Opening up a pawn brokers

[rich12]

Not something I'm going to do (unless it's a sure fire way to make me billions ha) so just interested in the capital costs etc.

How much start up capital would you typically need to be able to offer what would come in for an average shop?
How much are bad debts?
Assuming you don't lose out too often as you never loan close to the retail value?
How do they enforce repayments?

Is it a business that is dying?

Yes I've been watching an episode of posh pawn

Edited by rich12 on Sunday 25th February 19:52

[Sonie]

I’d get a job in one, find out the ins and outs and then decide too many chancers.

Tonight’s one, I want £X for a car.... no buyers
I want to know value of sword...takes it away.

Do they charge a fee if they don’t sell?

[technodup]

rich12 said:

Not something I'm going to do (unless it's a sure fire way to make me billions ha) so just interested in the capital costs etc.

How much start up capital would you typically need to be able to offer what would come in for an average shop?
How much are bad debts?
Assuming you don't lose out too often as you never loan close to the retail value?
How do they enforce repayments?

Item's worth £100. You loan £50 for it. They pay back £70. Or you sell it for £100. Difficult to lose, unless you loan on a fake.

You don't enforce repayments afaik. I'm sure modern ones send a reminder but when the term is up and not paid the item goes up for sale. So you don't really have bad debts either, the value you hold is more than the cash you loaned.

I should point out that my sole experience of pawn shops is watching Skint on TV. Although saying that my granddad had one. I never met him though.

[ctrph]

rich12 said:

Not something I'm going to do (unless it's a sure fire way to make me billions ha) so just interested in the capital costs etc.

How much start up capital would you typically need to be able to offer what would come in for an average shop?
How much are bad debts?
Assuming you don't lose out too often as you never loan close to the retail value?
How do they enforce repayments?

Is it a business that is dying?

Yes I've been watching an episode of posh pawn

Edited by rich12 on Sunday 25th February 19:52

Pawnbroking has seen a resurgence since the credit crunch and it is not going anywhere.

Depends on what area of the market you are going for. Low end, you could set one up a shop for around £250k. That should get you through the first 7 months, at this point you should be getting pawns redeemed with the added interest which eases cash flow. High end would require significantly more capital, at least £1 million.

Most pawn shops have a redeem rate over 90%, just depends how accurately you value the items when you pawn them in. Unredeemed lots can either be sold in the shop or at auction. The average offer is usually around 40-50% of the items value so that you can recoup any interest owed when you sell it on.

It is a relatively simple business but it all comes down to valuing the items correctly, which is why it amazes me that most high street pawn brokers staff have little to no training.

I've worked in Pawnbrokers and am a qualified gemmologist. Would love to open my own but haven't got £250k lying around.

[akirk]

you don’t loan against a % of retail value, you loan against a % of firesale value...
so if you need to sell, you can move it on quickly (i.e. at reduction over retail) and still make a profit... the last thing you want is to have your cash tied up longer than necessary...

not hugely complex for something mainstream (e.g. a car / iphone / etc.) but a minefield if it is more specialist (paintings / jewellery / et.) where you need more specialist knowledge...

[ctrph]

akirk said:

you don’t loan against a % of retail value, you loan against a % of firesale value...
so if you need to sell, you can move it on quickly (i.e. at reduction over retail) and still make a profit... the last thing you want is to have your cash tied up longer than necessary...

not hugely complex for something mainstream (e.g. a car / iphone / etc.) but a minefield if it is more specialist (paintings / jewellery / et.) where you need more specialist knowledge...

In my experience loaning against technology is one of the hardest things to loan against as you have to try and predict what they will be worth in 7 months and they are depreciating in value the whole time you have them. Most places will only offer a 30 day buy back to mitigate the risks. With cars, you need to take into account depreciation and storage costs.

I agree that specialist knowledge is required but learning about gold and diamond values is pretty simple.

[rich12]

Is there a generic interest/time period?
If you pawned something worth £5k, what sort of interest would you pay and are they usually short term or long term pawns?

[Yipper]

A high-cost, high-risk, low-profit biz.

£100-1000k to set up a tiny shop on a high street and flog old iPhones and the odd car is insane.

Ahm oot.

[akirk]

ctrph said:

akirk said:

you don’t loan against a % of retail value, you loan against a % of firesale value...
so if you need to sell, you can move it on quickly (i.e. at reduction over retail) and still make a profit... the last thing you want is to have your cash tied up longer than necessary...

not hugely complex for something mainstream (e.g. a car / iphone / etc.) but a minefield if it is more specialist (paintings / jewellery / et.) where you need more specialist knowledge...

In my experience loaning against technology is one of the hardest things to loan against as you have to try and predict what they will be worth in 7 months and they are depreciating in value the whole time you have them. Most places will only offer a 30 day buy back to mitigate the risks. With cars, you need to take into account depreciation and storage costs.

I agree that specialist knowledge is required but learning about gold and diamond values is pretty simple.

I think it depends on what it is, things like iphones generally have enough previous models to show depreciation trends, plus there are enough around to see how they sell - just pop onto ebay and search sold items on buy it now for a pretty accurate current view... one offs such as art / jewellery are more challenging simply because there are less examples to help demonstrate what the market will actually pay...

[ctrph]

rich12 said:

Is there a generic interest/time period?
If you pawned something worth £5k, what sort of interest would you pay and are they usually short term or long term pawns?

Most loans are over a 6 month period but you get 28 days after the loan expires to either pay back the value of the loan + interest or just pay the interest and extend the loan for another 6 months. Which is why I said about the 7 months in my earlier reply.

It all depends on the interest rates the pawnbroker charges. I've seen rates from 4% a month upto 12% a month, the majority on £5k would probably be around 8% on the high street which would be £2400 total interest over the 6 months.

[ctrph]

akirk said:

I think it depends on what it is, things like iphones generally have enough previous models to show depreciation trends, plus there are enough around to see how they sell - just pop onto ebay and search sold items on buy it now for a pretty accurate current view... one offs such as art / jewellery are more challenging simply because there are less examples to help demonstrate what the market will actually pay...

From my experience, I have never or saw a colleague pawn technology as the risks were too high. We offered a 30 day buy-back on it and even on that i've seen them be network blocked and then the customers starts complaining that there are problems with the battery or the screen.

With jewellery its quite easy, you just give a price on the materials so how much the metal is worth, how much the stone is etc. Art and memorabilia are very tricky to deal with.

[dudleybloke]

A friend of mine did a short stint working at a scummy cash-converters type place about 10 years ago and said they used to look up the cheapest price on eBay for the item and offer a third of the price.

[The Mad Monk]

Posh Pawn is the way to go.

[Nickyboy]

dudleybloke said:

A friend of mine did a short stint working at a scummy cash-converters type place about 10 years ago and said they used to look up the cheapest price on eBay for the item and offer a third of the price.

Cash Converters are ridiculous, had a look in the window of one recently, looked up 3 of the electrical items and found they were cheaper on Amazon brand new than they were selling used with no warranty.

[Stu78]

Mate has four or five now. He works on roughly £1m per shop but they do lend against high value goods and buy plenty of stock. It's interesting but you need to be on the ball about a lot of things or you get burnt. Value wise, he works on anything from 30-70% and defaults are quite common, even on big value stuff. There's a legal procedure that is followed that gives the owner a month (I think) to get back in touch, after that it's off pawn and his.