Most of us common folks can relate to the expression ‘“cash poor”, but when you think of what being cash poor looks like, you probably don’t envision Rolex watches and Ferraris. However, that is exactly what cash poor looks like in the world of luxury pawning.
In a world where individuals have a high number of assets but a low amount of cash on hand, there is often a need for quick access to capital. Business loans can take several months to be approved, so what do you do if you need liquid cash to buy necessary inventory for your business TODAY? Well, it turns out that some of the wealthiest among us can simply put up their Picasso or Aston Martin for pawn with a luxury pawn broker.
Luxury Pawn Shops
Luxury pawn shops specialize in high-value asset pawn loans. Meaning, they don’t deal with your run-of-the-mill pawn loans for fine jewelry or electronics. These pawn loans average $15K, but can range anywhere from $1,000 to 2 million dollars.
So why would someone risk losing their precious Harry Winston diamond for quick cash? Well, the approval process for a pawn loan is a lot easier and faster than other types of loans. Since the borrower is putting up an item as collateral for the loan, a credit check is often not necessary. The interest rates are higher than some other loan options but they are also short-term loans, which means that typically the borrower has the expectation that they will be able to pay the loan off fairly quick. It’s hard to wrap your head around paying off a $1.2 million loan in 60 days, but for some people, that kind of cash flow exists!
High net-worth individuals also find that managing these transactions are actually quite easy. The loan format stays the same, where the lender offers a cash loan for an item of value. If the borrower accepts the loan terms, they hand over the high value item until the loan is paid in full. If the borrower fails to pay back the loan, the lender receives ownership of the asset.
It gets better.
Luxury pawn stores offer the capability to manage their loans online and even the transit of their high-value items. Individuals not near a high-end pawn store can ship their asset to a broker securely and receive their cash the next day. When the loan is paid in full, the asset is shipped back.
It is an understatement to say that luxury pawning is a completely different ball-game. Ninety percent of borrowers are looking for loans to finance business dealings. The typical luxury pawn borrower will take out an average of 4 loans. These customers appreciate the ease and speed of pawn loans compared to other business loans and often times have no concern with their ability to earn their asset back.