How to open a pawn shop
If you are interested in opening a pawn shop, you'll be glad to know that this career option has been around a long time. For those who can't secure a bank loan and those who don't have the time, visiting a pawn shop is a perfect solution. To start the business on your own, you'll need the proper licenses and a full understanding of the business.
Understand the pawn shop business. A pawn shop operates on a short-term loan basis, and the amount of the loan is dependent on the value of the goods brought to the shop. A client will bring an item to a pawn shop as collateral for a loan, and the pawnbroker will assess the value of the item to determine the amount of the loan offered. If the loan is not repaid, the item remains in your possession.
Know that nobody can operate a pawn shop without a license. In order to get one, you will need to contact your state's Department of Financial Institutions and submit an application to the non-depository division (see Resources for an example).
Pay the fee to submit your application. It will cost around £975 and up to apply with the Department of Financial Institutions.
Contact co-workers (particularly those in financial institutions) and have them write letters of reference to include as a supplement with your application.
Get a letter from a CPA, or Certified Public Accountant, which includes a statement of your liquid assets and net worth.
Visit the police station to get your state's directions on pulling your criminal record. You will need to access your file for every state in which you've lived permanently, and you can call the stations in other states as necessary instead of visiting. You will most likely need to fax your permission to pull your file to each office.
Request a copy of your business and personal credit report from one of the three major credit reporting agencies like Experian (see Resources).
Submit the supporting documents for your pending application. You will need to include the document from your Certified Public Accountant, a credit report for your business, written proof of your financial expertise, a criminal record report, and your letters of reference.
Await your license approval for your pawn shop. You may need to submit other paperwork as required, but you should be on your way to looking for pawn shop locations in no time.
Select your property location. Consider a place that is centrally located, but in an area where residents are likely to look for quick loans and, quite possibly, impressive gold pieces on resale. Pawn shops do not need to be particularly large, but they need to have enough space to allow for security shields and product display areas.
Decide on an opening date for your shop, and allow time to place announcements in major newspapers as well as trade gazettes. Don't forget local websites and Craigslist.
Set up a website based on successful pawn shop sites (see Resources). It should be clear and easy to understand, and if you are operating in a city with a large Hispanic population, offering the site in both Spanish and English will aid your success.
Build your inventory while starting your business. While pawn shops sell items that remain unclaimed, you can also start adding to your offered items by visiting estate sales, garage and yard sales, classified's advertisements, and even eBay.
- Only those with advanced financial knowledge should attempt to open a pawn shop.