How To Start A Pawn Shop In South Africa
What is a Pawn Shop?
Is a shop or business who loans money to people who bring in valuable items which they leave with the pawnbroker. Examples of items that a person may leave are Jewelry, gold, watches, cameras, musical instruments, televisions or computers.
How To Start A Pawn Shop In South Africa
1. Choose the right location
A pawn shop needs to be in the right location in order to maximize its revenue, it’s probably not a great idea to set up a pawn shop in a village/township or small town. Your biggest monthly expense will be rent, you need to make sure that you are at least in a very good location.
It’s often best to be in a bigger town or city but not directly in the CBD. Rent in the CBD can be very expensive, you want your pawn shop to be a little out of the CBD but in a place that gets a lot of foot traffic. Foot traffic is a very huge source of business for pawn shops.
2. Register your business
There is a lot of regulation surrounding pawn shops, you have to first register your business as a private company. Then register for a pawn shop license and make sure that you are complying with the zoning laws. The purpose of the pawn shop license is to regulate the sale of second-hand inventory and lending rates.
3. Buy second hand inventory
No one will be attracted to an empty shop, buy some inventory to fill up the space in your pawn shop. You can get most of this in auctions, go to auctions and buy things like jewellery and other things of value. The main purpose of this is to fill up the space in your shop, not to really resell.
It’s important to buy things that will decorate your pawn shop and bring it to life. This goes hand in hand with buying your equipment. Common equipment includes a point of sales system, an accounting system and things like computers and a payroll system.
4. Make sure you have enough money
A pawn shop is primarily a loan business, you have to have money before lending it to people. This can be a lot; you have to have at least R50 000 in cash and is waiting to be loaned out. You can also work out how much interest you are going to charge. Let’s say you charge a 15% interest, you will earn an interest of R7 500, assuming that all this money is loaned out.
Even with a 30% interest, you will only make around R15 000, you still need to pay rent and employees. The more money you start with, the better, try to have as much saved up as possible.
5. Market your pawn shop
A pawn shop that is situated in an area with a lot of foot traffic will automatically market itself. Make sure you are in an area that has a lot of foot traffic and you might not need to spend a cent on marketing. Other marketing channels include advertising your pawn shop on the local newspapers.
When marketing to the general public, your focus should be on marketing the valuables that are in your shop. Don’t market your loan services, most people know that pawn shops offer loan services as well.
Frequently Asked Questions (FAQs).
How do pawn shops work in South Africa?
Pawn shops allow customers to pawn (or hock) something valuable in exchange for a short-term loan. If the customer returns the money, and the interest due on the loan, the item is returned. But when the customer cannot pay back the loan, the person who owns the pawn shop, or the pawnbroker, sells the item for a profit.
Who regulates pawn shops in South Africa?
In South Africa legislation has been amended in line with the constitution allowing companies to run legal pawn businesses in a regulated environment. The National Credit Act 34 of 2005 “NCA” regulates pawn shops and it is a requirement that pawnshops have a National Credit Regulation license.
Is pawnshop a good business in South Africa?
Pawn shops aren’t only profitable businesses, but they also often help customers too. If you have strong financial knowledge and are savvy when it comes to valuing and reselling items, starting a pawn shop might be an enjoyable business option for you.
Are pawn shops predatory in South Africa?
Pawnshops have come under scrutiny for predatory lending practices. These shops hold onto people’s valuables for three to four months, using them as a guarantee against a loan while typically charging a three to four percent interest rate. Often the valuables are worth much more than the cash loan.
Is Pawn Stars real or staged in South Africa?
Insiders revealed that there are real and staged elements to Pawn Stars. Mike Hoover, who claimed to be an extra on the show, discussed his experience onset. “[Visited] as tourists and my friend decided to buy a Cartier watch for his wife,” he said.
How does a pawn shop work in South Africa?
Here’s how pawn shop loans work: You bring in an item as collateral, and the pawnbroker will determine the value of the item, give you a loan based on its cost, and then hang on to your collateral until you’ve paid off the loan. In a nutshell, it is one way to get a personal loan without a credit check.
What type of business is pawnshop?
A pawnshop, pawnbrokerage or pawnbroker refers to a person or entity engaged in the business of lending money on personal property delivered as security for loans (Section 3 of PD No. 114).
Is pawnshop a financial institution in South Africa?
Although currently regulated by the Central Bank, pawnshops are admittedly the least regulated among the formal financial institutions. Those desiring to open a pawnshop do not have to seek prior clearance from the Central Bank, unlike other financial institutions such as finance companies.
How do I register as a money changer in South Africa?
Sole proprietors need to register with the Department of Trade and Industry, while corporations and partnerships must go to the Securities and Exchange Commission. You must then get a barangay clearance before proceeding to get a mayor’s permit. Note, however, that you must be registered with the Central Bank, too.
How does a pawn shop make money?
Many people bring items to pawn shops not intending to repay the loan. They know the pawn shop will make a profit on the item they pawned. Pawn shops also buy items they believe they can sell for a good profit, according to Empire Pawn of Nassau.
Do you get more money selling or pawning in South Africa?
Getting the Most Money when Selling or Pawning Your Items
Often, you can get more money for your item by selling it. However, with a pawn loan, you can get the money you need, and you still get to keep your item. Go online and find out what your item may be worth.
How do you make money pawning things?
You bring in an item to a pawnshop, and the pawnbroker will offer you a short-term loan based on the item’s value. If you pay off your loan in time, you get your item back. If you don’t pay the loan in time, the pawnshop is free to sell your item. You can also sell your items outright.
What is the disadvantage of a pawnshop in South Africa?
The most significant drawback of a pawn shop loan is its cost. Interest rates and finance charges for pawn shop loans are often high. It’s common to see interest rates between 5% and 25% a month. Another disadvantage is that if you don’t repay your loan on time, the pawn shop can sell your item.
Why do pawn shops have three balls in South Africa?
The pawnbrokers’ symbol is three spheres suspended from a bar. The three sphere symbol is attributed to the Medici family of Florence, Italy, owing to its symbolic meaning of Lombard. This refers to the Italian province of Lombardy, where pawn shop banking originated under the name of Lombard banking.
What happens if you don’t pay a pawn loan in South Africa?
If you pay late or not at all the items ownership falls to the store. There is no effect on your credit as credit is not a part of the transaction. The item may then be sold by the pawn shop.
Do experts on Pawn Stars get paid in South Africa?
Reportedly, experts on Pawn Stars do not get paid. According to DeadlineHollywood.com, “They work without a script and they’re not paid a dime, but being on the show has boosted their businesses and made them brand names in the appraiser field.”