As the economy has suffered, one business model has thrived: the pawn shop. In fact, this may be the golden age of pawn.
The number of pawn businesses has increased by half in the last five years to around 10,000 shops. And over that same time, the average pawn loan has almost doubled to $150.
“There’s been a real renaissance in the pawn industry,” says Emmett Murphy, spokesperson for the National Pawnbrokers Association. “We’re seen a real change in the way the American public perceives the pawn industry. This is partly due to the success of television shows like 'Pawn Stars' or 'Hardcore Pawn.'”
And it’s not just people on the lower-end of the economic ladder that drive business. The industry is also seeing growth at the extreme high-end of the market.
Jordan Tabach-Bank owns Beverly Loan Company. He doesn’t flinch at the idea of a million dollar pawn loan.
“We have made seven-figure loans,” he says.
His pawn shop defies stereotypes. It’s discretely located on the third floor of an office building in Beverly Hills. Art by the likes of Keith Haring and David Hockney adorns the walls. To provide confidentiality, employees discuss business with clients in private offices. His customers pawn everything from Picassos to fine-wine collections to diamonds.
Last year, business was up 10 percent due, in part, to clients from the top one percent.
“We really specialize in those white-collar customers. And never before have we seen so many in need of short-term lending,” says Tabach-Bank.
In the wake of the Great Recession, banks are making fewer loans. The upscale pawn shop offers an alternative.
At a bank, Tabach-Bank says, “You might fill out stacks of paperwork, provide financial statements. It will go to loan committee and you’ll be denied. Here, you can walk out with $250,000, $500,000 in a matter of minutes, only signing one document.”
Many of his customers need the money for business.
“We’ve found many business owners coming in here, especially during the holidays, who needed to meet bonus demands for their employees,” says Tabach-Bank. “We have business owners who are waiting for escrow to close; many real estate brokers. We’ve had customers who are simply looking to grow their business.”
Bob Donnelly pawned his watch.
“I just recently did a loan with them for a Patek watch,” says Donnelly. “It was a decent loan. You know, five figures. I use it in lieu of a kind of business line.”
In Las Vegas, Michael Mack owns a shop called Max Pawn that also targets the big fish.
“We advertise that we’ll do a loan of up to a million dollars,” says Mack. “But if it’s something bigger, we’ll look at it.”
His shop doesn’t look like the typical purveyor of pawn either.
“We often joke and say that we’re a pawn shop dressed up as a purse store,” says Mack.
He specializes in status-symbol bags from Louis Vuitton, Gucci, Chanel, Hermes -- some worth $80,000.
Over the years, he’s given pawn loans for cars, boats and even jets.
“We’re seeing people with great wealth -- with assets that they accumulated during the good times -- that need cash,” says Mack.
He charges up to 13 percent interest per month. But it’s negotiable.
“The more you borrow, the less you pay,” says Mack.
Pawn shops in Florida and some other southern states are allowed to charge 25 percent interest per month.
Jay Martin sees those rates as an opportunity for his online shop, PawnUp.com.
“With us, you could pay as little as 2 percent. And, you know, as high as 10 percent,” says Martin.
He says clients shop around for the best rates, especially for high-end deals.
“I’m seeing what I believe are people that, if you turned the clock back ten years ago, they were doing really, really well,” says Martin. “So today, that two-carat or three-carat ring that they purchased then possibly for $20- or $30,000, that’s what they’re using today to try to get thousands of dollars for a short-term loan or to pay their taxes.”
Online pawn shops are a relatively new phenomenon. Owners of walk-in businesses like Michael Mack don’t necessarily worry about the competition. But he recognizes the online trend.
“It’s getting bigger and bigger, and at the end of the day, the traditional brick-and-mortar pawn shops are going to have to get into the Internet pawn as well,” says Mack.
The owners of these companies wouldn’t reveal how much they make. But business is good enough that PawnUp.com plans to open a new office in Colorado this month. And Beverly Loan Company is expanding this spring with a new branch in New York City’s diamond district.