Pawn Shops For The Rich

The Suttons & Robertsons showrooms look like those of any high-end retailer or auction house: necklaces glittering with diamonds and emeralds fill the display cases, and sterling silver knives, forks and spoons sit on  wooden tables fit for a monarch. In the private room in back are bigger, shinier versions of the jewels out front. High on a wall is a coat of arms bearing the likenesses of two lions, with the date of the company’s founding underneath: 1770. Only on closer inspection does it become clear that between the lions are three balls dangling from a hook: the international symbol for a pawnbroker.

This English company focuses on the blue-chip, wealthy crowd. With almost 250 years of experience in the exclusive world of high-end pawn, Suttons & Robertsons has now gone to the US to fill what it believes is a growing need among wealthy Americans who have spent beyond their means and need a quick — and quiet — infusion of cash in exchange for a few baubles they are willing, at least temporarily, to live without.They have the capital to lend up to and beyond $1 million. 

Then there is the Beverly Loan Co, a California pawnshop that has been family owned since 1938.It is known for its discrete handling of the liquidity needs of the ‘Stars’-American Royalty,so to speak.They too have opened a second location called the New York Loan Co in Manhattan’s diamond district and are doing good business.

Other somewhat less swish options are Pawngo ,Borro ,Ultrapawn and iPawn. They are best compared with our Muthoots and Manappurams.

So how do these upscale pawn shops work?Pretty much like their more down market counterparts.Only the collateral is more upmarket and loan sizes bigger.So a person with a Mercedes McLaren that originally costs $450000, pledges it as collateral for a $190,000 pawn loan at a monthly interest rate of 2.5-4%.Typically,this person then leaves the car with the pawnshop and makes the monthly interest payments to keep the loan current. To get the car back, the customer must pay the principal and all the interest.If the customer misses any interest payments he/she could forfeit the item.

Sure, there have always been the rich who have fallen on hard times and have needed discrete loans to keep up appearances,fund private educations and weddings,deal with the aftermath of separations and divorces,but why the sudden growth in  upscale pawnshops?

The increasing popularity of TV Shows like Pawn Stars has reduced the stigma associated with pawning.Its easy to explain away pawning as cashing in a piece of treasure you stumbled uponbefore to try your luck again at Vegas.Moreover,conventional lenders over the past five to six years have become increasingly reluctant to advance credit on all fronts.The time it takes those institutions to make decisions has lengthened as their appetite has shrunk. On the other hand,a person can walk into an upscale pawnshop and walk out with funds in as short period of time.Greater anonymity is available for those who choose to go the online route.Also at pawnshops no questions are asked about the end use of the money loaned.

For those who borrow a couple of thousand dollars against, say, a Rolex watch, the rates range from 12% to more than 60% on an annualized basis for online pawnshops and into triple digits for brick-and-mortar operations .The new wave of pawnbrokers, or collateralised lenders, as they like to be known, isn’t just betting that people will pledge cars or planes. They are betting that as long as traditional bank lending is tight for individuals, there will be repeat customers.They look at affluent people as if they were little companies. When a business needs liquidity to fund operations or growth, they’re able to go to the capital markets and use business assets to obtain loans. The high-end consumer does not have that option. And most consumers in that bracket wouldn’t be caught dead in a pawnshop.When the rich have money in their pocket, they buy luxury goods,some of which act as alternative assets. When they don’t, they use these assets to get money for their next venture.

Many of today’s upscale pawners are small business owners.They range from sole proprietors to employers of about  200 people.Aside from financing new ventures,making payroll and purchasing inventory are 2 common reasons to patronize upmarket pawnshops.