Can you pawn wine?

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wine

Not at our Maui pawn shop, where gold, watches, surfboards and fine art are accepted. But Kamaaina Loan would need a license from the Maui County Department of Liquor Control to make a loan on wine.

But just because you cannot do it here does not mean it cannot be done. According to this report, a few pawn shops are in the business of lending on fine wines.

They have to be stored properly:

The market here was investment-grade wines with good provenance that have been stored at a secure climate-controlled facility. The wine acts as security for a loan equal to a percentage of its market value. Pay back the loan and get back the wine (which may not have physically moved from the wine warehouse when it is stored). Fail to pay the loan and the pawn shop owns the wine.

And, no, you cannot raise scratch on your carefully hoarded collection of Mad Dog 20-20. Anywhere.

When the late Dick Tuell was auctioning off abandoned property, he would occasionally spot a half bottle of whiskey. (Yes, people do put whiskey in storage.) He was always scrupulous in saying that the bids for the storage locker did not include the booze. That was thrown in free, to avoid violating the county’s licensing law.

 

Banks abandon the average Joe

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I cannot say I think much of this New York Times Dealbook story about changes in the pawn business.

It seems to be based on the novelty, to the reporter, that some pawnbrokers are offering platinum debit cards.

Of interest, though, is the statement that

banks zero in on more affluent customers who promise twice the revenue of their lower-income counterparts, close branches in poor areas and remain stingy with credit

This is news only to the New York Times and is incorrect to boot. Banks have been looking for ways to stop serving half their customers for a generation, ever since it dawned on them that 50% of their clients account for 150% of their profits. In other words, banks not only don’t make small profits out of Joe Sixpack, they make losses.

Were it not for government oversight, you would not find a bank branch anywhere on the poor side of town, and you will not find many.

It is entirely understandable why banks would want to behave this way but not very nice. When they say, we want to be your bank, they don’t really mean it.

Meanwhile, pawn shops keep on serving all comers, as they have for centuries.

Note also this statement:

EZCorp, a publicly traded operator of pawnshops, reported that total loan balances swelled 22 percent to $44 million in its most recent quarter.

EZCorp is big for a pawn business, but $44 million is unnoticeable in the context of commercial banking. In other words, EZCorp is there for the little guy.

 

 

More good press for pawn shops

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A ReutersMoney feature discovers (again) that well-to-do people use pawn shops for short-term loans. Pawnbrokers like to emphasize this, because so many people are convinced that all our customers are fences, derelicts and down-and-outers.

When Marc Kaye needed a loan to fund his boutique insurance firm at a time when payroll, his kids’ college tuition and a mortgage payment were all draining his cash reserves, he didn’t go to a bank.

Instead, he pulled a 1940s Picasso pencil drawing off his living room wall and made an appointment with Borro, a high-end pawnbroker. Borro did not require mounds of paperwork, did not care about his credit rating and did not put him through the third degree over how the money would be used.

“I needed some immediate cash,” says Kaye, who quickly got a six-month loan of $39,500, agreeing to a monthly interest rate of 3 percent plus about $175 in processing fees. “I had never pawned anything before.”

Nothing really new here. Even our little Maui pawn  shop has made a loan on a Picasso. It doesn’t happen every day, but it happens perhaps more often than you would think.

That’s the great thing about pawnbrokers. They are completely democratic.

Well, maybe not completely. Because some customers don’t want to be seen in a pawnshop, either because they are embarrassed or because they don’t want anyone to know money is tight, many brokers — including Beverly Loan Co., mentioned in the story and famous among Hollywood stars as a place to get a discreet hit of cash — have set up private transaction rooms, with secluded entrances.

At Beverly Loan Co., a brick-and-mortar pawn business outside Los Angeles that has catered to the wealthy for 75 years, business is also brisk, and small business customers are on the rise, says owner Jordan Tabach-Bank.

To meet demand for loans ranging from a few thousand dollars to $1 million, he opened a second office in the New York City’s International Gem Tower; it offers well-heeled customers secure storage for everything from GIA-certified diamonds to Patek Philippe watches.

Kamaaina Loan has a private transaction room, too. We go further. Call for an appointment, and if the deal sounds big enough, we’ll send a limo to pick you up.

In  reality, our private transaction room is used  at least as much for appraisals to help conservators settle estates as it is for pawn loans.  (Since the owner is a court-recognized appraiser.)

And not necessarily only for high-value deals. As Jimi, who has been working our pawn counter for longer than anybody except our owner, Big Rich, points out, sometimes a customer comes in with 50 items, all different, that he wants to borrow on (or sell).

That’s awkward to do on the counter, so usually that bargaining ends up in the private transaction room, where there is room to spread out. (Think about offering a collection or coins or stamps. It takes time and space to go through a big assortment.)diamond

Should you be interested in the private transaction room, call for an appointment, 242-5555.

 

‘I didn’t know you were legit’

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goldaLes Gold, the Hardcare Pawn guy, is promoting his new book, so he’s all over the interview shows this week. Here, on Fox Business News, he explains that the bankruptcy of Detroit is not good news for his pawn business there.

Our Maui pawn business is no different. Here at Kamaaina Loan blog, we keep trying to debunk common, but wrong, opinions about the business.

The Fox interviewer assumed that most pawn customers are desperate. That’s not true.

Besides, nobody,  but nobody wants to do business with people who are going to have no income. Not Les, not us.

Now, it is true that a fraction of a pawnshop’s customers are selling or borrowing on their last assets, and they are one step from destitution.

And pawn shops do do business with those people, helping stave off the wolf for another few days. What other business would touch them? Not one.

But while that is something pawnbrokers do, it is not how they prosper.

They — and we on Maui — do well when borrowers redeem their collateral.

It’s true that a pawn loan is somewhat less insecure than any other loan. The lender has his collateral already, unlike a mortgage lender, who, if the loan is not repaid, has to shell out money to start foreclosure, then sell the property and hope the return covers the balance. (Something that, as we all know, frequently did not happen since the Crash of ’08.)

The pawnbroker’s security is in house, but, as Les Gold explains, it costs him money to store and insure it, and if he forecloses on it, he still has the expense and trouble to trying to sell it. Since it is used goods, he will have to offer a bargain price.

It’s a system that works, but not perfectly.

People find it hard to believe, but a pawnbroker would always rather have the loan repaid. Then he gets his principal back with interest. If all has gone well, the customer is pleased with him and may come back to make a new loan sometime.

Contrast that with a pawn loan to someone with no further assets. The pawnbroker loses his principal and gets no interest. He may or may not be able to recover that by selling the collateral. And the customer may not be happy to have lost his (ring, surfboard, computer etc.)

(The pawnbroker will have an easier time, usually, if the collateral is gold or silver. Unless the price of precious metals has gone down during the 60 days he has been required by law to hold the item. This has been the case lately, as gold has dropped by hundreds of dollars per ounce. There ain’t no free lunch.)

Besides, the customer’s broke and out of assets, so he won’t be a repeat customer anyway.

Gold says redemption rates at his pawnshop and across the country average 90%. That might be a little optimistic over the long run, although redemptionr rates have been up in recent years. But 80% is a solid number year in and year out for most pawnshops.

And, remember, there is a fraction of borrowers who are getting rid of something they no longer care to have. They could just sell it outright, but sometimes they aren’t sure. So they pawn it, and when it comes time to reclaim it, they decide — even if they have the money to do so — that they don’t want it.

Call it values clarification.

The Fox interviewer is surprised by all this. “I didn’t know you were legit,” he tells Gold.

 

 

 

‘Is Pawn the new Prada?’

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midtownlogoIt is in Miami, according to this press release from the Jiminez Group. (Full disclosure: our Maui pawn shop, Kamaaina Loan And Cash For Gold) knows Jiminez well; we use their pawn business consulting services.)

“It’s like the Neiman Marcus of Pawn, the Mercedes-Benz of Pawn, the Tiffany’s of Pawn . . . you get the idea,” laughs President, Adriana Hernandez, “it’s the complete opposite of the dark, cluttered, seedy places you may have seen on Law & Order or in the movies.” 

Well, our Maui pawn shop is not dark and seedy, but nor is it the Neiman Marcus, Mercedes-Benz or Tiffany’s, either.

Somewhere in between, we like to think. You can indeed find Tiffany jewelry in our retail store at 42 N. Market St. , and Prada in our eBay store, safedeal. But no Mercedes-Benzes.

Pawn shops continue to battle their image as resorts only for down-and-outers. In a way, pawnbrokers should be proud to help down-and-0uters. Who else does? Not banks, that’s for sure.

But we keep trying to get out the message that pawn borrowing is a service that can suit the needs of everybody, from the person who’s out of work and hungry to the rich entrepreneur that Hernandez is angling for:

“It’s no different today. You’d be surprised at how many of our clients are visionaries or businesspeople who want to take their unused assets and trade them – temporarily – for the capital they need to invest in a new venture or project, and who were turned down by traditional banks. We offer a safe, cost-effective alternative for financing. The way we see it, we don’t make loans, we fund dreams, just like (Queen) Isabella did (to finance the voyage of Columbus) 500 years ago.”

In reality, the story about Isabella pawning her jewels is not historically correct, but kings and queens did pawn their stuff in the old days. Maybe they still do.

Here is another story about pawn’s bad reputation, this time in Roanoke, Virginia. The comments are interesting.

Somebody named Joe says what Kamaaina Loan Blog has often  referred to:

Pawn shops are governed by the state. They do not knowingly take in stolen merchandise, or they would lose their pawn license. A customer is required to have a valid State ID, and a complete description of the item, including the serial number if applicable, is entered into the shops’ computer system. At the end of every business day, all pawn shops report all of their transactions to the Virginia State Police. Once that information is submitted, the State Police enter the information in a data base so detectives from various counties can access the list for a match of possible stolen merchandise. Believe this; the thieves get caught.

Some people aren’t fortunate enough to have good credit. These folks might get in a bind and need some money to pay a bill or whatever. A pawn shop helps these people in times of need. In fact, pawn shops have been around longer than banks. Look it up.

Don’t worry, South Roanoke, the pawn shop will not cater to thieves and drug addicts as you so believe. They are legitimate businesses with educated owners and employees. Also, you never know, one day you might need a little loan to get you out of a tight spot.

Even if you don’t need a loan, try taking that one diamond earring — the one you lost the pair of under mysterious circumstances at the best party you ever went to (you think you remember) — to a bank and see what you get for it.

Then try us.

How your old gold becomes new again

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crucibleGold is recycled more than any other substance. Here is a 9-minute video showing how old jewelry is turned back into pure gold. The video isn’t the clearest, but the narration is OK.

At our Maui pawn shop, we melt down old jewelry in a small crucible. No matter what goes in, the product that comes out is almost always just under 60% gold (because of the average mix of 10-, 12-, 14-, 18- and 22-karat gold that people bring us).

That’s just a preliminary step. The video by The Precious Metals West Blog shows what happens next. We at Kamaaina Loan don’t do this; it’s an industrial process that uses a very nasty substance, aqua regia (a mixture of hot, fuming nitric and hydrochloric acids), that only pros with special equipment mess with.

Aqua regia dissolves gold; it is the only thing that will. This is how we recover diamonds. The gold is dissolved, but the diamonds are not affected.

This is safer than trying to pry diamonds from settings, which can break or chip them.

 

Education of a pawnbroker

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In principle, pawnbroking is simple. The borrower presents some portable collateral and the lender gives him money. Later, they settle up and reverse the exchange. If the borrower can’t pay, the broker keeps the collateral and tries to sell it to recoup his loss.

And most of the time, it is pretty simple. Probably three-quarters of the deals at Kamaaina Loan And Cash For Gold’s Maui pawn shop are for gold in one form or another, or silver  or other precious metals. Most of the rest are for familiar items like Playstations, iPods, surfboards or fishing poles.

But the residue? Some curious stuff comes over the counter.

A good place to find it in at 50 N. Market St., where we sell fishing gear, golf clubs and tools. Most of the tools are common enough: battery-powered drills are probably the most numerous item these days. (Corded drills are becoming rarities, almost.) But ask Bob to show you around and you’ll likely encounter a tool you not only don’t have but never heard of.

Today’s exhibit is a professional grout scrubber. Yes, it was new to  Bob, too. Turns out that for a big tiling job, with several tilers laying down tiles, it pays to have one worker follow behind them cleaning up the new floor with a power scrubber and massive sponge.

The one we have is made by Rubi, and while it’s used, our price is less than a third of the price for a new Rubi Spomatic 250 Electric Sponge.

That’s why it pays to stick your head in the door every few weeks, even if you’re not shopping for anything in particular. You never know when we’ll have something you never knew you couldn’t live without.

Big dog

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Here at Kamaaina Loan And Cash for Gold, we often brag about being Maui’s biggest pawn shop. But that’s big-frog-in-small-pond talk. DFC Global just announced it had bought a chain of pawn shops in Romania that will bring its total to  1,457.

Its press release says Romania has a long history of pawn loans, but the shops are quite small. 32 shops did a turnover of $9 million,  That’s less than $300K per shop. Even Maui’s smallest pawn shop probably does more than that.

DFC Global Corp. is a leading international diversified financial services company serving primarily unbanked and under-banked consumers who, for reasons of convenience and accessibility, purchase some or all of their financial services from the Company rather than from banks and other financial institutions.

 

Romanian pawn shops are similar to Maui pawn shops in that they primarily lend or buy gold, usually jewelry. However, they also make auto loans, which some pawn shops in America do, although not so much

 

Arizona loves to pawn

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Nationwide,  about one American in 5 uses a pawn lender to raise cash, according to the private financial regulator FINRA.

But for some reason, in Arizona it’s 1 in 4.

Old West Indian trading posts were, among much else, pawn lenders. But there couldn’t be enough trading post business to account for the difference.

Our Maui pawn shop has active accounts for around 1 in 10 Maui residents. The FINRA survey asked whether respondents had used a pawn loan in the past 5 years.

There are other pawn shops on Maui besides Kamaaina Loan, and we have some turnover in customers over 5 years, so Maui people might be close to Arizonans in using pawn.

Nationwide, there’s more pawning in the South. But that’s because most Southern states raised the ceiling on interest, not because Southerners are specially attuned to pawning.

 

 

A pawn shop chain moves upscale

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Pawn America is one of a couple of large (for the pawn business) chains that started in the past generation. Most pawn shops, however, are still small, local and often mom-and-pop operations.

Kamaaina Loan And Cash For Gold fits the usual pattern.

This story from the St. Paul Pioneer-Press describes how Pawn America is trying to attract shoppers who have never tried a pawn shop’s retail operation by separating it from the lending operation.

Our Maui pawn shop

Brad Rixmann, pawnbroker

did that long ago. In fact, we are perhaps overseparated, with four locations along one long block of North Market Street. One for jewelry, art and curios; one for tools, fishing and golf, the pawn shop and the new store with a wide selection of stuff, from guitars and surfboards to DVDs and Hawaiian artifacts.

The Pioneer-Press story also gives a good explanation of the difficulties pawn shops face from local governing authorities who have decided — but misguided — ideas of what pawn shops are.

“Six or seven years ago, they came to the city of Inver Grove Heights and we said no,” Mayor George Tourville said. “We took a look at the issues around how they operate, and the stigma of stolen goods going right straight to the pawn shop, and we didn’t have the votes to get them into the city of Inver Grove Heights.”

 

It took a while, but eventually the hicks in Inver Grove Heights got a clue:

Police were reassured by safeguards like the Automated Pawn System, which provides law enforcement with daily computerized reports on everything the pawn shop acquires — along with photo identification of each seller. That makes it much more secure than online resale activity, where it’s easier to stay anonymous.

Only then did Inver Grove Heights discuss rewriting its pawn ordinance and changing the zoning for Pawn America.

“It was not a slam dunk,” Tourville said. But with those safeguards and the company’s strong reputation, “it allowed the city council to say, ‘Hey, this is a good thing for our community,’ ” he added. “They built a good space, they’ve got people working. That space was empty and it was filled.”

As this blog has noted many times, a pawn shop is a really stupid place for a fence to offer stolen goods. He has to leave his name, address, driver’s license (or other ID) and a thumbprint, plus be filmed by surveillance cameras.