New age of pawnbrokers?

By Will Smale
Business reporter, BBC News

Image caption,
Pawnbrokers will typically lend out 70% of the value of the item being brought into them

It was a burning issue that made small businesswoman Boudicca Scherazade first go to a pawnbroker - all her stock had gone up in smoke.

Thankfully, no one was hurt in the fire at her Surrey home last year, but Ms Scherazade lost £250,000 worth of vintage clothing and antiques.

"It was a pretty bleak situation," says the 41-year-old. "I had just got wind of a whole scoop of vintage luggage up for sale in Monaco that I knew I had customers for.

"But suddenly I didn't have the money to go out and buy it, and I needed cash fast - much faster than a bank could lend it to me."

So taking a deep breath, Ms Scherazade remembered that a friend of hers had admitted going to a pawnbroker.

"There is still a lot of stigma about pawnbrokers, but I was desperate. So off came the Rolex watch and my other jewellery."

Less than 24 hours later, she was able to borrow £5,000 against the value of the items, and set off for Monaco where she bought the new stock.

She says selling the luggage was as easy as she had predicted, and a month later she was able to pay back the pawnbroker and reclaim the jewellery.

'More acceptable'

At a time when small firms continue to complain that banks are unwilling to lend, Ms Scherazade is far from unique - pawnbrokers across the UK are reporting a big rise in the number of business people coming to them for short-term loans.

Image caption,
Ms Scherazade says she has continued to find pawnbrokers useful

One such firm, Borro, says it has seen a 45% rise in small business customers over the past six months alone.

"The reluctance of the banking sector to lend in recent years has certainly helped us, but it is more than that," says Borro founder Paul Aitken at his modern office in the City of London.

"Thanks to the internet and changing attitudes, pawnbroking has become a lot more accessible and acceptable.

"We are now attracting more and more people who have a lot of assets, but some short-term cash issues, such as a vital need to get a deal sorted as quickly as possible."

Borro, which claims to be the world's first online pawnbroker, will typically lend 70% of the value of the item being pawned. So if you bring in a watch worth £10,000, you can borrow £7,000.

And while the interest it charges is eye watering - an annual rate of up to 69% - Mr Aitken insists it is still good value.

"The APR [annual percentage rate] doesn't look good, but this is not about long-term loans," he says.

"We are talking loans over say one to four months, with no administration fees, or penalties for early repayment."

As the number of business customers using Borro continues to grow, so does the sheer range of items that the company says people are bringing in.

"We've had City types drive up their Ferarris, or bring in paintings, antiques, music memorabilia, signed first edition books, stamps etc," he says.

"We've even had a few pieces of work by street artist Banksy... but paintings he has done on canvas rather than the wall of a terrace house in Bristol."

'Cash injection'

Fellow pawnbrokers New Bond Street and Mays also confirm that they have seen an increase in the number of business people using their services.

"We've been in business for over 20 years and we've always dealt primarily with business people," says New Bond Street manager Ian Welsh. "But there has definitely been an increase in the past two years.

"You'd be surprised at what people bring in, we've had big Andy Warhol pieces and cases of fine wine. Anything really that has got a high value."

Mays said small business people are increasingly attracted by how quickly pawnbrokers can give out the money.

"Small businesses are attracted to the instant solution - unlike borrowing from a bank where there's lots of paperwork to fill out and time delays, pawnbroking provides an instant cash injection, which will tide the business over when they need it most."


But what if a small business person finds they can't afford to pay back the loan?

Image caption,
Mr Aitken says it is rare for people to bring in fakes

Borro's Mr Aitken says any images of "banging on front doors" are completely misplaced.

"The vast majority of our customers pay their loans back on time, but if they don't, we either sell their items at an auction house, or they can renew the loan by paying off the interest and rolling on the principal," he says.

"Most importantly, we never chase any money that is owed to us. These are unsecured loans, so if we don't make the money that we are owed [at auction], then it is our mistake in not valuing the item correctly."

To ensure they do correctly value each item being brought in, each pawn house has a team of experts, who also check for fakes.

"We don't get many fakes, but in most cases the people bringing them in know exactly what they are," says Mr Aitken.

Ms Scherazade, who owns Stand Antiques, a shop in Chiswick, west London, says she has continued to occasionally use pawnbrokers.

"Sometimes if you are in business, it is just very useful to be able to borrow money almost immediately," she says. "I know that I'll always be able to pay it back. That bit is important."

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