Profit Prospective In Pawn Shop Stocks

Last weekend I witnessed a most unusual sight. I pulled into the parking lot of a small strip mall in Northern Arizona. I was on a mission to pick up some needed essentials for dinner. As I got out of my car I noticed people parked in the Ford Explorer right next to me. They were pulling boxes and a nice looking guitar out of their car. They then carried these items into one of the stores.

How strange.

I'm used to people carrying boxes out of a store, but not into a store. What really boggled my mind was the steady stream of other individuals. The people parked right next to me weren't the only ones. I noticed 3 other people doing the same exact thing.

Returning unwanted items?

I quickly realized that these people weren't returning defective or unwanted items. I was witnessing a local pawn shop in action. Pawn shops are just like local banks. They provide cash loans to individuals, and they profit from the interest and fees charged. Pawn shops make their living acting as a financial institution - just like Bank of America or Citibank.

I bet you never thought of them like that?

Pawn shops just take the collateral idea one step further. They hold onto the assets as collateral. It's like getting a mortgage on your home, but instead of a home, you use tools, musical instruments, or jewelry.

Providing a valuable service.

People in need of short term loans often use pawnshops. It allows individuals to leverage assets and get much needed spending capital. Now, pawning items is not their only business. These pawn shops have a number of ways to profit. . . but more on that in a minute.

This isn't your father's pawn shop anymore.

Pawn shops used to have a bad reputation. Now these once seedy shops have become legitimate means of financing for many individuals. The business is run by national companies who own hundreds of stores. They provide safe and clean environments, and locate stores in good neighborhoods. Some high powered image consultant is truly working wonders.

But that's not all.

Pawn shops are not just focused on pawning items. Now they offer a number of other services including short term personal loans, paycheck advances, and lending against automobiles. This allows pawn shops to expand their product offerings and diversify their revenue.

For pawn shops, recessions are a good thing. Money's hard to come by, and credit standards are tightening. This is when pawn shops do more business. And more business means more profits.

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