Tag: Traditional loan vs pawn loan

Why Finance a Business through Pawn Loans
“They must be in serious financial distress.” That has been a common perception of folks who seek out pawn loans.

However, current trends indicate quite the opposite. With economic growth on the rise, small business owners are looking to grow their businesses, and entrepreneurs are looking to seize money-making opportunities. Unfortunately, the stagnant paper pushing that comes with business loan approvals does not allow much opportunity to carpe diem on any quick-moving deal. That is, unless, you have collateral on hand to back up the risk of your loan.

Why Finance a Business through Pawn Loans

Here enters the relatively new and successful relationship between pawn loans and business finance. Pawn shops are the new players in the world of business loans. Their customers are looking for loan amounts well over $5,000, and sometimes up to half a million. These large loans aren’t going towards personal needs, but instead are used to finance business operations or business deals that have a high sense of urgency.

Besides the quick turnaround of pawn loans, small businesses and entrepreneurs find that the ease with which a loan can be obtained is also incredibly attractive. Most online and luxury pawn shops can close a loan within 24 hours without a credit check or submission of financial documents. Why would they care what your credit score is if they have your beloved Picasso as collateral?

A recent instance of this – a client of one luxury pawn broker needed access to $400,000 in cash to close on a commercial real estate. The client had exactly one week to come up with the cash. You would be hard-pressed to find any bank that would approve such a loan in as little as one week. However, a pawn broker can because this client has a watch collection that could back up the risk of the loan.

The fact is that banks are approving fewer small business loans than 10 years ago, with a reported gross drop of $200 million in total small business loan worth according to the FDIC. And just for fun, the already complicated loan approval process has continued to get more complicated. In short, banks aren’t helping themselves earn new small business clients. Entrepreneurs have no choice but to look for alternatives for three reasons.
1. The chances of being approved are less likely
2. The process for getting approved is too difficult
3. The timeliness of funding is not consistent with the quick demands of business operations.
It is hard to argue against the case for seeking small business financing through luxury pawn shops.

The only battle that luxury pawn shops are up against is getting the word out to their affluent potential clients that all the assets they need to close a deal, are probably sitting in their closets and/or garages. However, word travels quickly in the world of business finance as we continue to see more luxury pawn shops pop-up online as well as in cities like Chicago, New York and LA.
August 13, 2018
History of Hong Kong Pawn

Pawn shops have a long and robust history throughout the world. One of the longest-running pawn civilizations is that of Hong Kong. Dating back to 3,000 years, Buddhist monks began the first ever recorded pawn and trade operation when they began granting loans to peasants while holding common household goods as collateral. The world took note of this brilliant business model and soon western civilizations like Greece and Rome were implementing pawn loans to provide a way for the lower class entrepreneurs to build their small business dreams.

The History of Hong Kong Pawn

Unfortunately over the years, the unregulated industry allowed seedy and/or illegal activities to take place undetected, earning the industry a negative reputation in most western civilizations.

However in Eastern civilizations such as Hong Kong, pawn shops have continued to be pillars of their communities. The positive intentions of the Buddhist monasteries stayed with the business model for generations to come, creating a rich tradition. A government-regulated industry since 1926, there are now more than 250 pawn shops in Hong Kong. The law limits the amount of interest a shop can charge to 3.5% per month and limits the overall loan amount to $100,000 HK.

Eastern and Western pawn shops have much in common aside from their reputations within their communities. The business model itself is the same on both sides and the intentions of their customers remain the same. Shops in Hong Kong required collateral from their loan customers the same as in the US. And if the loan customer fails to pay back the amount of the loan, they lose their collateral. Customers are often folks who are interested in quick access to cash. Whether to finance an investment or payoff another loan, customers on both sides of the world find the pawn loan process much easier than dealing with the bureaucracy of being approved for other institutional loans.

What is really interesting is the trend both Eastern and Western pawn industries are currently experiencing of high-net worth pawning. If you read our previous article on Luxury Pawn shops, you know that the number of individuals with large amounts of capital, or the capability of producing large amounts of capital, is rapidly increasing. Turns out that high net-worth individuals across the world are recognizing the exponential benefits of using pawn loans over traditional business loans. The only differentiator between the East and West here is the low loan limit the Hong Kong government sets on their loan amounts.

So why do such identical industries have such different reputations across the globe? There is speculation that the 19^th century boom of pawn brokers across Britain sparked industry competition that granted loans on practically anything (like bed linens). Taking into consideration that the industry was unregulated and there were no paper trails, pawn brokers could (and would) change the loan terms on borrowers at will. Whereas on the Eastern hemisphere, pawn brokers have always been viewed as part of a rich tradition that others in the community adore and value. In fact, when the infant mortality rate in Hong Kong was at a critical level, parents would choose their local pawn broker to serve as godparent to their child because they were viewed as an auspicious person and would bring good fortune to the infant.

If you are considering pawning one of your belongings or simply visiting us to see what is available for sale, please stop in at 14158A Lambert Rd in Whittier.

June 25, 2018
Traditional Loans vs. Pawn Loans

The recent wave of reality TV shows has created a perception that pawn shops are really great places to buy and sell unique and/or rare items. However, that perception is a bit skewed and has taken the focus off of what pawn stores were originally intended for. That is, to provide loan options to those who may not otherwise qualify for a traditional bank loan.

A pawn loan is a temporary loan between the pawn shop and the borrower. The loan uses items in possession of the borrower as collateral for the loan. The pawn shop retains ownership and possession of the item until the lender can pay the loan back. If the lender is not able to pay the loan back within in the set time frame (most states give you at least 30 days), the permanent ownership of the item remains with the shop.

Contrary to what some may believe, pawn loans are safe loans for borrowers. Until the loan is paid back, it is the responsibility of the pawn store to keep the item held for collateral safe and stored properly. Also, most facets of pawn loans are regulated by the states including the interest rates. In fact, interest rates attached to pawn loans are typically much more affordable than rates attached to payday or cash advances. Again, rates are regulated state-by-state so in some areas this may not hold true.

Perhaps the most distinguishable difference between a pawn loan and a traditional loan is that defaulting on a pawn loan does not impact your credit score in anyway. Pawn loans are considered “no recourse” loans. So if the borrower forfeits the loan, they simply lose their pawned item and do not have to worry about the pawn shop suing them for payment or reporting them to the credit bureaus. In addition, if regular interest payments are made on the loan, one can typically extend the loan as needed until able to pay back the principal in full, offering more flexibility than other traditional loans.

In short, pawn loans are safe and easy loans to complete. They offer an option for quick cash to those who may not qualify elsewhere or who prefer to avoid the high interest rates of cash advances. However, unless you’re certain you can make regular interest payments or pay the principal within the set amount of days, don’t put something up as collateral that you can’t bear to lose.

August 8, 2016