Have you seen the incredible reality shows about pawn shops? These businesses have been around for many years and have proven themselves to be incredible businesses. Not everyone can become a pawn broker and many states have restrictive licensing in place. However, if you are so inclined, you could start a pawn shop and do well, especially in a recession. People are always looking for money and a pawn shop can fit that need easily. Banks, credit unions and other lending institutions simply have tightened their lending belts to the point that it is extremely difficult to get any loan.
A Pawn Shop on the other hand does not have these credit restrictions. There is no credit check, no reporting to the credit bureaus, no lengthy applications to complete and so on. The process is quite simple. If you have anything of value, then you can take it to a pawn shop. The employees there will appraise the item and if it is of interest to them, they will loan you money. Keep in mind; pawn shop loans are not cheap. They carry high interest and you must be able to repay the loan which is usually around 60-90 days after you get your money. There are instances in which you can get an extension, but there will be interest due.
If you cannot pay the loan, the worst that will happen is you will lose the item you pawned. The pawn shop can sell the piece for as much as they want. You need not worry about collection calls or any of the other problems with past due loan payments.
Now that you have a general idea about pawn shops, let’s discuss how you can start your own pawn shop and make a lot of money.
While there may be some excitement with your desire to become a pawn broker, stop and consider the following. Before you open your shop, check to see what regulations are in your city. Many areas require a pawn broker license, a business license, a criminal background check. All necessary licenses are needed prior to opening this business. When checking for licensing, be sure to check your state, county and city. Many states do not require a license, but county and city governments do. You will also need a business license and surety bond for at least $10,000 and of course a criminal background check.
Once your licensing is in place, the next step is to find money for operations. You will need money to buy goods for the store, for making loans against pawned items, for business expenses such as rent, phone, payroll, etc. Keep in mind however that loans are usually paid back in 60-90 days along with interest so your money won’t be long in coming back to you. You will also need money for buying goods that people no longer want and don’t want to pawn. Be careful, you might be presented with a piece worth thousands. If you don’t have the money you will have to turn it down.
If you don’t know how to appraise items, this will make your chance for success much lower. There are price guides that you can buy. There are some websites that offer free appraisals of certain goods. Gadget Value is a great website for getting values on desktops, laptops, flat TVs, tube TVs, iphones and ipads. If you decide to accept gold, silver, platinum and palladium items you can easily get their value. By using a digital scale, find out how much each item weighs. You can find their current value online at one of the sites providing pricing per ounce of gold, silver or other precious metal. Determine what type of gold you have. Is it 10k, 18k, 24k? This will help determine how much the gold content is and what its value should be.
Next, there are many items you will need to properly run your business. A Jewelers Loupe is used to determine the grade of certain precious metals and also of gemstones. As already mentioned you will need a Digital Scale which can weigh up to 32 ounces (1,000 grams). A Platinum Precision Carat Scale will help determine the carat for various precious metals. Equally important is pawn shop software. There are many different programs available, but since you are starting out you should locate a free package. While you might think this could not be a good program, you will be wrong. Check the internet and compare products.
One other step: find a building you can rent to open your pawn shop business. Remember, location is critical. Be sure you are in an area where there is plenty of traffic. Be sure to report to the local police items you have gotten on pawn in case the item is stolen. Working with local police will also come in handy when you run into problems with troublemakers.
There are several things to remember that you should never be involved in with this business. Don’t ever sell a pawned item before the loan is up. Wait an extra day or two if you can. Better to hold an item a few extra days than have someone show up to redeem their item only to find out you already sold it. Keep detailed records of all transactions. Your software package will help. Set up your loan terms, interest rates and other items ahead of time, and don’t waiver. Never sell junk. When you start to sell junk, your reputation will go down the drain and you will quickly lose customers.
Opening a pawn shop is not a simple task and you certainly won’t become rich quick. However, you can do quite well especially when you realize that this business is truly recession proof.