A pawn shop loan may carry a high interest rate, but it is still better than a payday loan. If your startup needs cash now, this may be your only option.
Do you have a great idea for a start-up business? You’re not alone! According to the Small Business Association (SBA), 627,000 new businesses open each year!
While owning your own business is an incredible venture, it also comes with plenty of challenges. The first of which is often figuring out how to finance your business in the first place.
One often-overlooked option is a pawn shop loan. What is this, and how can you use it to fund your startup? Keep reading to learn more!
What is a Pawn Shop Loan?
First things first, what is a pawn loan, anyway? It’s merely a loan given by a pawn shop in exchange for something that you own which you’re willing to leave as collateral.
How to Take Out a Pawn Loan
When you bring an item to a pawn shop, they’ll assess its value, the condition of the item, and its resale potential. Then they’ll let you know whether they’re willing to offer you a loan. In general, you can expect to receive a loan for approximately 25 to 60 percent of the item’s resale value.
Some of the items that you’re best off pawning include:
- Newer electronics
- Musical instruments
- Brand-name digital photography equipment
If you accept the loan offer, you’ll leave the pawnshop with cash in your hand and a pawn ticket. When you’re ready to get your item back, you’ll need to present this ticket, so it’s a good idea to take a photo as a backup.
Retrieving Your Items
To get your item back, you’ll need to come back within the agreed-upon timeframe (usually 30 days or a few months) and pay off the loan amount which will include fees and interest.
Sometimes, if you’re not able to pay the loan off by the deadline you may be able to renew it or request an extension. Otherwise, the shop will sell your item and keep the money.
Benefits of Using a Pawn Loan to Fund Your Startup
While a pawn loan isn’t the best option for many people, if you aren’t able to get a conventional loan and your cash needs are short-term, it can be a great option.
These loans aren’t cheap, but they’re less expensive than payday loans. They allow you to get cash fast, without a credit check. If you’ve come across a business opportunity that you need to jump on right away, this could be a good way to bridge your financial needs until you can start seeing a return on your investment.
There is also no legal requirement for you to pay the loan back, so it won’t hurt your credit score if you find that you’re unable to pay it back. Some feel that this minimizes their risk while they’re working on building their business.
You’ll need to closely evaluate your finances and your business plan to decide whether this is the right option for you. At a minimum, you now know that you have one more option.
Follow Your Dreams Today!
Now that you’ve seen how a pawn shop loan can help you fund your dreams of owning your own business, nothing can stop you! Take some time to browse through a few more of our posts to find even more great business advice to help ensure your success.