Pawnshop

Tips for Opening a Pawn Shop

By Steve Krupnik

Should I be a pawnbroker?

I've had many entrepreneurs contact me who state they are planning to open a pawnshop and are seeking my assistance. In talking to them I discover they are most interested in buying, selling, and trading secondhand goods. They are shocked to discover this is not the main business activity of a legal licensed pawnshop. I always suggest to them to consider opening a secondhand store as opposed to attempting to meet the requirements to become a licensed pawnbroker. This is important for you to realize. The main business activity of any pawnshop is providing short-term credit to consumers who in turn pledge personal property as collateral for the pawn loan. Simply stated; if you do not want to be a moneylender, you should not choose to be a pawnbroker.

What kind of "stuff" do I need?

Most wannabe pawnbrokers are overly concerned about filling up their showroom with used merchandise before opening their business. While I'm not suggesting you open a pawnshop with an empty showroom, what I am saying is there are many more important aspects to opening a pawnshop that should concern you first. The first being, will you have sufficient capital after your initial startup costs to begin building a solid pawn loan base and also to operate with negative cash flow and minimal profits for several months? If the answer to this question is no, you should not even consider opening a pawnshop until the answer is yes. Another thing you will need immediately, before the front door opens for the first time, is sufficient knowledge and tools to test and identify precious metals and gemstones. In most pawnbroking operations, fine jewelry accounts for over 50% of items pledged for a pawn loan or offered for sale. If at least someone in your business cannot identify a diamond from a moissanite or a solid gold ring from a heavily plated ring, you will have an extremely difficult road ahead of you. Plus you should also...