How to open a pawn shop
A Pawnshop provides cash solutions to people who need it urgently and who have the possibility of leaving an object of value as a guarantee. Since they do not require guarantees from third parties or property from the applicant, they are a very quick and easy way to obtain money. Learn how to set up a Pawnshop.
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Initial investment to open a Pawnshop
Because a Pawnshop lends cash, you will need several thousand dollars to be able to make such loans without problem. Another factor you will have to invest in is applying for permits and licenses to operate as a Pawnshop, for which you will have to go to the state offices that are responsible for enabling companies to operate commercially.
Once you have solved this issue, you will need to find a place and invest in its rent and equipment. If you hire staff, you will also have to invest in their salary and social contributions.
Finally, the payment of taxes and fixed expenses during the first months will also be an investment until the business begins to make a profit.
How a Pawnshop works
The Pawnshop works in the following way: the client goes to the Pawnshop to request cash, for which he presents an object of value as a guarantee, which can be anything from a piece of jewelry to an appliance, which will remain in the house until the client finishes paying all the loan fees.
Once the object is evaluated and appraised by a person with knowledge in appraisals, the client is informed how much money can be given to him/her for the object, the interest is calculated and the amount of the installments in which it is agreed to pay back the loan. The amount of the fees varies between one and twenty-four, but they can also be more if the client needs it.
To calculate the interest, find out if the legal system in your country stipulates any limits for interest. You should also provide extra interest for late payments.
In turn, the client will sign a document that says that in case of non-payment of the loan fees, the Pawn Shop has the right to sell the object after a certain amount of time that will be stipulated in the document.
To equip the Pawnshop you will need a counter to serve the customers, a display case to show the objects you have left for sale, paint the window with the name of the Pawnshop or a poster with that information.
A Pawnshop needs staff who are experts in antiques and in valuing objects of all kinds; the person who works in this place will also have to know how to identify whether the jewelry is authentic, gold or imitation.
Requirements to start a Pawnshop
The most important thing in this business is to have the necessary permissions since it has a bureaucratic character a little different from the rest of the businesses, in addition it is necessary to know about the objects like the garments and its ample content, as well as the purchase and sale of used articles in good condition that have a calculable value, due to the fact that one is going to work with loans taking as guarantee objects of value.
To count on a space of security included, that is sufficiently great as to even place vehicles in pledge in good state and safe, besides to have a zone where to take care of the client with windows of fast loan or also the client interested in acquiring articles.
Advantages of having a Pawnshop
The pawn shop once it is functional is a business that practically keeps itself, you just have to wait for the client who needs money, receive the object by pledge, when the payment term expires and the object has not been recovered back, offer it for sale and recover the loan plus a profit, basically the nature of this process is the main purpose of this business, which makes it a very easy one to manage when you understand it.
It is a business where you work in a quiet space, it doesn’t require forceful activities or entering strong environmental conditions such as under the sun or rain, which makes it a comfortable business to work in, basically you have to open with the best attitude every day and wait for the money to come through the door of your business.
Tips for starting a Pawnshop
One of the tips for setting up a pawn shop is to study the market and the space where it will be located beforehand. It should be a space where there is a diverse community and high circulation, very well identified so that it attracts the public and is of immediate location.
Regulatory permits must be obtained prior to
opening of the business, such as the trade register, as well as insurance protection against loss or damage.
Regulations should be created for the reception and permanence of pawned objects, avoiding excessive conditions so that people feel they have a space where they can leave their garments in exchange for a quick cash to be obtained to solve any urgent problem.
It is advisable to have elements or tools to test the precious metals, as in this business model you work with jewelry, in addition to having several security elements, such as guard personnel and cameras to help run the business in safe conditions in order to work.
A successful company in this sector is Hermanos JJ, which offers the possibility of obtaining the maximum profitability for the jewels and vehicles, with ample guarantees and the advantage of recovering the goods a few days later. They also have pawn shops and you can apply for the loan you need leaving the vehicle as the only guarantee.
So, if you need to pay a debt urgently or an unforeseen event has occurred and you have no credit available at the time, the safest option left is to pawn tangible goods that you have on hand, such as the vehicle or the gold pieces.
Problems that can arise
This business tends to be a bit risky, since you are working with term loans, if you do not have a good organization about the terms of arrears of the loans you extend your business can lose, plus the customer can be difficult so the customer treatment can be stressful in these cases.
Remember that people who need money quickly temporarily detach themselves from an object of value, so if they do not understand the nature of the loan, it can bring problems to your store or conflicts.
At first it can be difficult to get started, the flow may be a little low so be on the lookout for good advertising or locate your business near other pawn shops to help you get customers faster.