Unlike banks, pawn shops provide collateral loans without applications, credit checks or the risk of overextending credit lines. Borrowers also don’t risk bankruptcy if they default on the loan.
“Businesses don’t want to take on any more debt,” said Samuel Beloff, an Ohio Pawnbrokers Association board member and retail consultant for the Small Business Development Center in Clark County.
A number of businesses statewide approached Ohio pawn shops for assistance last month when their quarterly taxes were due, said Beloff, a managing partner at Rose City Fine Jewelry & Loan in Springfield.
“I think it’s looking for a fast, short-term solution that has no long-term effect either on credit rating or debt analysis in the cash flow balance that caused them to do that,” he said.
Small business owners seeking loans at pawn shops is not new, but “it might be a little more prevalent nowadays,” said Ric Blum, vice president of the Ohio Loan Co. at 3028 Salem Ave. and 1171 W. Third St.
Some business owners turn to pawnbrokers when “they can’t get the money from banks,” said David Bertke, president of Rich’s Pawn Shop, 708 Watervliet Ave.
Bertke said one general contractor was making loans on tools he needed for work to cover payroll and taxes. “His back was against the wall, he said.”
Bertke is now seeing realtors seeking loans on their jewelry because of the depressed housing market and record gold prices, including one agent who pawned a Rolex watch. “We recently had one that probably owed us around $4,000,” he said. “She just paid us off because she finally sold something.”
The number of loans made at Rich’s Pawn Shop has nearly doubled in the past year to almost 1,800 active loans, up from the usual 1,000, Bertke said.
“Since the beginning of the year, across the board there has been a significant increase in the percentage of the population that has used the services of a pawn shop,” Beloff said.
Popular reality televisions series such as “Pawn Stars” has helped put a positive spin on the industry, Blum said.
Lehrner said his shop has seen an increase in “upper-end loans, where people are actually in trouble on their mortgages and their housing.” More loans are being made to suburban addresses in Oakwood, Kettering and Centerville, he said.
People borrowing a few hundred dollars to pay their rent is not unusual, but pawnbrokers are now seeing a “different class of customer” borrowing $1,000 or more to make their mortgage payment, Blum said.
“Typically those people need a little more substantial loan and they are bringing in a higher grade of merchandise,” Blum said. “We are seeing larger diamonds, we are seeing more jewelry.”
Flat-panel LCD televisions and notebook computers also are becoming common as collateral items at area pawn shops, he said.
Ohio’s Department of Commerce licenses and regulates pawn shops, limiting the interest rates they can charge to 5 percent per month, and performing annual audits.
Pawnbrokers lend money based on the appraised value of the item used as collateral.
“Your hopes are that times will be better in the near future, because the idea is to make a short-term loan — 60 or 90 days to get you back on your feet,” Blum said.
When a customer repays the loan, the item is returned to them. A customer also may choose to surrender the collateral as payment in full. On average, about 80 percent of all pawn loans are repaid, according to the Ohio Pawnbrokers Association.
Contact this reporter at (937) 225-2419 or dlarsen@DaytonDailyNews.com.
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