Those who cannot qualify for personal loans from both banks and online lenders due to low credit scores and inadequate income statements, often turn to pawn shops, which lend money, that needs to be repaid along with an interest within a certain time, to people who put up their assets, such as expensive jewelry items, electronics goods, or bigger objects like car, bikes, etc. as loan collaterals. Apart from the loan interests, pawn shops earn money by reselling the merchandise that they have purchased outright from individuals. Also, they sell the items that the collateral loan borrowers, who defaulted on their loans, have forfeited to them. Loans offered by pawn shops are quite a convenient personal financing option for those looking for quick funds. Also, pawn shop owners do not consider the credit score of the loan seekers to assess their creditworthiness as the lent amount is always based on the value of the pledged items, which can be seized and sold to recover the lent money, in the case of defaults. Hence, the pawn shop business is often considered lucrative. However, like any other business, pawn shops sometimes require additional funds to grab impromptu business opportunities, to cope with emergencies or to just grow their existing businesses. This is when business loans come to play. Also, those who have just opened pawn shops but do not have enough inventory to sell and ample money to lend, look for business loans to kick-start their ventures.

When it comes to business financing options for pawn shops, there are many. But, only a few suit the requirements of pawn shops best. Traditional financing options like term loans offer funds that come with affordable interest rates and fixed repayment terms, that usually range from 2 to 5 years, depending on the credit score, trade history, and income statements of the borrowers. Also, business lines of credit are a favorable financing option for those looking for funds to cope with emergencies or fill momentary cash flow gaps. In the case of business lines of credit, the borrowers get access to a pool of funds, from which they can withdraw only the amount required, and save up the rest for future use. Interest is only applied to the withdrawn amount and not the entire approved limit. The outstanding amount can be repaid and withdrawn again when needed. In the case of business lines of credit, no collateral is required and borrowers get access to the funds comparatively quicker. But, pawn shop owners with low credit scores usually find it difficult to qualify for both the above-mentioned financing options. For them, Merchant Cash Advances(MCAs) often turn out to be ‘the savior’. More than credit scores, MCA lenders consider the applicants’ income and profit and loss statements of the last 6 months to one year to assess their creditworthiness. MCA lenders provide a lump sum in return for a percentage of the borrowers’ daily credit card sales. The daily repayment amount is withdrawn daily till the entire amount is recovered. In the case of MCAs, approvals are given within a few hours of the application, and funds are disbursed within 24 to 48 hours of the approval. Hence, MCAs are also known as same-day loans.

6 purposes pawn shops can use business loans for:

Stocking up inventories.

Pawnshop owners often purchase a huge volume of merchandise including jewelry, art pieces, clothing, home décor items, etc. at considerably low prices, from estate sales and resell them at higher prices to make profits. Newly opened shop owners often look for business financing to make these purchases. Also, established pawn shop owners, sometimes, seek quick funds to avail of upcoming or ongoing limited-period sales.

Getting the store and the inventory insured.

As a pawn shop owns multiple expensive products, ranging from jewelry to cars and bikes, it must have insurance coverage that will protect it along with all its valuable merchandise. However, while selecting a pawn shop insurance plan, one must make sure it covers damage caused by theft and natural disasters, besides other incidents.

Offering more collateral loans.

During the initial phase of a pawn shop business, owners often lack sufficient money to provide collateral loans, from which they can earn interest. Business loans immensely help pawn shop owners to set their businesses in motion.

Investing in technology.

To thrive in today’s technology-driven world, pawn shop owners must have access to various software, designed specifically for pawn shops. The software helps owners, primarily, to keep track of the inventory and securely store their customers’ contact details. However, these types of software do not come at pocket-friendly prices and hence, many pawn shop owners get business loans to purchase the latest software and computers that will support them.

Marketing the business.

Having a strong digital presence is a must for all businesses in today’s tech-savvy world. Hence, even after having an established brick-and-mortar pawn shop, one must build an online store and promote it on various digital platforms. Also, pawn shop owners often need to print and circulate flyers, brochures, etc. to make people of the localities aware of their presence and offerings. Business loans help pawn shop owners to carry out different marketing activities.

Opening branches of the existing shop.

Successful pawn shop owners often look to open stores in new locations to acquire more customers and grow. But, opening a new store requires a good amount of investment. To set up a store, one needs to rent or purchase a space, hire employees, decorate the new store, purchase inventories and integrate a high-quality security system or hire an efficient security team. Also, the store needs to be marketed well in the particular locality. Business loans can be availed to pay for the initial set-up and marketing costs.