Pawning Goes Online, Businesses Step Up

Vertical metal bars line the windows. Shady-looking characters walk in and out. Inside, bullet-proof glass protects employees and warns customers to look out for flying projectiles. A prison, or just your local pawn shop?

Movies like “Pulp Fiction” and “Drive” make weapons seem like a necessary appendage for any visit to the local pawn shop, but this seedy image was not created in Hollywood. And, reality series like “Pawn Stars” and “Cajun Pawn Stars” aren’t helping. Still, there’s no safer place to pawn your valuables, or take out a loan, than your own home. The pawn industry has gone online, making it an appealing destination without any stigma attached.

That’s what is banking on. Its basic operating principle is the same as the brick-and-mortar shop downtown. According to the National Pawnbrokers Association website, more than 30 million Americans are unbanked or “underbanked,” making the pawn shop a convenient source for quick cash in exchange for valuables. But some valuables are more valuable than others, and this is where UltraPawn comes in. Catering to high-end clientele, UltraPawn separates itself by not performing credit checks and not asking for customers’ bank accounts to withdraw loan payments — both pleasant non-intrusions. Rather, it’s a straight-up trade of cash for goods. If the cash loan isn’t repaid on time, the goods belong to UltraPawn to sell. The site charges monthly interest rates ranging from 2 to 10 percent.

Variations on the formula can be found among several upstart online pawn sites such as Pawngo, Pawntique, iPawn and PawnIt.

Owners of ultra-valuable goods may seem like a narrow market for emergency loans. However, this clientele has been collecting reasons to complain about garden-variety pawn shops for years. One pawn customer writing on the website, owned by market research firm Opinion Corp., summed up the sentiment: “The owner is usually the only one working and he treated me like some low life piece of garbage.” Writes another: “An owner cursing out a customer and overcharging so much are huge red flags as to what kind of business they run!”

UltraPawn has another source of revenue — pawned goods sold on the site for deep discounts. Think of it as a big “Buy It Now” section of eBay, just as safe as the online auction site but probably safer than the corner pawn shop. Some traditional pawnbrokers who have websites operate these in the same fashion, with unappealing product on a page that looks slapped up overnight as an afterthought. UltraPawn is not the first to offer gently used high end goods online in the form of a luxury retail shop, but they are the first to open an upscale online pawn site, more like Nordstrom or Bloomingdale’s for online shopping.

What might be most surprising is how many small business owners are now turning to pawning as a means to refinance or cash out. While UltraPawn CEO George Souri would not name names, he gave some interesting examples of companies usingpawning as leverage. “A home builder regularly uses his Rolex like an ATM on his wrist, to float his operating costs in between home sales. An excavation/demolition company uses its equipment to borrow money to float payroll and finance costs associated with putting out new bids. Another customer pawned a large diamond to get the cash to start a new restaurant,” said Souri. He adds, “typically, a small business will use to float short term operating costs – if, for example, they are waiting for payment on a receivable or are expanding and need cash to finance expansion.”

Whether business or personal, savings and convenience are two good reasons to pawn online, and as George Souri says “everyone saves money, even rich people.”

By Beth Fields