This article briefly discusses the pawn shop business. Find out some of the things you need to know in order to start your own pawn shop business.
Pawnshops have been in existence since early history and is said to be one of the oldest trade known to humankind.
The fact that this industry still remains to this date only goes to show how solid and resilient it is. This should serve as an assurance for those who have their sights on starting their own pawnshop business.
The pawnshop industry fills a need that the banking system cannot cover. A bank loan generally takes time to process, time which the average pawn shop client does not have. The concept of easy cash is the reason why most people are drawn to pawnshops instead of banks or other lending institutions.
How exactly does a pawn shop business work?
Simply put, pawnshop owners or pawnbrokers offer high interest short-term credit to their clients. The amount of loan is dependent on the value of the pledged good. Compared to banks, pawnshops provide an easy and quick way to loan money.
A pawnshop transaction can be divided into four steps.
- One, a client brings an item (usually but is not limited to jewelry) to be used as collateral for a loan.
- Two, the pawnbroker assesses the value of the item and proposes a loan amount. It is vital therefore for the pawnbroker to be adept in testing the authenticity and value of precious metals and gems. If the client is agreeable to the amount, he or she then enters into a transaction with the pawnbroker which culminates with the latter lending the client the money. The pawnbroker then issues a pawn ticket wherein the following information is indicated: the items description, the amount of money loaned, and the date the money is due back.
- Three, the client repays the loan after the given period of time and to get the pledged item back.
- Four, in case the client fails to repay the loan, the pawnbroker gets to keep the item.
How to get a pawn shop license
No person can run or operate a pawn shop business without a license. To get a license, you must first accomplish and submit a pawn application form to the Non-depository division of your states Department of Financial Institutions. Subsequently, you also need to pay the stipulated application fee which on average range from $1,500 to $2,000 per branch.
You will then be required to submit the following supporting documents to verify your financial standing and character.
- A comprehensive financial statement duly verified and prepared by a certified public accountant. Your aggregate net worth and liquid assets must meet the minimum amount set by your state.
- A credit report for your business so it is best to have this report on hand.
- Written proof that you have garnered the required minimum number of years of finance related experience.
- A criminal record report from the state police where you reside.
- Reference letters preferably coming from depository financial institutions.
You will be given a pawn broking license only after your application has been approved. Once you have your license, then and only then can you be deemed authorized to launch and operate a pawn shop business.
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