3 Things to Consider Before You Buy a Pawn Shop

Posted On: / By: Brian Knoderer
Buying A Business

From musical instruments and power tools to luxury handbags and gold jewelry, pawnshops are a hub of memorabilia. The beauty of owning a pawn shop is that you can take several different directions with your operations. A true pawnshop offers short-term pawn loans in exchange for collateral. However, you can also follow in the footsteps of Rick, Chumlee, and the other Pawn Stars and trade goods for straight cash. You even can digitize your efforts and reach a massive online customer base. You might not become the next eBay, but plenty of other online pawnshop businesses see success in the digital marketplace. Read on as we take a more in-depth look into the world of collectibles to decide if you should buy a pawn shop!

Why Buy a Pawn Shop?

Despite COVID-19, many pawnbrokers are seeing a solid return on their investment. Many experienced an uptick in business as people sought alternatives to traditional bank loans or needed quick cash for a fair price and low interest rate. Some shops around the United States reported having record-breaking months in the earlier stages of the pandemic.

3 Things to Know About Owning a Pawn Shop

  1. Loaning is a Large Chunk of Business pawn shop worker showing rings to customer
    Popular reality TV series may have made it seem that most transactions involve a collectible and straight cash. But, the traditional route of pawning is much more centered around providing short-term credit options. The most successful pawn shops are moneylenders, and if you’re not interested in that side of the business, you may be better suited for buying a secondhand store instead.
  2. You’ll Need a Pawnbroker License 
    Building off our last point, to legally offer short-term and title loans, you must hold a pawnbroker license. Most shops are licensed at the state level, but regulation does vary, so you’ll want to research the laws from where you live. Keep in mind that you’ll also have to follow other state and local ordinances requiring a general business license and perhaps a secondhand dealer license or precious metals license.
  3. Don’t Short Yourself on Credit Lines
    Given the modernized view of local pawn shops, most assume that their inventory is the used merchandise they have occupying their floor space. In reality, a pawn store’s actual inventory is its liquid cash, and whether you’re concerned with buying and selling tangible items or short-term loans, this cash is your key to success. Especially in the first few years of business, it’s important to make sure you’re covered! Consider different financing options that will allow you to comfortably adapt and grow without putting yourself in a risky position.

Pawning can be a lucrative endeavor, and buying an existing shop is a great way to set yourself up for success. This will allow you to work with a business that’s already generating cash flow and one that has an existing customer base. Are you ready to fulfill your dreams of owning a pawn store? Contact your local Sunbelt Business Brokers office to discover secondhand stores and pawn shops for sale near you!

Brian Knoderer is the President of Sunbelt Business Brokers. He has over 20 years of experience as a business owner and managing business transactions. As a seasoned intermediary, Brian has successfully represented companies in a broad range of industries helping business owners achieve their desired exit strategy or growth initiative.

Brian is also co-owner of Sunbelt Indiana and Managing Director of MMI Capital Partners, a franchisor focused investment banking firm.

Previously Brian was involved in several entrepreneurial ventures as well as having held corporate roles in Franchise Development for Prime Hospitality and Choice Hotels.

Brian is a graduate of Ball State University with a degree in Management Information Systems and earned his MBA from Butler University. He has received the Certified Merger & Acquisition Advisor (CM&AA) designation, holds both the Series 7 – General Security License and the Series 63 – Uniform Securities Licenses, and is a licensed Real Estate Broker. He has been affiliated with several organizations including the Entrepreneur Organization, a Member of the International Business Brokers Association, Venture Club, and a Board Member of The Entrepreneur Institute.

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