If you have a cash flow issue and a rare piece of art you can do without, consider checking out what was once thought of as a lender of last resort. People facing layoffs with depleted savings, or those who are cash-strapped with inconsistent incomes, often use valuable items as collateral in exchange for a cash loan. For some, the pawnshop remains an important lending source, and like retailers, the pawn shop is now online.

Pawnshops represent a short-term loan alternative for small businesses and individuals.

Without a rigorous credit check or bank approval, and very little paperwork, people bring an item of value to the pawnshop (or this can be done online), where it is held as collateral against a loan. If the loan is repaid, and about 85% are, the item is retrieved. If not, the pawnshop sells the item to the public.

Over the last few years, a new breed of high-end pawnshops like Borro can be found in places such as New York City and Beverly Hills. In exchange for luxury items like art and watches and using an online platform, Borro loaned nearly \($404\) million to cash-poor, asset-rich individuals in a recent year. Many high-end collateral lenders have added additional online services where borrowers can get items appraised before shipping. Online players like iPawn and Pawngo have made it easy for consumers and small businesses to access short-term loans with discretion and privacy to avoid the negative stigma of pawn shops. Collectively, iPawn and Pawngo have loaned tens of millions of dollars to customers.

The industry has been glamorized by highly rated reality TV shows like Pawn Stars, which profiles three generations of the Harrison family engaged in the colorful pawn business world in Las Vegas. Americans in all economic groups, and even small business owners, are utilizing pawnshops in place of traditional credit lenders. In both good and bad economic times, companies like Borro will continue to occupy a unique niche in a growing number of alternative-lending technology startups.

Questions for Critical Thinking

1. What is your perception of pawnshops, and do you have personal experience or know anyone who has bought something there? Are pawnshops a substitute for banks?

2. The dark side of the pawn industry is its lack of regulation and exorbitant loan rates. Do some additional research to discuss the benefits and drawbacks of this trend.