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August 26th, 2013
From NY Times Dot Com
Platinum Card and Text Alert, via Pawnshop
By STEPHANIE CLIFFORD and JESSICA SILVER-GREENBERG
Linda Ballard, 61, uses the word “love” to describe her banking relationship, lauding the ease of cashing her bimonthly paycheck, the convenience of text alerts about her balance and the features on the platinum card that she was upgraded to in July.
But she is not getting all this from a bank. She is getting this array of services from a pawnshop — part of an industry that has long had a reputation of taking advantage of vulnerable customers handing over prized possessions in exchange for cash.
As banks zero in on more affluent customers who promise twice the revenue of their lower-income counterparts, close branches in poor areas and remain stingy with credit, pawnshops are revamping their image and stepping into the void to offer financial services.
“The way the banks have tightened up so much on making small loans and making equity loans, we’ve kind of evolved into, I like to call it the poor man’s bank,” said Robbie Whitten, chief executive of Money Mizer Pawn and Jewelry of Columbus, Ga.
There are, however, plenty of potential drawbacks, consumer advocates say.
Some loans from pawnshops can come with interest rates as high as 25 percent. And fringe financial operations, the consumer advocates say, can imperil lower-income customers’ ability to save for the future. Without a traditional checking or savings account, borrowers often pay more for basic financial transactions like cashing checks, paying bills and wiring money, financial counselors say. And because pawnshops do not seek or report matters affecting credit scores, pawnshop banking makes it hard for customers to build credit history.
“Consumers need to be aware that the products don’t always carry the same protections as those you would get from a bank,” said Tom Feltner, director of financial services at the Consumer Federation of America.
How fast the pawnshop industry is growing is unclear, but the industry association estimates there were 10,000 pawnshops in early 2012, the latest figures available, compared with about 6,400 in 2007. That expansion is, in part, fed by the rising number of Americans whose tarnished credit effectively bars them from the mainstream financial system. The growth has attracted the attention of the Consumer Financial Protection Bureau, a recently formed regulator that has been scrutinizing pawnshops, along with other nonbank lenders like payday loan operators.
EZCorp, a publicly traded operator of pawnshops, reported that total loan balances swelled 22 percent to $44 million in its most recent quarter.
Another publicly traded lender, Cash America International, told investors in June that the company’s fortunes were growing as more “traditional consumer lenders are exiting the market.”
As a result, pawnshops are offering services like check cashing, Western Union money transfers, bill payment and prepaid cards to customers who are “getting forgotten in the banking system,” said Jerry Whitehead of the Pawnshop Consulting Group.
The services are not, generally, big moneymakers for the shops. The main attraction is that they bring in traffic, and many of those shoppers go on to buy items from the pawnshop or to take out a pawn loan themselves — and that is where the stores make their money.
The basic business of pawnshops is, of course, a financial service. If a man walks in and hands over, say, a watch, the shop will lend him money based on a percentage of the item’s value. The customer has a set period of time to pay that back, usually one to four months. If he pays it back in time, and pays the interest, he gets the item back. If he does not, the pawnshop sells the item.
Pawn loans are so profitable simply because of the high interest rates pawnshops can charge. Interest rates vary by state and range from 2.5 percent to 25 percent a month, the industry group the National Pawnbrokers Association estimates. So a 30-day loan on a $150 item would give a pawnshop a profit of up to $37.50, while a four-month loan could mean a profit of $150. Pawnshops may also charge fees for things like storage and lost tickets.
Yet for many customers who have been denied credit because of checkered financial histories, an instant loan from a pawnshop can feel like something of a miracle — at least at first — consumer advocates say.
But the high interest rates can plunge borrowers already on precarious financial footing deeper into debt, consumer advocates say.
Emmett Murphy, a spokesman for the pawnbrokers’ association, said about 85 percent of loans were paid off, and pawnbrokers would much rather see a loan repaid than deal with selling a pawned item.
La Familia Pawn and Jewelry, a chain based in Winter Park, Fla., that focuses on Hispanic customers, began offering bill-paying services this summer and will add Western Union and prepaid debit cards soon, mostly because customers wanted convenience, said its chief financial officer, Woody Whitcomb.
“Some customers actually asked if we could be their bank, which we can’t, because we’re not licensed to take deposits,” Mr. Whitcomb said.
La Familia charges $1.50 for each bill paid and uses the standard Western Union rates, but the point is to get customers using its much more profitable pawn loans.
“The pawn business will always be our bread and butter,” he said, “but if we can give customers other reasons to come into our stores, that will increase traffic.”
David Sanchez, 38, who lives in Hanes City, Fla., says he uses his local La Familia shop as “an interim banking system.” For money between paychecks, he regularly pawns a gold chain in return for a $100 loan for 30 days, with a $25 fee at the end — even though he has a checking account and a credit card. Now, he is paying bills and cashing checks at La Familia. “I really do not go into my bank,” Mr. Sanchez said.
Pawn America, a Minnesota chain, has gone a step further in emulating banks: building financial centers with a separate entry that abut most of its pawnshops. Go in one way, and you can hock your ring. Enter the adjoining room, and you see “nice, private teller windows, and that’s our financial center. You’re going to be served by somebody wearing a white shirt, a tie, very professional,” said Chuck Armstrong, chief legislative officer.
And its services look awfully similar. Under its Payday America operation, customers can get a one-year line of credit of up to $1,000 without putting down an item. And this year, it introduced a platinum version of its prepaid debit card with express-lane checkout, 5 percent cash back on purchases or 5 percent extra on loans, and free check cashing.
Ms. Ballard, of St. Paul, is a Pawn America customer who received the platinum card in July. She said she was initially wary of the industry.
“The first time I went to a pawnshop, I looked around to see who was looking at me go in,” she said. Now, though, despite her bank checking account, she cashes her paychecks at Pawn America rather than using direct deposit. And she loves her new platinum card.
She has other financial products, she said, and, “I would give them all up but that one.”
August 14th, 2013
From Entrepreneur Dot Com
An Upscale Pawnbroker Offers an Alternative Form of Financing
August 13, 2013
By Michelle Goodman
Losing the lease on his Manhattan storefront left men’s clothing and costume designer Michele Savoia scrambling for funds last summer, traditionally his slowest time of year. House of Savoia–which caters to Broadway, film and TV productions and individual clients–is a thriving business. But the lengthy legal battle Savoia waged trying to stop his landlord from hiking his rent sapped his savings.
To get over the financial hump, Savoia put up his prized 1958 Harley-Davidson as collateral for a $5,000 loan from borro, a high-end, modern-day pawnbroker that makes same-day loans of $1,000 to $1 million against luxury cars, watches, jewelry, fine art, antiques and other personal assets. Appraisers–20 in borro’s New York office and throughout the U.S.–meet borrowers in person to make their valuations (or the service can be completed online). Loans typically span six months, although extensions are negotiable. Borrowers who fail to repay their loan forfeit their assets.
To date, borro, which launched in 2008, has funded more than $70 million loans in the U.S. and U.K. Founder and CEO Paul Aitken estimates that more than 60 percent of U.S. customers are small-business owners. According to Aitken, borro’s rates–2.99 to 3.99 percent in monthly interest, plus 5 to 7 percent in setup fees–are often lower than the cost associated with selling personal assets by auction.
It sounded like a good deal to Savoia. After losing his lease, he had purchased a vintage yacht in New Jersey with the intent of bringing it to New York’s Chelsea Piers and running his business from it. Then Hurricane Sandy hit. We talked with him about pawning his motorcycle to stay afloat.
Why did you turn to borro?
Cash flow was tight, so I said, “Just let me try to pawn it for a little while.” I went online and I found borro. I think it was the next day that I drove the bike up. We put it in the garage and went upstairs, and within an hour the paperwork was done and the cash was handed over.
It was quite easy, and it helped me out a lot.
How much did the loan cost?
Monthly I think my bill was $190 in interest. I could pay the whole $5,000 and get my motorcycle back at any given time. There’s no prepayment penalty. You have an indefinite amount of time on the loan, as long as you keep renewing it. That’s what they hope for. It’s like a credit card. They don’t want you to pay it off.
Isn’t this an expensive way to borrow money?
My motorcycle garage costs me $400 a month, which I don’t have to pay now. So the interest is really nominal for what I’m actually saving. Having the bike in storage for a year [with borro] saves me $4,800. They just charged me a one-time storage fee of $125.
Did you get your bike back?
No, I didn’t. I renewed the loan in March and plan to pay down the principal this summer. The first thing on my list is not to get back the motorcycle but to get my boat here. Right now my boat needs another $12,000 to $15,000 worth of work. So that $5,000 I borrowed is going toward getting the boat finished and getting it up here.
Is selling your bike an option?
No, never. It is my pride and joy. I built it. If I was broke, I would still have my motorcycle.
Would you take a loan like this again?
Definitely. It’s a great way of getting some cash flow if you have some assets.
Copyright © 2013 Entrepreneur Media, Inc. All rights reserved.
August 8th, 2013
From Main Street Dot Com
Why Even The Rich Are Warming to Pawn
By Robert McGarvey
NEW YORK (MainStreet)—The problem: you need $100 to take your sweetie out to dinner tonight for her birthday and you are tapped out. The bank account comes up goose eggs, the credit card was maxed out last year, mom and dad hang up when you call. What do you do?
Remember that $500 Bulova watch granny gave as a graduation present? The watch that is sitting in a drawer, because who wears watches anymore?
Bingo: you are prime to join the pawn revolution, borrowing for those without credit and who want a kind of on the fly liquidity that, suddenly, is gaining popularity “with new kinds of customers,” said Emmett Murphy, spokesman for the National Pawnbrokers Association.
“Pawn has become a mainstream financial service,” added Murphy. “People need access to credit, they have to get through to the end of the month.”
“Donald Trump calls it ‘leveraging assets,’” said industry consultant Steve Krupnik. “Pawn customers just call it ‘pawn.’”
Pawn, make no mistake, has its critics who loudly point out the loan carrying charges are toxic. A $100 pawn usually will cost $115 and more to redeem in a month, putting the annualized interest rate into three figures and that’s definitely on the wrong side of usury.
But face this: there’s been a lot of tightening of credit availability. That’s forced more consumers to turn to different kinds of lending and, for some, the answer has become pawn. That includes the well-heeled who may want a discrete, short-term loan that has no presence on any credit report and where, uniquely, it’s entirely the borrower’s choice to repay the loan (i.e, “redeem the pawn”) or to simply walk away from that watch or necklace or whatever (the NPA stats say 85% of pawns are redeemed). “A pawnbroker will never ruin your credit, will never go into collections,” said Krupnik.
Once a blue collar preserve, pawn is attracting a broader audience these days. “When they need access to cash and they don’t have a traditional source, they are pawning jewelry, fine art, wines,” said Murphy.
Don’t scoff. There’s a steady uptick in pawn by the affluent, said Tom McDermott, a onetime Capital One executive who now heads US operations for Borro, a U.K.-headquartered pawnshop that is pursuing high-end specialty pawn from its Third Avenue storefront in midtown Manhattan. “We lend up to $1 million, and we can make it happen in 24 hours,” said McDermott, who indicated Borro has an appetite for classic cars (“we’ve taken in Maseratis”) and fine art (“we’ve pawned Warhols”) in addition to jewelry.
Key customer segments at Borro, said McDermott, are entrepreneurs and small business owners who may have cyclical cashflow and may also find traditional banks standoffish. But when times are flush, these folks celebrate – by buying pricey cars, baubles, etc. So when times are constrained, it could make sense to pawn that diamond pinky ring for a quick $10,000 to make payroll Friday.
The minimum Borro loan, said McDermott, is $1,000 and the company trolls for a national clientele over the Internet.
Talk with a Borro rep, if a deal is struck, you ship your item to New York where it is verified (with some items Borro will send a rep to you). If all checks out, “we wire the money into your account immediately,” said McDermott.
Understand: Borro is the exception. Most pawn grinds out dollars at a lower end. At the nation’s 100,000 pawn shops the average pawn is around $150, according to NPA numbers.
Woody Whitcomb, CFO of La Familia Pawn, a chain in Florida and Puerto Rico, explained that his average loan is $115 and La Familia is rooting for every customer to redeem his pawn because the core of the business is the repeat pawner who may come in four, six or more times in a year. “They use their pawn as a credit card,” said Whitcomb.
Pawn evangelists see nothing but upside for their business. “The business of pawn is renting money,” said Krupnik, who added: “There’s a growing need for short-term credit and, for some people, pawn is the best answer they will get.”
–Written by Robert McGarvey for MainStreet
July 16th, 2013
From Marketplace Dot Org
Interview by Kai Ryssdal
We measure the health of the American economy all kinds of ways: New housing starts, GDP, retail and unemployment.
Also? Pawn shops.
Cash America — the biggest pawn shop company in the country — said today profits probably won’t be as good as everybody’s expecting. The firm blames mostly weaker demand for both pawn and consumer loans. That lower demand could also mean that Americans are starting to feel a bit more financially stable.
Michael Mack is the owner of Max Pawn in Las Vegas. He says that the conventional wisdom that pawn shops doing well means a bad economy isn’t necessarily true.
“Pawn shops do well in most every economy,” he argues. “We loan more money in the downturn; we sell more merchandise in the upside. So we try to hedge ourself both ways.”
The last few years, demand for loans at pawn shops has been higher — even for loans in the tens of thousands of dollar range. At his shop, he’s seen cars, airplanes, and other seemingly weird items get put up.
“The demand for loans is still there,” he adds.
The news the country’s biggest pawn broker is hurting, explains Mack, isn’t just a sign that the economy is getting better.
“A lot of [pawn shops] have depended on that gold rush, where people were selling gold off at a high price. Of course, gold’s taken a big dip this year,” Mack points out. “That easy business of taking gold, refining it, making money, making a profit margin, is over.”
June 25th, 2013
From Inc Dot Com
Christine Lagorio | Inc.com staff
What The Pawnbroker Knows
Les Gold, the entrepreneurial star of the cable series Hardcore Pawn, on what his pawn emporium has taught him about business, succession, and economic forecasting.
Les Gold, patriarch of the Detroit-based American Jewelry and Loan and subject of the series Hardcore Pawn, has been in the pawn business since he was a kid working in his grandfather’s little loan office and store. Today, he runs a 50,000-square-foot pawn emporium in a former bowling alley off of 8 Mile Road. Gold says his 50-employee business attracts 1,000 customers each day, who put down items they own in exchange for cash, agreeing to pay it back with 3 percent interest within three months. Recently, as the economy has slowly been picking up, American Jewelry and Loan is also doing a brisk business in selling the items–watches, electronics, prosthetics (yes, prosthetics)–that go unclaimed. In talking with Gold briefly while he was in New York City promoting his new book, For What It’s Worth: Business Wisdom from a Pawnbroker I asked him about what Wall Street–and entrepreneurs just starting out–can learn from his peculiar multi-generation family business.
How did you pitch the show to producers?
I didn’t! They came to me. Twice. At first, Seth, my son, turned down the producers. He said, “no way.” My daughter, Ashley said, “no way.” But I said, “yes!” So to try to keep control of me, they agreed and did the show. Three years and 120 shows later, I don’t think they have any regrets.
Why’s that? Don’t they argue a lot on the show?
Honestly, the show has brought us a lot of business. Our shop in Detroit has become a tourist destination. They come from Australia. They come from the Netherlands. In the old days people might not have wanted to know what a pawnbroker had to say.
Your new book is banking on the idea that nowadays, people do want a little business advice from a guy who resells jewelry.
One of the reasons I did the show is I wanted to change the perception of what pawn shops are–change the stigma from the ’70s movie with Rod Steiger [editor's note: he's probably referencing the 1964 Sidney Lumet film, The Pawnbroker, which is about a Holocaust survivor who operates a pawn shop in East Harlem]. I wanted to show them what a well-lit, well-run business we have.
It’s interesting to me that your business can be seen as an economic indicator of sorts.
Wall Street can learn from us. It’s simple: When the pawn line is long, the economy is bad. When the redemption line is short, people are hurting. And the inverse is true: When the pawn line is short, the economy is good. When the redemption line is long, people are doing better. Wall Street should contact us every three months. I can forecast what the economy is going to do in the next three months. We can tell you how many people are working.
So what does your business right now indicate for the economy this summer? Is it still turning around?
As I see three months from now, people are working. People are not as desperate as they have been. The amount per loan has dropped about 10 percent. People don’t need as much as they did three months ago.
When the economy is good, though, isn’t your business destined to sink?
Even though the loan business has gone down slightly recently, our retail sales have grown about 22 percent. When the economy is OK, pawn shops do OK. When the economy is bad, pawn shops do OK. That’s why they’ve lasted 3,000 years. If we lose in one area, we gain it back in another.
Your show is one of two featuring pawn shops on TV right now. Do you have a rivalry with Pawn Stars?
I’ve never looked at the Joneses. My way of thinking is: If I have my eye on what you’re doing, I’m taking my eye off what I’m doing. Their show is sort of “Antiques Roadshow.” Our show is “what happens in an hones-to-goodness pawn shop.” But we’re not talking about Coke and Pepsi here. We are just pawn shops trying to survive.
What’s the strangest thing you’ve ever accepted as a pawn?
Well, we once got a prosthetic eyeball. We didn’t take that one, but we do take prosthetic limbs.
As in plural prosthetic limbs?
Sure. And one time we had a $100,000 Elizabeth Taylor broach. I know she owned it because they had the papers.
Your grandfather got you into this business, and your kids are continuing it. How are you going to ensure this business survives in its notoriously fickle industry?
There’s nothing I want more than for blood to run this business. But, sure, no one can be me. So, I’m not going to retire. I’m going to make sure of its continued success myself. They’ll have to carry me out when I die. And then I’ll come back to haunt them! Generation after generation, one of those generations is going to ruin the business. What I like to see is that both Ashley and Seth want is to make American Jewelry and Loan the best it can be. The only way the business will survive is if they keep their eye on the prize. Every day when we get to work is we kiss each other hello. And every night we kiss each other goodbye. And that’s why it’s going to survive.
What advice do you have for entrepreneurs just starting out?
You have to wake up every morning knowing how bad you want it. Every dream is accessible if you work hard enough
May 7th, 2013
From Terra Dot Com
Father-son road trips can be powerful and life-changing. But while most excursions wind up at Cooperstown or the Grand Canyon, Robbie Whitten’s yearlong odyssey with his dad ended with him behind the counter of a pawn shop–and eventually, at the helm of an empire.
In 1979 the billionaire Hunt brothers were working to corner the market on silver, ultimately driving up the price from $11 per ounce to almost $50 per ounce. That was when Robbie, then 18, and his father, Robert, hit the road, setting up booths in hotel lobbies around the South, buying unwanted gold and silver jewelry and selling it to a smelter. It turned out to be a genius business, and by the end of the year they had 30 teams of buyers crisscrossing the country.
But when the market collapsed a year later, the Whittens found themselves with a warehouse full of jewelry in Columbus, Ga. “We ended up with really nice pieces that were too pretty to melt down, so we bought some showcases,” Robbie Whitten remembers. “We decided we didn’t want to be in the retail jewelry business, so we said, ‘Let’s try a pawn shop.’ Thirty-three years later, that original location is still going strong, and we’ve expanded.”
The younger Whitten now has seven Money Mizer franchise locations in Georgia, Florida and Alabama; he’s preparing to open five more this year, and eight to 10 per year after that. He let us behind the counter to learn how he has built his business. Hello, Dalí: Robbie Whitten of Money Mizer.Photos© Rob Culpepper
How do you deal with the seedy reputation of the pawn business?
We’ve been fighting negative images for years. Pawn shops can be kind of shady, but the reality TV shows have been a big boost to the industry and its reputation. Now a lot of mom-and-pop shops are cleaning up their stores to take advantage of the interest.
There are a lot of new customers coming in who say they’ve never been in a pawn shop and want to check it out. We don’t want them to feel like they’re in a pawn shop. On one side we want them to think they’re in a fine jewelry store, and in the sporting goods section we want them to think they’re in a Bass Pro shop, with a department store in between.
What sets Money Mizer apart?
Our stores are different from about 95 percent of pawn shops. We’re almost like a retail store, and a lot more customer-friendly–and we’re on the good side of town. Our employees don’t have long hair or tattoos running down their arms. We attract more of a white-collar clientele.
Are the upscale customers buying or pawning?
Our loans have definitely increased to the white-collar side. There are lots of guys, like real-estate agents, who were making six figures that are now living on 40 grand. They can’t borrow $3,000 or $4,000 from the bank anymore–they just don’t make those types of personal loans. The term we like to use in the industry is “underbanked.” But these people have lots of nice tangible assets. They might have a Rolex or a $500 Ping driver they can sell.
But people like to shop here, too. Recently we had a lawyer come in and buy a flawless 2-carat diamond from us. Then he took it to a jeweler and had it put in a mounting. We could have done the exact same thing for less, but he said he didn’t want his fiancée to know the diamond came from a pawn shop!
February 14th, 2013
From Post Bulletin Dot Com
Heard on the Street: Couple win wedding — in pawn shop
Jeff Kiger | Posted: Wednesday, February 13, 2013 11:37 am
When Julie Ohm checked her email Saturday night, she got an early Valentine’s Day surprise.
“Oh my God, we’re getting married Thursday,” she told her longtime fiancé, Dennis “Cub” Lunde. “And it’s going to be in a pawn shop.”
It turns out Ohm and Lunde are the winners of Laser 101.7′s “Once A Pawn A Wedding” contest. That means they are getting hitched at National Pawn’s southeast Rochester store on Valentine’s Day.
Instead of a more traditional minister to lead them in their vows, Rochester radio personality Big Mark Clark will officiate the ceremony as they walk down the aisle… of the pawn shop at 426 Third Ave. S.E. The whole event will be broadcast live on the radio at about 5:45 p.m.
“I’ve never met him, but I hear he’s a nice guy. I guess I’ll get to know him Thursday,” Ohm said.
The couple has been engaged since 2009, and Ohm said they are excited about winning this whirlwind, if quirky, wedding. However, this isn’t actually the prize they were hoping for when they entered the contest at the urging of a friend.
A ZZ Top-style 1933 Ford Coupe initially got their attention, and they’re still in the running for the national contest drawing for the car.
“It’s great. This is what we’ve always intended to do,” she said. “And what the heck, we might win a cool car, too.”
The couple first dated in the 1980s and then went their separate ways. They reconnected a few years ago and rekindled that old flame. These days the pair work together on their Rochester business, Dennis Lunde Flooring. It was formerly known as Custom Carpet Craft.
So how do they feel about tying the knot in the middle of a pawn shop?
“It’ll be different, but it is going to definitely be unique. That fits us pretty well. Cub is a pretty unique character,” Ohm said.
Beside providing the wedding “chapel,” National Pawn is providing wedding rings for the couple. Carousel Floral Gift & Garden Center is handling the flowers. A reception will follow at Shar’s Country Palace with dinner provided by Wildwood Sports Bar and Grill. The wedding cake is coming from Coldstone Creamery. The newlyweds’ special day will wrap up with an overnight stay at Courtyard by Marriott.
February 7th, 2013
From The Register Dot CO Dot UK
South Koreans pawn shiny tech for stress-free loans
Hocking Gangnam Style!
By Phil Muncaster
Posted in Business, 7th February 2013 06:29 GMT
Cash-poor South Koreans are increasingly pawning their shiny new smartphones, fondleslabs and laptops for hassle-free loans at a growing number of specialist hock shops springing up in the Asian nation.
There are 15 of the new IT pawn shops in the Seoul area alone, all designed to cater to a younger, tech-savvy clientele, according to Korean news agency Yonhap.
A world away from the shady image of the classic pawn shop, usually manned by a chain-smoking octogenarian, this new breed of hocking shop reportedly features young staff, flashy, modern interiors and store web sites.
“One guy was telling his friend he was having a hard time finding someone who could lend him 200,000 won ($184),” pawn shop owner Kim Moo-hyun told the news agency.
“What was ironic is that he was holding the latest iPhone and iPad, which are obviously expensive. I thought this could become a business model.”
These shops typically pay 50-70 per cent of the device’s market price with interest at roughly three per cent, Yonhap said.
Loans apparently range from 200,000 won (£117) to 1 million won (£586) on average, with a Galaxy S3 in good nick potentially fetching 350,000 won (£205).
Customers can be in and out in ten minutes, after showing ID, signing a contract and handing over the device, in a set-up designed to service those in need of hassle-free, one-off loans.
Korean pawn shop owners have even tried to allay customers’ anxiety over being seen in their establishments by offering personal consulting services on mobile messaging platforms, Yonhap said.
But with new product release cycles shorter than ever, items will typically only be taken for a month or two. ®
January 8th, 2013
From Market Watch Dot Com
Pawnbrokers pitch loans to kings and queens
Shops go upscale, as Beverly Hills pawnbroker opens Manhattan location
By Charles Passy
With holiday bills starting to come due, even some affluent Americans may be looking for a source of quick cash. But these days, the wealthy are increasingly likely to be wooed by lenders from a place outside the traditional financial realm—the local pawnshop.
In recent years, the pawn industry, once saddled with a skid-row reputation, has targeted a more mainstream and sometimes downright wealthy clientele by offering to deliver short-term cash with speed and discretion.
Colorado-based Pawngo, an online pawnbroker that launched in 2011, is appealing to the moneyed set by advertising loans of up to $1 million “without financial disclosures or bank hassles.” Some established pawnbrokers also are pursuing the high-end market: Beverly Loan Co., a 75-year-old business in Beverly Hills, Calif., that describes itself as an “upscale collateral lender,” is adding a Manhattan branch this year.
More surprising, industry analysts say, is that at least some wealthier borrowers are responding positively to the pitch—despite interest on loans that can reach 240% a year. Indeed, the growth in the higher-end segment is helping fuel the pawn business as a whole, according to Marketdata Enterprises, a Tampa, Fla., research and consulting firm. It estimates that pawnshop revenue topped $15.5 billion in 2012, a 7.2% increase from the previous year, and it projects similar growth in 2013. “People who wouldn’t ordinarily go to a pawnshop are considering services like this,” says Marketdata research director John LaRosa.
To be sure, some of this white-collar growth reflects the economy’s lingering struggles. But pawnshop owners say more upscale clientele are responding to a different kind of economic pressure: With credit tight, even the rich can’t always get a traditional loan on short notice. Finding bank financing can be particularly thorny for small-business owners with cash-flow issues.
“We can hand out $100,000 in a matter of 10 minutes,” says Jordan Tabach-Bank, chief executive of Beverly Loan. Mr. Tabach-Bank says his well-heeled loan applicants often only need a cash infusion as a “bridge” if they are buying a home while selling another, or to jump into an investment opportunity. Among the common collateral: artwork, diamonds and gold.
Even borrowers who can get a conventional loan may still prefer the pawn route because it is relatively streamlined and private, with no loan committees or reporting to credit agencies. Indeed, all that most pawnbrokers require from applicants is identification and, of course, an item to be used as collateral. (Once the loan is paid off, the borrower can reclaim the item.)
Still, there’s a literal price to be paid—namely, those eye-popping interest rates. For that reason, financial advisers continue to advise borrowers to exhaust every other option—a home-equity line of credit, a loan from a family member or a high-interest credit card—before pawning anything. “A credit card that’s 25% a year is cheaper than a loan that’s 25% a month,” says Michael McGervey, president of McGervey Wealth Management in North Canton, Ohio.
December 4th, 2012
From Denver Post Dot Com
By Claire Martin
If power tools, musical instruments, jewelry and DVDs are on your shopping list, consider shifting your attention from Santa’s workshop to a pawnshop.
Go with a discerning eye, some knowledge about how to assess the object of your quest, and this question: “What are your warranty terms?”
“It varies by location, but most of the chains offer some kind of warranty, and check with individually owned shops,” says Eric Garman, president of the Colorado Pawnbrokers Association and regional director of operations for EZ Pawn.
“In my shop, we offer a six-month warranty with everything we sell. It’s a satisfaction-guaranteed warranty. Three months down the road, if you don’t like it, you can bring it back. We’ll take care of it, just like any other retailer.”
His insights might surprise people who associate pawnshops with shady merchandise and even shadier characters .
But step into a pawnshop these days — EZ Pawn, Big Daddy’s Jewelry & Pawn, or Wedgle’s Music & Loan, a Denver institution — and it’s like any other no-frills retail store.
The lights are bright. The merchandise is sorted by category. Unlike the History Channel’s “Pawn Stars” line — “You never know what’s going to come through that door” — the inventory in a typical pawnshop is actually pretty predictable. (What’s on the shelves typically is the collateral forfeited by its former owners after failing to pay back a short-term loan.)
There will be guitars hanging with violins and mandolins, power tools on sturdy shelves, DVDs and Blu Ray discs in narrow racks, glittering jewelry displayed under glass counters, cel phones, and an assortment of electronics — flatscreen TVs, laptop computers, tablets, MP3 players, even the odd Sony Walkman CD player.
“What happens when you don’t have much experience with pawnshops, you go in for whatever reason, and people cannot believe the value they can get,” Garman said.
“I tell our team, ‘If you can just get ‘em in the door, and you’re clean, you’re friendly, and you offer good service, you’ll have a customer for life.’ I never knew, till I started working in pawnshops, what good deals they had. Now I always check pawnshops before I buy new.”
As secondhand shoppers know, it’s important to be flexible. Go to a pawnshop hoping for Season Two of “My Name Is Earl,” and you’ll probably be disappointed — until you find a full boxed set of “The Sopranos” for $10 per season.
Finding exactly what you want could mean trekking from one shop to the next. Different pawnshops tend to feature different specialties and quirks.
EZ Pawn, a regional chain, reliably carries pawnshop standards — power tools, electronics, jewelry, laptop computers, cellphones — and some surprises. The EZ Pawn on Larimer Street near downtown Denver, for example, recently had a Jagermeister tap for $100, several sets of Pinnacle tires ($780 for a set of four that looked new), and a Juicy Couture handbag ($150) loaded with charms.
Wedgle’s Music & Loan, now in its fourth decade at 1122 Broadway, carries more guitars, drums, keyboards and violins than some conventional retail stores that specialize in musical instruments.
The staffers are knowledgable, each specializing in different instruments and equipment. (Wedgle’s amplifier specialist could teach a college class in historical and technical sound equipment.)
A lot of parents buy their child’s first musical instrument here. Wedgle’s also gets plenty of traffic from professional musicians, who sometimes cast an envious eye on the collectible vintage posters, including a Grateful Dead New Year’s Eve promotion.
Big Daddy’s Jewelry & Pawn only sells bicycles that come with their original bill of sale, a policy that eliminates stolen bikes. It also means Big Daddy’s doesn’t have very many bicycles, but the bikes they’ve got are excellent. Recently, Big Daddy’s had a 2010 Orbea racing bike (with a Littleton Cyclery receipt for $1,181 hanging on the handlebars) for $700. Its Mavic wheels alone were worth that much.
Big Daddy’s also is renowned in local pawn circles for its impressive collection of Apple products, including desktop iMacs and laptops. Don’t expect thrift store prices, but recently Big Daddy had a $2,400 iMac with a 32-inch screen that was loaded with approximately $11,000 of software including Final Cut Pro, which retails for $300.
A caveat about buying electronics from pawnshops: Be cautious as co mputers and vacuum cleaners both can harbor viruses and other problems.
“I don’t buy electronics from pawnshops,” says Chris Cassera, who often sells to pawnshops the gold and silver jewelry he culls from thrift store grab bags.
“My experience is that electronics, there’s usually a reason they’re in the pawnshop. Even with laptops, it’s hit or miss.”
His advice to pawnshop novices: Get the details on the warranty — does it cover only manufacturer-identified problems? Will you be able to replace the DVD player that suddenly won’t open?
One more tip: Look at the price tag. At EZ Pawn and some other pawnshops, there will be several numbers listed. The first is the current price, or the price when the item first went out on the floor, often next to a date. The second postdates the first by two or three weeks, reducing the original price by 10 percent or more discount. The third price is an even deeper discount.
“It’s a gamble, but everything on the floor is already listed on eBay,” Cassera said.
“What’s good about pawnshops is finding something obscure. I found a “Masters of the Universe,” the Dolph Lundgren one released in the 1980s, for $3 in the clearance section at a thrift store. Not a scratch on it. I’d looked everywhere for that, and you couldn’t find it because it was so outdated. That’s what you find at a pawnshop.
Claire Martin: 303-954-1477, firstname.lastname@example.org or twitter.com/byclairemartin