How to start a pawn shop business

Written by sherry londo-thomas
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Pawn shops have their roots in ancient China in Buddhist monasteries. Wealth that was donated to the monastery was used as a foundation to lend to those in need. The monks would then lend to people at a rate of 3% or less. Not bad for 1812AD. These days a pawn shop is where people take their valuable items to be used as collateral for a loan. After a predetermined number of days, the person can retrieve his item by paying back the loan plus an additional fee to the pawnbroker.

Skill level:


  1. 1

    Contact your state's Small Business Administration (SBA). In some states it's enough to fill out and submit a DBA (Doing Business As) form at the county courthouse. Other states have stricter licensing laws for pawn shops.

  2. 2

    Pay a fee. The application fee for a license ranges from £975 to £1,300 and it is to be paid to the non-depository division of your state's Department of Financial Institutions.

  3. 3

    Submit documents. Along with the application fee, you will need to submit a verified financial statement (prepared and verified by a CPA-Certified Public Accountant), proof that you have experience related to operating a pawn shop business and a credit report to the non-depository division of your state's Department of Financial Institution.

  4. 4

    Apply for a Federal Firearms License from the ATF (Alcohol Tobacco & Firearms) if you'll be accepting firearms as collateral.

  5. 5

    Apply with a pawn shop franchise. They will do the leg work for you. If you go the franchise route, research their success rate.

Tips and warnings

  • -Be willing to work with law enforcement. Although pawn shop reputations have improved, stolen merchandise and firearms are still offered as collateral for loans.
  • -Hire the service of a reputable security company for your store.

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