Desperate Times ?
Desperate Business owners turn to pawn for funding ?
Faced with difficulties borrowing from the banks, and attracted by easy availability of funding, a growing number of small business owners are turning to pawnbrokers.
One such firm, Borro, says it has seen a 45% rise in small business customers over the past year alone. In an interview with Will Smale, the BBC’s Business Reporter, Borro’s founder, Paul Aitken explained, “The reluctance of the banking sector to lend in recent years has certainly helped us, but it is more than that. Thanks to the internet and changing attitudes, pawnbroking has become a lot more accessible and acceptable.”
David Sonnenthal of the New Bond Street Pawnbrokers commented: “As the banks have restricted their lending we’ve seen a big increase in businessmen and entrepreneurs coming to us to raise cash with a short term loan. We don’t need to know what the money’s for and we don’t ask, but some of our customers have said that their bank has refused to extend their overdraft and they’ve risked losing their business, missing out on a deal or failing to pay their staff if they couldn’t raise some cash quickly.”
Apart from availability of finance, the major advantage of using a pawnbroker is the speed at which they are able to lend. There are no credit checks, or lengthy decision making processes; once the security for the loan has been assessed, and the size of the loan has been agreed, the customer is able to leave with the money. Typically, pawnbrokers will lend up to 70% of the value of the item being pawned.
The popularity of pawnbrokers is growing generally. The Local Data Company’s latest report, titled ‘Pawn is Reborn’– a snapshot of high street ‘banking’ across the UK 2008-2010’, based on Britain’s top 720 towns and cities shows a significant increase (+44%) of pawnbrokers across the country whilst banks have reduced their numbers (-1%).