Pawnshops rely on people falling on bad times and needing hard cash quickly. But they’re shaking off their seedy image as Germany’s economic downturn hits the business community.
Pawnshops are reporting an increase in business in Germany.
Stiller, who set up a business just over a year ago and is still struggling to get a foothold in Germany’s volatile construction market, turned to pawnshops when the bank wasn’t willing to help any more.
"The bank went through my business accounts and refused to give me a loan," Stiller says explaining his situation. "Schadow’s pawnshop made me an offer and I took it."
Because the overall economic downturn has begun to hit German businesses hard, more and more people have resorted to a visit at their local pawnshop instead of going to the high street bank when they need cash.
Quick cash, no hassles
The concept is straightforward. The pawnshop loan costs one percent in interests per month plus fees -- the law establishes this -- and anyone who has something to offer as a pawn qualifies. Unlike the tedious process of applying for a bank loan, hard cash is handed out in minutes without filling out forms or running a credit check.
If the customer’s pawn is not redeemed within a few months, however, it goes to an auction, and the money from the sale flows back to the pawnbroker.
"Ninety percent of our clients are people with small businesses. When their customers don’t pay, they still have to come up with the wages. Suddenly, they have a cash-flow problem…those are our regulars," Achim Schadow says.
Achim Schadow's Auto Pawnshop in Berlin
And Schadow speaks from experience. He runs the first pawnbroking business for cars in the German capital.
"About 60 percent of the cars that are brought in are saloons, but we also have sports cars - a Masserati, two Ferraris, even a Harley Davidson… expensive vehicles, brought in by businessmen," he says listing off some of his pawns.
Germany’s pawnshops are packed with the relics of bygone better times. Trade is booming and the second oldest business in the world has long become a sound branch of the service sector.
Last year turn-over rose by 9.4 percent says Joachim Struck, the chairman of the Association of German Pawnbrokers, and for this year he expects the industry to increase by the same amount again.
Pawnbroking is a 400-million-euro business with one million customers in Germany. According to Struck, much of the new business is due to the restrictive loan policies of German banks.
"Many people don’t get credit at all or they get less than before. This hits freelancers, the self-employed and the many foreigners from outside the European Union who live in Germany," he says.
The need to get cash quickly and without a lot of hassle is catching on. As a result, pawnshops seem to be shaking off their seedy stigma.
"People used to be inhibited – and now they are not any more – they just need the money. Things have changed. Pawnshops used to be down a back alley way – now they’re right on Berlin’s prosperous Ku’damm. They look like jewelry shops!" Schadow, the car man, says.
Guntram Goebel owns one of the traditional establishments that specializes in gold, watches and jewelry. He, too, has noticed the effect of the economic slowdown on German businesses and the resulting increase in his business.
"More and more people are coming to our pawnshop – I’m sure it’s the economy… We get two or three new customers a day," Goebel says.
He makes about 80 percent of his turnover with loans worth around 500 euro. For many of his customers, that now makes the difference between pinching the pennies and pinching the dimes.