rose 20 percent in 2007, outpacing the 5.5 percent achieved by the S&P 500. Art prices had a return of 10 percent, comparable to that of stocks during the 1954 to 2004 period, the index shows. The art boom was fuelled in part by easy credit from private banks—and vice versa. Now, as the credit crunch continues to wreak havoc on global commodity and stock markets, many private lenders are pulling back, and art world professionals fear that will put even more pressure on the once-booming market for art.

U.S. and international art collectors borrowed an estimated $2 billion to $3 billion from private banks and other financial-services companies during the past decade, according to Art Capital Group, a New York-based firm that specializes in art finance. The loans are often backed wholly or partially by the art itself with private lenders typically charging modest monthly interest payments. Now, even the wealthiest collectors are finding it difficult to secure lending, experts say.

"The truth is, it's simply a much tighter lending environment right now," says Andrew Rose, president of Art Finance Partners, another New York firm that specializes in art finance. Rose says his institution is still lending and that business was up 15 percent to 20 percent in the third quarter compared with 2007—in part because new clients are turning to his firm after being turned away by large, commercial lenders.

Baird Ryan, managing director of Art Capital Group, says banks will likely continue to be tight-fisted until credit markets recover. "Long-time clients at the larger banks are probably fine," Ryan says. "But if you're a new client, or new to the art market in particular, banks aren't making the loans regardless of what you're worth. "