Apparently even the affluent need cash sometimes. Though, according to Emmett Murphy of the National Pawnbrokers Association, the national average pawn loan is only $150. "Pawn customers represent the working families of America," says Murphy. "Pawn loans keep the electricity on, the rent paid and cars running with full tanks of gas." According to an FDIC study, 40% of "unbanked and underbanked households" have used pawn stores.
So don't expect to get huge piles of cash at the corner pawnshop. To get a million, you first have to pick the right bank.
1. Pick the right bank
New York Loan Company is one of only two pawnshops in the country that will lend virtually any amount, and it has barely been open a month. The other is its sister store, Beverly Loan of Beverly Hills, established by Tabach-Bank's grandfather in 1938.
In New York, he's definitely picked the right building. The new International Gem Tower is itself a gema dazzling glass and metal skyscraper designed by one of New York's most prestigious and long-lasting architectural firmsSkidmore, Owings & Merrill. Providing privacy, security and a vault in the basement, this choice seems destined to attract his clientele.
"Our target demographic is the hedge fund manager, or divorcee, or any person, professional or otherwise, who finds themselves in a cash crunch," he said. Even the rich and famous, hence the joint's registered trademark, Pawnshop to the Stars.
"Let's say they're waiting for escrow to close on a home they're selling, but purchasing a new home, and the bank's unwilling to provide a bridge loan. Or potentially, they have a capital call, or margin call on an investment," he says. "We have seen people who are forced to liquidate an estate, but have probate taxes due before the goods go to auction. I could go on and on."
For example, Alison Daley and Baba Blumkin, two GIA certified gemologists working onsite, recently had a client bring in a five-carat Harry Winston engagement ring and an original work by Pop Art artist Edward Ruscha. "He needed quick cash to help supplement a deposit on a brownstone in the city," says Daley.
Personally, I don't have a million dollars worth of stuff hidden in my sofa. But I brought a little collection of items just to see how this works. And I discovered, if you need a million bucks, you've got to bring the right stuff.
2. Bring the right valuables
Most New York Loan customers come with a good idea of what their valuables are worth, but if you want to show up with a shoebox full of random items, Tabach-Bank is happy to sort it for youand happy if you're surprised by their worth. "It's our 'Antique Road Show' moment," he says.
I hoped for such a moment with my little collection: my Auntie's tiny diamond rings, a great uncle's pocket watch, a silver dollar my grandpa gave me as a teenager and a photo of a Picasso print my wife picked up in art school. I mention a family grandfather clock too, but Tabach-Bank says they rarely lend against antiques due to their size and storage.
"The diamond and the pocket watch are something we would lend against," he says, handing the rings over to Baba Blumkin for inspection. "Typically with pocket watches we would have to take a closer look, as they might be gold plated." My watch, even if solid gold, is no Patek Phillipe. And while coins often require an online consultation with their Beverly Hills numismatist before making a loan, it's pretty clear my silver dollar is nothing special either except as a memory of grandpa.
What about fine art? I point out my wife is an amazing abstract painter. "We only loan against artists with a secondary market," he says gently, "So we know that if we came to own the piece, we could dispose of it, without being a gallery." Sorry, wifey. And as for her little Picasso print? "One of the best parts about editions is that there are auction records associated with a particular print or photograph, and it's easy to find comparables and loan accordingly."
With my stash dwindling, I turn hopefully to Baba Blumkin, who's studying Auntie's rings with a jeweler's eyepiece. "The smaller one is a smaller old mine cut diamond" he says nicely. And while Tabach-Bank would be willing to make a loan against it, "it might be a tad smaller than our typical loan"maybe a low three figures, which is a long way from a million. What about the bigger diamond? "The larger is a diamond simulant," Blumkin remarks with a straight face. The boss chimes in, "Were you trying to trick us?" and soon we're all laughing. Sorry, Auntie, your ring's a fake!
However, if I did have a real Harry Winston diamond necklace and a signed Picasso, what would be the next step? Making the right deal.
3. Make the right deal
Pawn loan terms are heavily regulated by federal, state, and local laws. In New York City, pawn loans can be a maximum of four months at the maximum rate of 4%, with limits on additional fees. "While interest rates are regulated by the state, pawnbrokers encourage their customers to shop around for the loan that meets their needs," Murphy says. Shopping around is difficult if you need a million. But even at New York Loan you should be clear about the purpose of the loan and tailor the amount to match.
Tabach-Bank urges you choose the items with the value that matches your needs as closely as possible. "We never want a client to borrow more money than they needm," he says. And if you can't pay it all back in four months, don't be afraid to ask for more time. "We can, and will, allow our customers some leeway," he says. "We make every effort to make sure our client's ring is back on our client's finger."
If that dreaded day comes and you still can't pay, there's only one step left. Tabach-Bank frowns. "It's the 'F' word," he says. "A dirty word in my world, called a 'foreclosure.'" Ouch. Exactly like losing your house. "The difference between us and other lenders is we don't affect one's livelihood," he smiles. "We don't ding their credit, risk the roof over their head, or garnish their wages... Worst case scenario, they lose a bracelet."
Not bad. In exchange for grabbing that brownstone, surviving divorce, or starting a business... I think Auntie would approve.
--Written by Jay Alan Zimmerman for MainStreet