When the wealthy need money in a hurry, they don’t bother asking a bank – many turn to pawnbrokers instead. This story below may not be in the U.S., but it rings true all over the world as we are all in an economic recession. We have stated in many of our past blogs that wealthy people use pawn shops for quick cash and its not just for the lower income folks as the stigma seems to be. No matter how large the transaction, PawnMaster can do the job! If you weren’t aware, our software is available internationally from Europe to South America and even New Zealand. Give us a call today and let one of our qualified sales reps show you what it can do for your bottom line!
By Kara Gammell
If you think that Britain’s pawnbrokers are only trading cash for garish sovereign rings and clunky gold bracelets, then think again. The financial crisis and subsequent double-dip recession have handed pawnbrokers a new type of customer – wealthy individuals short of cash.
These cash-strapped middle classes are exchanging luxury cars, vintage designer handbags, jewel-encrusted Swiss watches and multi-carat diamond rings.
Take Simon Bennett, for instance. The Wolverhampton-based entrepreneur had no luck with his bank when he needed to get his hands on some much-needed cash to plough back into his business. So his solution was to pawn his Aston Martin Virage.
Mr Bennett said: “The banks seem very reluctant to lend, so securing a short-term loan against some of my assets in order to grow my business seemed the easiest way to get the money I required.”
Mr Bennett has since bought back his car, but he has subsequently used additional assets, such as his classic Aston Martin DBS V8, pictured here, an Omega watch and a painting to increase his cash flow for the business.
He added: “I have no plans to lose the items I’ve pawned, so it was essential that I had an exit plan when I took out this type of loan. But so long as you know how you will pay the money back and it is only for the short term, it can be a great way to raise capital when you need it.”
But Mr Bennett isn’t the only middle-class consumer pawning his big-ticket possessions.
For Boudicca Scherazade, a Chiswick-based antiques dealer, pawning personal assets has meant keeping her business afloat during the downturn.
Miss Scherazade, 43, has borrowed £4,000 against a 18ct gold Rolex and Cartier love bangle to raise money to buy antiques on behalf of her clients.
“While it is an expensive way to raise money, it is much easier and faster to get a loan through a pawnbroker,” she said. “With my business, I often need money quickly to pay upfront for a purchase for one of my clients, and going to a bank takes time and can mean I miss the sale.
“I have always got my items back, so for me this is a swift and slick way to get access to cash when I need it.”
The wealthy middle class now account for nearly half of all new business, according to the National Pawnbrokers Association (NPA).
The size of loans taken out has also increased during the economic downturn, with the online pawnbroker Borro reporting a rise of 525pc in value – up to an average of £5,000 from £800 in 2010.
“People are undoubtedly being hit by these tough economic times and are looking at different ways to raise money for various reasons – tax bills or business cash flow issues, for example,” said Paul Aitken, the chief executive of Borro.
He said many consumers who had interesting and valuable personal assets sitting in their homes or in storage were now realising they could use them to gain access to cash to make ends meet. “We have seen an influx in the number of high-value personal assets coming to us,” he said.
“The good news is that the vast majority of our customers come back to claim their assets.”
Pawnbrokers are one of the winners of the recession as the number of shops both on the high street and online has more than tripled in the past five years – rising from just 530 in 2007 to more than 1,800 today.
Pawnbrokers generally offer loans of up to 50pc of the value of an item for six months. The customer then repays the loan with interest – at an average rate of 8pc. According to the NPA, 85pc of loans from pawnbrokers are redeemed.
“With banks often refusing to lend or being unable to satisfy demand for short to medium-term small cash loans, many are using pawnbrokers instead,” said Ray Perry, the chief executive of the NPA.
The popularity of pawnbrokers is also a reason why share tipsters rate stocks such as Albemarle & Bond and H & T as buys. Collins Stewart said Albemarle’s shares offered good value and rated the company a “buy”.
Of H & T, Charles Stanley, another broker, said: “Even after trimming our price target from 390p to 360p to allow for movements in peer valuation measures, we still see more than 20pc upside.”
