A buy sell pawn business, pawns and buys items and then resells it at a profit.
This business is straightforward a person looking to pawn or sell something comes in and you make an assessment tell them how much you are willing to loan against or buy the item for. This business has a few legal requirements, you need to keep a record of the people selling to you and a copy of their ID, some businesses just operate with those SAPS secondhand-goods register (I would have linked to it, but the SAPS website like SAPS does is not working) while others have computerised records. If you fronting loans you need to be NCR registered as a credit provider. Most of the smaller ones are not.
Some of these shops are purely a pawn shop – they offer secured loans to clients, who put up an item as collateral and pays interest upon collecting and when they don’t collect the item is displayed for sale in the shop.
In terms of pawn transactions, money is lent and the borrower provides an item of property as security, the resale value of which is greater than the loan. The creditor is entitled to sell the property if the money is not repaid by an agreed date, and to keep the proceeds of the sale.
We’ve now seen a hybrid model, where a buy shop is operated alongside the pawn business and even offer unsecured loans. Most if not all will buy precious metals such as gold by the gram which is easy to resell again.
This business caters to people looking for money fast, to get money against their items or sell their goods fast, they will almost always get more from selling it privately so this business is usually a time-sensitive loan business for small amounts.
You usually have the hybrid buy shop and pawn business, some offer loans as well.
Now the “pawn” industry doesn’t have a very good reputation, we’ve seen some franchise brands in South Africa, Cash Converters, Cash Crusaders who have given the industry a more professional image and you will notice they don’t use the word “pawn”.
Crusaders: Use your valuables to take out a 30-day secured loan of up to R15000.
Convertors: Calls their pawning “Cash Advance” – Loan against the things you own. Converters and also has another loan product called a “Payday loan” which is like Wonga the loan is against your salary and unlike a secured loan (only item and ID required) you need a lot more stuff banking details, proof of this and that.
To successfully run this business you need to know not only how much an item is worth but how much you can sell it for, it’s no good you have money standing on a shelf and you can’t sell the products you pawned. You also need a way to test precious metals and gems if they are real.