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Although the industry has grown considerably, the dominant segment, estimated to be 94 percent, remains in the control of individuals who own fewer than three stores and in most cases are single store owners. Smaller operators tend to loan less “per item” than larger chains with greater cash resources. With the borrower interested in maximizing their cash, the small store owner is in jeopardy of losing their customer base. This has become an increasing problem for undercapitalized store owners. Over the last several years the pawn industry has begun to experience consolidation as larger companies, with more experienced management teams that are well-versed in the acquisition of growth capital and retail management, are beginning to gain market share by purchasing individual “Mom-and-Pop” stores. Analysts suggest this process is in the early phase as the major chains continue the consolidation of a highly fragmented industry. This process has added visibility to the earnings potential of pawnshops and introduced new technology to the management of the assets. |
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 The non-banking public has been defined as individuals preferring, or required to use cash and/or money orders to manage their financial affairs. A Federal Reserve Board Survey of Consumer Finances found that many Americans do not have checking or savings accounts and are excluded from mainstream credit markets. These people occasionally need money to make utility payments, receive medical attention, or require cash for a variety of situations that occur without notice. Pawnshop loan customers are usually employed and most generally
paid weekly. However, in recent years pawnshops have served a
broader range of customers and socio-economic backgrounds whether
they seek a loan, are interested in buying discounted quality
merchandise or simply using the store to liquidate unused
merchandise. Statistics show that 70 percent of patrons are repeat
customers.
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 Pawnshops provide short-term secured loans and sell pre-owned
merchandise to the value conscience consumer. Most pawn loans are
for less than $500, the most frequent loan is $20, and the average
loan is about $70. These loans have fallen below the “radar” of
traditional financial institutions. Traditional credit sources have
exited the small loan market because they could not recover the
administrative costs of these small loans without substantial
increases in rates and charges. Loan customers who frequent
pawnshops are known in the industry as the “non-banking public.”
These are individuals who by choice or necessity operate on an all
cash basis. The potential size of the market of consumers with
occasional short-term loan needs is estimated at 50 million people.
For these people, pawnshops fill an economic need, supplying cash
conveniently and quickly.
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Pawn loans have become an economic necessity because most small loans have fallen below the "radar screen" of traditional banks and financial institutions. Traditional creditors increasingly have exited the market of small loans due to servicing costs, default rates, and the complications of storing and disposing of unconventional collateral. Most pawn loans are for amounts less than $400, with the average loan about $70 and the most frequent loan is about $20. Pawn loans are made on the pledge of personal property typically for a maximum of sixty (60) days. |
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The loan training process begins with service to the customer.
Employees are reminded to put themselves in the customer’s position and
be empathetic to their needs. They are encouraged to alleviate any
anxiety the customer might have about the loan process and help them
feel comfortable about the security and safety of their pledged items.
The majority of collateral for loans consists of jewelry, sporting
goods, electronic equipment, tools and appliances. To qualify as
collateral for a loan, items must be in good working order. Testing of
pledged collateral is a major consideration in the lending process. All
loan collateral is tested to reduce the possibility of accepting broken
merchandise. It is against POC policy and a violation of the law to
make a loan on an item that has had the serial number altered or
removed.
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