Starting a Pawn Shop Business

Pawnbrokers perform two functions buy personal property or secure loans for property. The customer might choose to use his personal property as collateral to obtain the loan.

The broker estimates the worth and value of the property and offers a sum. On the alternative the customer could choose to sell the property outright.

The item should have relative value before the pawnbroker accepts it as collateral. Common items found in pawn shops are cameras, jewelry, expensive items, antiques, musical instruments and television sets.

They also accept novelty items that are valuable and easy to sell. Within a contractual period an item pawned for a loan should be redeemed or the item is forfeited to the broker.

Therefore pawn brokers sell redeemed items and goods bought directly from the customer. Pawn shops are common in many countries such as Hong Kong- China, Malaysia, Philippines, India, Sri Lanka and Indonesia.

From shadowy beginnings pawn shops are now more upscale and have good reputation. They provide short loans governed by their respective countries trade and loan laws.

To start your pawn shop business you need to determine the business structure. Are you going to pawn and sell only items offered by customers?

Or adopt a different model by adding brand new items to your store. Here are a few ideas on starting a pawn shop business.

List of Items in Pawn Shop

• Novelty Items
• Painting
• Electronic Items
• iPod players
• Cell phones
• Cameras
• Musical Instruments
• Audio Equipment
• Video Games
• Jewelry
• Computers
• High-end Television sets
• Power Tools

Starting a Pawn Shop Business

Pawn shops provide short term loans with high interest. To start the venture you need to master the art of valuing items.

You also need a good business plan, start-up estimate, permits and licenses. Other requirements are sales tax, business registration and location. Hire competent staff, purchase inventory and promote the establishment.

Write a Business Plan

Do a comprehensive market research to understand the business. The research identifies competitors, target demography, customer base, interests and wants.

Develop a powerful business concept, operational plan, financial plan and marketing strategy. Once you are through with your business plan carry out a feasibility study of your locality.

Learn Goods Valuation

The most important aspect of being a pawnbroker is mastering the art of valuation. This is very important to the success or failure of your enterprise.

Learn through different resources such as on hands experience in an established pawn shop. Other ways are through tutelage, apprentice schemes, online resources, internship programs, books and experience.

You need to know the secondhand retail value of items such as jewelry, electronic items and precious stones. Remaining trendy with current prices of goods is very important.

Apart from knowing the value of goods you need to establish positive identification of the seller to avoid stolen goods. Items are usually assed on its condition, value, current price and marketability.

Hard to sell items are usually rejected by pawnbrokers.

Loan Determination

The pawnbroker’s job is to determine the value of the item and offer an amount for loan. The value is usually determined using the wholesale value of that item.

The lower price offered has a short mature time with high interest rate. Knowledge of jewelry, germ stones, electronic and supply and demand are all techniques employed by brokers.

The loan could also be assed on likelihood of customer paying back the loan. The pawn shop owner needs to hire a qualified lawyer to write the agreement and contractual papers used during the loan process.

How to Get Start-up Capital

You need lots of start-up capital to cover loans and purchase of items. Create a financial plan to determine fixed and working capital.

Fixed capital involves furnishing, permits and security gadgets. Working capital entails staff wages, rent, maintenance and purchase or loans.

Visit any commercial bank in your area with your business plan and financial plan. You need to have at lest 1/3^rd of startup funds and collateral. Try to secure long term loans with low fixed interest rates.

Pawn Shop Licenses and Permits

You need to apply for operational permit and licensing. The laws differ from each country so make sure you abide by them.

Secure a business name and register your business as a limited liability company. The company’s credit rate and financial statement should be properly documented.

You need a personal tax identification number and apply for sales tax permit. Apply for other licenses you may require including trade license.

Locating the Pawn Shop Business

There are strict zoning policies in some countries pertaining to pawn shops. A good location should have heavy pedestrian and vehicular traffic.

You shop should be easily accessibly, visible and centrally located. You need ample parking for your customers including storage space for goods.

The earning power or income level of your target customers should be accommodated such as middle class earners or upscale areas. The quality and value of the items you receive depends largely on your location.

By Joi ,CC BY 2.0, via Wikimedia Commons

Furnish the Shop

Your store need moderate furniture such as cashier table, shelves, lockable display cases and good security system.

Hire Staff

Hire only experienced staff with previous knowledge of the brokerage industry. You need a good accountant, sales girls and security personnel. Hire a driver, cleaner and expert-appraiser on freelance bases.

Inventory and Stock

Keep a good grasp of the inventory in your shop. You need to constantly restock with popular items to meet customer demands. Apart from receiving property for loans you could purchase items in auctions, yard sales, online or flea markets.

Promote the Store

You need to promote the store to attract steady patronage. Pawn shops are people oriented establishments and you need lots of customers to succeed.

You could offer discounts, launch fun activities or develop an online store. Advertise in local newspapers and magazines in your locality. Use traditional advertisement method such a printing flyers, billboards and banners to attract patronage.