Pawnshops: Where a bust can be a boom

The average pawnshop sees a lot come through its doors: engagement rings, TVs, guitars.

But consider this: In recent years, the Burnsville-based Pawn America chain has given quick loans on an original Picasso, a 26-foot cabin cruiser, a $75,000 flawless diamond and dozens of other luxury items. And as the economy worsens, the chain's owner expects he'll see more high-end merchandise pledged as collateral.

Now Pawn America is offering a more discreet way for the elite to hock their goods. Called "Premier Loan," customers are welcomed into a modern conference room in a Burnsville office park, where store officials will research an item's value, the parties will agree on a loan amount and the store will cut a check.

"We provide loans to people from all walks of life," Pawn America founder Brad Rixmann said. "We have in the last year seen more higher-dollar items come into our stores."

The pawn business is booming these days, industry analysts say and profits show.

Area brokers say they've seen more activity from people hocking goods for quick loans, selling jewelry to cash in on the high price of gold and shopping for bargains.

At Texas-based Cash America, which calls itself the "largest operator of pawnshops in the world," third-quarter 2007 results for its pawn and related businesses show a 59 percent gain in net profits from the same period a year earlier.

"You can look at all the publicly traded companies and their businesses obviously have benefited from this current economic cycle," said Liz Pierce, a senior research analyst at Roth Capital Partners.

Enhanced image

Some local brokers also attribute increased business to a cleaner image.

Pawn America, for instance, has gussied up some of its retail stores, giving them the feel of a Best Buy store on the retail side and a bank on the loan side. They also market heavily. The company jingle, "Pawn America is right for you," is a staple on TV and radio.

In the new Burnsville store, warm-toned wood graces the walls and soft lighting illuminates jewelry counters. Flat-screen televisions advertise the chain's services and tout its community involvement.

Dan Colins of Lakeville waited in line recently after he was laid off from his air-conditioning and heating job. Using a surround-sound speaker system as his collateral, he was scrounging up cash and credit to buy a furnace and install it for a job he was doing privately.

"You've got to scramble nowadays," he said. He got a $100 loan for the speakers, he said, and will have to pay $12.50 in interest and fees after just a couple of days -- an amount he reasoned was about equivalent to a family trip to Starbucks. "If you do it smart, it's not a bad deal."

If he doesn't pay or doesn't extend his loan, he knows the surround sound set could end up for sale.

In the same store, a suburban mom who didn't want her named used paid off her loan and got her laptop back. She has pawned it several times in the past few months, she said, because the high prices of gas and food were breaking into her tight budget.

"It's helped me out in a pinch," she said. And she figures it's better than the potential of ruining her credit by putting things on plastic. "This way, if I don't have the money, then I guess I just lose whatever it was I brought."

Pawn America sales associate Damion Frelix said when he works behind the counter to make loans or buy people's goods, they sometimes volunteer their story of why they're there.

There are always surprises, such as unexpected medical bills and emergency car repairs, he said. But gas prices have increasingly entered into the conversation, he said. "And lately, it's 'I got laid off,'" he said.

Not all customers, though, are out-of-luck workers.

Pawn America's Rixmann said high-end loans sometimes go to business owners trying to make payroll or waiting on a bill to be paid. It will hold them over until they get a payment from somebody else.

They can't go to their bank and bring in their jewelry collection to quickly secure a $10,000 loan, he said.

Bargain hunting

At Max-It Pawn in Coon Rapids, student Tsuhue Xiong of Ramsey brought in four Game Boys and three video games for "money to get around" with high gas prices.

Meanwhile, Melisa Moffitt of Anoka browsed the store looking at iPods for her son. She found a Nano version for $69. "It's a little scruffed up, but my son doesn't care," she said, adding that she started shopping there just recently.

A new store, Max-It sits next to a Green Mill restaurant in a high-traffic commercial area just off Main Street in Coon Rapids. Revenues since it moved three months ago have doubled, according to a co-owner.

"I've seen a lot more people from all walks of life come into a pawnshop than what I've seen in the last five years," said Mark Smith, who co-owns Cash-N-Pawn, which operates Max-It Pawn stores in the metro area. "I think the economy is creating more pawn customers that are looking for bargains ... Balancing that, I've seen a lot more people -- contractors and other types of trades -- come in for needing short-term financing for payroll and materials, waiting for draws or just because business is slower."

Not everyone links growth in the pawn business to the economy. If Cash America is any guide, the industry has seen a steady increase for several years.

The Cash-N-Pawn chain, with locations in Minnesota and stores in Missouri and Indiana, has grown by a double-digit percentage in the past year, Smith said. Unlike many businesses, it's continuing to expand and hire, Smith said.

Rixmann said sales at his chain's stores are up 22 percent so far over last year, which was up 20 percent over the previous year. Loans have gone up 50 percent, but the quantity of loans has not increased significantly, Rixmann said, pointing to higher gold prices and more high-end collateral. Purchases are up about 35 percent and account for a larger part of his business, he said.

Andy Strauss, owner of Avi's Pawn & Jewelry in Richfield, said he's seen increases, too, though mostly from people selling their gold.

"We've always done well in bad times," Strauss said. The pawn business is an easy way to get a small loan, he said. "It's another source of income. ... If you don't want to ask your aunt and uncle, and you don't want to ask your friend, where do you get $500?"

Staff writer Mike Meyers contributed to this report. Pam Louwagie • 612-673-7102