Beverly Hills Pawn Shop Business Booms

Pawnshops are cashing in

Reggie Pendleton was laid off last week and needed money to buy his wife and two young children Christmas gifts. So he turned to an increasingly popular option in this deepening recession — a pawnshop.

On Tuesday, the former technology firm recruiter walked into Collateral Lender Inc. in Beverly Hills clutching a stainless-steel Rolex he had bought in better times for $3,300.

After an inspection by one of the store’s appraisers, Pendleton was offered a $400 loan. He can buy back the timepiece within 4 1/2 months at a monthly interest rate of 18%.

Pendleton, 43, was hoping for more money, but a holiday without presents was unthinkable. So the Culver City father took the cash and headed for the mall to buy toys and jewelry for his family. “This will be the toughest Christmas,” he said.

People have long turned to pawnshops as a source of ready cash during the holidays. Patrons bring in items of value and exchange them for money.

In turn, the shops hold the items for a state-mandated period. During that period, customers can reclaim their items by paying back the loan plus interest. But after that, the lender is free to sell them and keep the profit.

This year business is up, an indication of how much tougher this season has become for some. Collateral Lender has seen a 20% surge in customers over the last three months or about the same period the stock market tanked.

Traditional lenders have seized up, and people of all walks of life are handing over their diamonds, purses and golf clubs to make their next mortgage payment or, in some cases, pay their employees for the holiday season, pawnshop workers say.

“This whole period now is nuts,” said Tal Shmargal, owner of Collateral Lender. “We have people taking loans just to keep their business afloat.”

It’s a trend that’s been reported nationally as the nation’s economy continues its downward spiral.

Two of the nation’s leading publicly traded pawn companies — Ezcorp Inc. and First Cash Financial Services Inc. — are among just a handful of stocks that have risen this year, up 31% and 20%, respectively.

“For a lot of people, we’re the only source for money,” said Dave Adelman, president of the National Pawnbrokers Assn. and owner of Jerry’s Pawn Shop in Atlanta. “They can’t go to a bank and get money because they won’t lend. . . . Most definitely pawnshops are more busy. This time of year we’re doing very well.”

Such is the case at Collateral Lender, where a Christmas tree commanded center space on the shop’s floor and Wham’s “Last Christmas” was blaring from the radio speakers.

On the corner of Wilshire and Robertson boulevards next to a glossy BMW dealership, Shmargal’s pawn brokerage is also a reminder of how hard times afflict the affluent.

Collateral Lender opened in Beverly Hills in 1990 around the time many pawnshops were shedding their age-old image of being dangerous haunts of last resort by instead focusing on the well-heeled.

Shmargal said many of his visitors appeared rich on paper but were cash poor in this economy. Those seeking loans include actors he cannot name who come and drop off their wares and stockbrokers in desperate need of paying off debts immediately.

“We don’t ask their stories unless they volunteer,” Shmargal, 52, said.

Collateral Lender might seem out of place down the street from Rodeo Drive. But inside, the bounty of pawned goods would leave a Neiman Marcus salesclerk breathless.

There are racks in the backroom filled with mink coats and Gucci and Louis Vuitton purses. A bright orange Hermes box conceals a $14,000 pink handbag.

Behind a thick metal vault are stacks of luxury watches in cushioned cases and rows of jewels stored in yellow envelopes. On one shelf is an Emmy statue.

“We even had an Oscar before,” said Shmargal, who spends much of his day behind his marble desk taking calls, processing paperwork and monitoring images from his surveillance cameras.

To Shmargal, one sure sign of the financial malaise is the rate in which clients return for their goods.

Traditionally, 94% of his customers eventually buy back their pawned items. But in the last year, he’s seen the rate dip to 85%. One of his backrooms has nearly run out of space for fur coats, guitars and bicycles.

In turn, Shmargal has to lower the price of his goods. He said he’d sell a Cannondale mountain bike by the store window ticketed at $899 to anyone who offered him $600. A group of conga drums tagged at $325 apiece could be had for $175 each.

“It’s a scary cycle,” Shmargal said. “It’s scary for us too.”

Not far away on Santa Monica Boulevard is Beverly Loan Co. — a pawnshop the same way a Bugatti Veyron is a car.

The 70-year-old business, on the third floor of an office building that makes it look more like a doctor’s office, was born out of the Great Depression and is experiencing growth with this recession.

“This is probably the closest thing we’ve seen to that time,” said Chief Executive Jordan Tabach-Bank, whose grandfather, Louis Zimmelman, founded Beverly Loan. “Between the 1930s and today, we’ve experienced several cycles but nothing as dramatic as now.”

By that, Tabach-Bank was referring to the number of white-collar clients who have been coming through his bulletproof-glass door and the percentage of customers who fail to reclaim their valuables, which has jumped from about 3% in more sturdy times to about 7% today.

This week, a business owner whose line of credit had been frozen by his bank needed to make his payroll and did so by pawning fine watches.

“Rolexes, Patek Philippe, Vacheron Constantin and Panerai,” Tabach-Bank said. The loan was “over $100,000.”

The company deals mostly in luxury timepieces and jewelry but there is also artwork by Marc Chagall, Andy Warhol and Salvador Dali. There are ivory horses in the main showroom pawned by an African princess, Tabach-Bank said.

In the last year, real estate brokers have been appearing more while waiting for escrow to close. One showed up with diamond studs.

“We get a lot of laid-off people,” Tabach-Bank, 30, said. “Stock portfolios are at an all-time low. Ordinarily, they’d sell stock and do their Christmas shopping. Not now.”

source: http://www.latimes.com/business/la-fi-pawn25-2008dec25,0,4228591.story

Growing Up in a Las Vegas Pawnshop

Slate’s Charles Bock writes a personal story of the son of pawn shop owners in an excerpt from State by State, A Panoramic Portrait of America. Pay attention to the highlighted paragraph for an excellent view from the owner’s point of view.

There’s a picture of me in the back of my parents’ pawnshop. It must have been taken during the seventies, because I’m not ten years old. Wearing a black knockoff Adidas sweatsuit, I’m surrounded by racks of record players, eight tracks, golf clubs, and typewriters. I’m half turned, looking toward my father, who is holding the camera. In front of me, a long flat cardboard box is jammed with rows of booklets, which are stuffed with pawn tickets. I spent untold afternoons in the back of that store, numerically organizing the tickets and stapling them into the correct books. Sometimes, when I finished with one book, I’d count and roll quarters. It’s a Polaroid photo, most likely taken from a hocked camera whose owner had never come back to redeem his ticket.

My parents were far from any clichéd image of pawnbrokers. As soon as you walked into the shop, my dad—a lanky guy with a thickening middle, bright brown eyes, and black hair receding at his temples—greeted you with a kind smile. I see him making small talk while writing up a loan, bringing up the previous night’s ballgame, or rolling out one of his favorite groan-worthy jokes, Hey, do you know who likes cats? No? Mrs. Katz. In the mid-sixties, he and Mom left the East Coast, following her parents who’d moved to the warmer climate of Vegas from New York City after Mom’s mom got cancer. Dad then spent ten years trying to write plays and short stories while dealing craps at different casinos. He once had a screenplay that supposedly was going to be developed into a movie starring Burgess Meredith. Mom taught grade school and tried to sell Tupperware over the phone. They got into pawnbroking because my grandfather—a dice-throw-ing, trifecta-betting, mathematical genius—had his own pawnshop on Fremont Street, the gambling and tourist mecca of downtown Las Vegas. The struggle of being pawnbrokers became more appealing to my folks than the struggle of trying to make ends meet on their crappy salaries while raising four children. When I was eight or so, Gramps guaranteed the loan that allowed Mom and Dad to take over a struggling downtown pawnshop of their own.

Fremont Street was the heart of the city. Originally a Mormon missionary outpost, Las Vegas was essentially born as a town in 1905, when the completion of the train station prompted the building of shops and the sale of 1,200 lots to private citizens—all downtown. The city, which was officially recognized by the state legislature in 1911, was built from Fremont Street outward. Even in the late nineteen seventies, downtown Las Vegas was just as much a destination as the Strip. Sure, the Strip had huge hotels like Caesar’s Palace, The Riviera, The Dunes, and The Sands. Some were clustered together, but for the most part, each resort was an island unto itself, a quarter mile from anything, with long swaths of hard desert between hotels. By contrast, downtown was like the French Quarter: a small and defined area, every place within walking distance. And just as Bourbon Street was lined with one bar after another for partiers to stumble between, Fremont Street was similarly packed with casinos. You couldn’t come up with five locations on the planet more ideal for a pawnshop.

Here’s how the biz works. You bring in your watch—say it’s eighteen-carat gold, and you need a loan on it. You’d like to get five hundred for it. My dad weighs it and discovers the weight is a little light. It’s not the greatest make or brand. When you bought that watch three years ago, you paid five hundred. You tell my dad you should get five hundred. Maybe you get pissed. You have all sorts of financial pressures on you and you need that money, so maybe you shout and call my dad a dirty Jew. Maybe not. I don’t know you. But let’s say you hold back the epithets, and are smooth in your negotiations, and have some luck to boot. Let’s also say your watch is actually worth a damn: you get a loan for two, maybe two-fifty. You sign a ticket agreeing to a monthly compounded interest rate of eight percent. Your $250 loan would cost you $270, if you wanted to get the watch out during that first month. Your watch would cost you $291.60 the second month; $314.93 the third. Pawnshops make most of their money on the interest which has accrued when people redeem tickets for their goods. Your ticket says you have six months to redeem your watch. After six months, if you haven’t come back, the shop owns the watch—that is, unless you call and explain your difficulties and ask them to hold on for another month. Most will then hold the watch. My parents do that, most likely, my dad wishing you well and sounding positive and trying to make you feel good (It’ll be here waiting for you, don’t worry). This having been said, at a certain point—figure the end of that seventh month—time’s up; that watch is going out in a display window.

Making a living this way is methodical, tooth-pulling work; at John’s Loan and Jewelry, my parents—neither of whom is named John—toiled for ten hours a day, three hundred and sixty days a year, my mother haggling with locals who needed to hock their goods to help pay their electric bill, my dad dealing with the couple who brought in the family television in order to get baby formula. Here’s a former UNLV basketball star turned casino security guard, bringing back in, for the ninth time, the watch he got when the team made it to the regional finals of the NCAA tournament. Here are young lovers looking for wedding bands on the cheap. Thais and Filipinos on international gaming junkets. Drunks on the tail end of holiday benders. Tourists wandering down the showcases, bleary and angry and worn out, busting my parents’ chops about how much some item is worth. Or ripened gamblers, who’ve suffered hard dry runs and are still in the grip of gambling fever, maybe they live in the grip, and need to exchange this diamond bracelet for cash, no, not to fill the tank with gas, not to drive back home to California—these are the ones who sign their pawn ticket and receive their bread and go right back in for another run at the craps table.

Looks like fascinating reading.

Pawn Shop

Pawn Shop

Find a pawn shop near you.

Pawn shops are a place to get a quick loan or to get some money for those items that you are not using any longer. Your local pawn broker may help you get the cash that you need today.

How does a pawnshop work?
Pawnbrokers lend money on items of value ranging from gold and diamond jewelry to musical instruments, televisions, tools, household items, etc.. These items maintain their value over a reasonable period of time and are easy to store, especially jewelry. All customers provide collateral, eliminating the need to distinguish high risk from low risk borrowers. Typically, loans are small averaging between $70 and $100, although they can be as small as $20 or as high as several thousand dollars depending on the value of the collateral. Contracts vary from state to state, but the average loan period is 90 days. Generally, interest rates will vary with the amount of the loan. The process is much the same as any other lending institution, with the primary difference being the size of the loan, the collateral and the holding of the merchandise until the interest or the loan has been repaid.

Why would someone go to a pawn shop to get a loan?
Pawnshops offer the consumer a quick, convenient and confidential way to borrow money. A short term cash need can be met with no credit check or legal consequences if the loan is not repaid. A customer receives a percentage of the value the broker believes the collateral would bring in a sale. Although the loan to collateral ratio varies over time and across pawnshops, a loan of about 50 percent of the resale value of the collateral is typical. In other words, pawnbrokers feel their loan is “paid in full” at the time it is made. When a customer pawns an item, terms of the loan are printed on a pawn ticket that is given to the customer. The ticket states the customers name, address, type of identification provided to the pawnbroker, a description of the item, amount lent, maturity date, interest rate and amount that must be paid to redeem the item. Most states regulate pawnshop interest rates and other charges, such as storage or insurance fees.