When money is tight, pawnbrokers tempt you with quick cash.

Without a lot of effort you'll be liquid again.

A prospect that attracts customers, especially in times of high inflation and rising energy costs.

"In the last three months we have noticed an increase in business," says Frank Funke, Managing Director of Saarbrücker Pfandleihhaus GmbH.

He specializes in high quality jewelry and watches.

The pawnshop business is actually quite simple and strictly regulated: deposit against money, 1 percent interest per month plus fees, no credit check and no liability beyond the deposit.

As a rule, it is about short-term loans over three months.

Funke doesn't give money for every item: "We mainly lend money to things that retain their value.

These are primarily gold jewelery and high-quality watches.” Gold jewelery can already have up to 80 percent of the resale value.

It is more difficult with computers, laptops, mobile phones or consumer electronics.

“Equipment like this has a high depreciation in value.

That's why there is significantly less money for them.” With rarer items, only research helps - and orientation to auctions.

According to the business economist, who is also an expert on gemstones and has been in the business for 35 years, the majority of his pawn loans are less than 5,000 euros.

According to the Central Association of the German Pawn Loan Industry (ZDP), based in Stuttgart, more than 90 out of 100 items are released again.

Before the corona pandemic, the approximately 250 member companies paid out more than 630 million euros in loans each year.

During the peak phase of the pandemic, however, business was not so good.

"During the Corona period, the pawnshops were exempt from the closures.

But business has declined somewhat because consumption was scarcely possible.

And that's why many people had enough money earlier," says the association's managing director, Wolfgang Schedl.

A niche market 

Now there is an increased influx again.

Sometimes that was due to the weather.

“So people went to the pawn shop to get money for the holidays.

From the membership, however, one can also hear that customers are increasingly citing the increased prices.

In view of the current situation, I can therefore imagine that people's need for credit will increase significantly in the coming months." However, he does not yet have concrete figures.

The industry also relies on new customers.

“Many are not yet familiar with the pawn loan,” says Schedl.

According to the information, there are only two municipal pawn shops in Germany, in Mannheim and in Stuttgart.

The deal is worth it.

In the Baden-Württemberg state capital, it is a subsidiary of Landesbank Baden-Württemberg.

This is a real rarity, because the majority of the companies are in private hands.

On average, the loan amount at the pawnshops in Germany is around 500 euros.

In Stuttgart, too, loans are often taken out for jewelery or high-quality watches, but also for e-bikes, bicycles, musical instruments or luxury handbags.

“In recent years, a market for high-quality designer bags has also developed.

That's why we included them in the program three years ago," says Funke.

Pawnshops are often referred to as "poor man's bank".

Association manager Schedl contradicts this.

Customers are a reflection of society.

“More and more self-employed people and craftsmen are coming to provide interim financing.” Funke has also noticed this.

Pledge credits have been granted since the early Middle Ages.

But it is a niche market.

According to the Schufa database, there were around 17.6 million installment loans in Germany at the end of 2021.

The national average for the remaining debt per person with at least one installment loan last year was 14,093 euros.

For 2021 newly concluded installment loans over 1000 euros, the average loan amount is 17,226 euros.

The industry is special.

It is not a training occupation, says Schedl.

An official permit, a lot of specialist knowledge and investments in appropriate equipment are necessary.

There are hardly any start-ups.

Jewelers often created a second mainstay in order to create another source of income.

The Federal Financial Supervisory Authority (Bafin) watches over the industry with eagle eyes.

Pawnbrokers may not accept shares or other bearer securities as collateral.

These are not subject to the “pawn loan privilege”, but only banks with a permit and under the supervision of the Bafin may grant commercial loans secured with it.

The Banking Act makes an exception for pawnbrokers: They only need a business license because they only generate small sales.