For Those Expecting More!


Posted by : David Brewer   /  

Years ago I told Paola, my wife, I wanted to start a chain of pawn shops.

"Absolutely not" was her reply. She never really told me why but she said it with such certainty that I just kinda agreed and let it go. 

Fast forward a few years and I find a pawn shop for sale here in San Diego. I drag her along kicking and screaming to go see it. We have a long talk with the manager  who explains all the workings of the store and how they make money. I'd spent years researching pawn shops so I was just pretending to listen while I was really checking out the store. 

"Why don't we just open our own store from scratch"? she asks after we leave " I just never knew what a pawn shop was until that manager explained it to me" she says. I was dumbstruck. All this time she never asked and I never thought to explain it to her. 

Apparently she isn't alone. While doing research recently on search terms people put into Google related to pawn shops I found that there is massive volume of searches guessed it "What is a pawn shop". Well here is the real dirt on pawn shops. 

A pawn shop is:

1. A Financial Institution. The number one profit center of a pawn shop is to lend money against their customers collateral. The customer provides some type of personal property which is held by the pawn shop until the loan is repaid at which time the property is returned. 

pawn shop lends money against collateral

If the customer doesn't return for their property by the due date (In California that would be in four months) they risk losing the item to the pawnbroker who will then sell it to recoup his loan and interest lost.

Although simple in theory it quickly gets complicated complying with the numerous government agencies regulations. Then throw in life's curveballs such as divorce, bankruptcy, moves out of town, deaths, incarcerations, military deployements, and on it goes. I assure you it is never dull figuring out how to deal with the crazy situations we see.

2. A Retail Store: Pawn shops buy new and used goods from customers every day. This is a huge part of the business. Many people have no interest in trying to sell their items themselves. They prefer the simplicity of taking their item into the store and walking out with cash and no further responsibility. 

Every pawn shop is a little different in the type of goods they like to buy. At Posh Pawn we generally stick to the luxury type of goods but will also buy things like Apple computers since we are so familiar with them. 

3. A Recycling Center: Pawn shops buy gold, silver, and platinum with the intention of having it melted and recycled back into the marketplace. Most of the metals get sold to a refinery and then go back into jewelry as well as computers and military applications. 

4. A Jewelry Store: At Posh Pawn we have an on-site jeweler. Not all pawn shops do but it is quite common. Our jeweler keeps busy taking jewelry we have bought and often using the stones to make something completely different. Repairs are another profit center and sometimes we will make a custom piece for a customer. Lastly all the jewelry that goes into our showroom is inspected and refurbished prior to being put in the cases. 

5. An Appraiser: A pawnbroker must be a good appraiser on the value of jewelry as well as just about every used good sold.  Pay too much and his store will quickly turn into a museum of artifacts or he'll go out of business losing money selling the items. 

It is a common occurrence for a customer to walk into the store with an item worth over $20,000 and expect to be given a cash offer in minutes. That is where expertise as an appraiser helps speed up the transaction and the customer comes away satisfied that they were treated fairly and honestly. 

6. An Expert: As a pawnbroker you are expected to be an expert in...well everything-coins, jewelry, watches, antiques, art, handbags, computers, etc. Imagine you not only have to have a high degree of knowledge on these items, you need to know how to value the item, how to grade them (think diamonds), check authenticity, and find the problems the seller may be hiding from you. Don't even get me started on all the facets (pun intended) of gemstones. 

Pawn shop expert


So the next time your significant other leans in and says "why don't we start a pawn shop", you can look them in the eye and say "Absolutely. I read a blog post on how to do it". 

Feel free to comment below and let us know if you have more questions on how a pawnshop works. Even better stop by our store and we’ll give you a tour and show you all of our more interesting items. 


← Older Post Newer Post →


  • Tom Jaharis

    I really like your website and your blog really helped me understand how pawnshops work. Thank you and keep up the good work
  • Joyce Lemley

    Your lesson on what a pawn shop is was excellent. I can see why you guys are doing so well. You did your homework. Long before you started your your store.