Are Pawnshops Better than Banks?
The wealthy are turning their backs on banks...
But where are they turning to?
The chief executive of the National Pawnbrokers Association, Ray Perry, says “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.”
And why not? When the wealthy need money quickly pawnbrokers are always there for them.
You've seen television's hottest new trend of documenting pawnshops and storage wars, but this trend is catching, beyond the reality shows and into reality.
You can see just how valuable pawning is to individuals in The Telegraph's report this week on pawnbrokers throughout England.
Simon Bennett is an entrepreneur out of Wolverhampton, England and was having some bad luck with his bank when he needed quick cash for his personal business. So instead of being yanked around by the banks, he looked to pawn his Aston Martin Virage.
Mr Bennett says, "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."
The beauty of Bennett's quick thinking is that he has since bought back his car, but also has used additional assets like an Omega watch, an expensive painting, and even another Aston Martin (DBS V8), to increase his cash flow for his business.
(Courtesy of Cars124.com)
He said, “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 Bennett's pawning of his Aston Martins is just the tip of the iceberg when it comes to the wealthy dodging banks .
One antiques dealer, Boudicca Scherazade has been pawning personal assets for years now and it has meant keeping her business afloat during the downturn.
She says that in terms of raising money, it is much easier and faster to get a loan through a pawnbroker, especially in her business of antique sales. She often needs money quickly to pay upfront for a purchase for one of her clients, so pawnbrokers are ideal for such sales. Going to a bank takes too much time and for her, time is money for antiques.
“I have always got my items back [like an 18ct gold Rolex and Cartier love bangle she got £4,000 for]. So for me this is a swift and slick way to get access to cash when I need it.”
Pawnbroker shops have been on the rise for the past few years. In England, the Albermarle & Bond pawnbroker company is taking over, expanding to 300 outlets and recording up to £12.1 million in profits over just the last six months. In the past five years, the number of shops increased from just 530 in 2007 to more than 1,800 today in England alone. The National Pawnbrokers Association reports that there are over 30 million pawn store customers per year while the national average loan amount has just jumped from $80 to $100 over the past year.
And the people that are making the most from these pawnshops are the wealthy middle class, like Bennett and Scherazade.
From the Telegraph,
"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.
Companies like Albermarle & Bond and H & T are both considered stocks to buy lately, as the popularity of pawnbrokers across the globe has increased significantly.
For individuals that are smart with their investments but even smarter with their quick loans, pawnshops are becoming the best answer. As Bennett said it bluntly, “Pawning my Aston Martin was the best option.”+20
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