“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.
- The chances of being approved are less likely
- The process for getting approved is too difficult
- 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.