Wealthy entrepreneurs are turning to an unexpected source to finance their new business ventures: pawn shops.
According to news from CNBC on Monday (March 5), there has been an uptick in wealthy people pawning their valuables for collateral and quick small business loans. There are only a “handful” of companies enabling individuals to do this, reports said, largely because entrepreneurs are seeking much more than the average size of a loan from a pawn shop.
The National Pawnbrokers Association pegs that at about $150, reports said.
According to the publication, the financing strategy is helping pawn shops shed their reputation as a source of quick cash for the down-and-out. According to Jordan Tabach-Bank, CEO of The Loan Companies, which operates high-end pawn shops in several locations around the U.S., the pawn shop industry’s growth is “certainly geared more toward opportunity loans than anything else.”
Luxury Asset Capital President and CEO Dewey Burke said the industry shift is also part of an effort to educate entrepreneurs about the financing opportunity they have.
He told the publication that part of this effort means “educating the affluent customer that they have all these assets sitting in their closet.”
Burke pointed to one client who pawned four luxury watches; the shop, in turn, was able to provide him with $400,000 in 48 hours — something traditional lenders wouldn’t do, he added.
“Oftentimes if I talk about my business, the assumption is that people borrowing money from you, they must be in a bad spot,” Burke told CNBC. “That’s simply not true. We also more often deal with business owners that are growing.”
Last year, the Consumer Financial Protection Bureau and the Attorney General of Virginia took action against a pawnbroker in Virginia, ordering the business to pay restitutions to customers due to misinforming them of fees associated with loans.