HARD TIMES:Securing even a temporary overdraft from a bank isn't easy these days, as most of us know. Re-enter the pawnbroker, looking a little less Dickensian, writes CAROL RYAN
AFTER 20 YEARS in banking, Frank Cronin saw an opportunity for an alternative to traditional lending. When his employers Friends First closed its asset-finance division last year, he decided to take the leap and open Borro Now, which he describes as Ireland's first high-end pawnbroker.
"Bespoke" pawnbroking is nothing new. Suttons and Robertsons, pawnbrokers to the rich in London, will loan up to £1m to asset-rich, cash-poor business owners to get them over a hump. They have secured loans against Ferraris, private jets, yachts and Picassos. In the US, the Beverley Hills Pawnshop takes in some of the most expensive jewellery in the world from strapped movie stars.
Unlike in the UK, where pawnbroking is a familiar form of borrowing, it has more of an image problem here, Cronin admits. "In Ireland, it has connotations going back to when people went in to get money for food or rent . . . to pawn the Sunday suit."
By targeting the wealthier end of the market, he hopes to change that perception. "I think anyone who has come into us has found the experience to be entirely different. It is appointment only, people are treated very well. We are doing secured loans, simple as that." He opened on the southside of Dublin and 90 per cent of his business is done during lunchtime. "It was a conscious decision to open in Dublin 2. We didn't need to be in the high street because I think that puts people off coming in."
Business is brisk, he says. Expensive trinkets accumulated during the boom years are being used to fund these leaner times. August was busy, with customers borrowing to pay private school fees. He lends against valuable jewellery, watches and fine art, but has been fielding some unusual requests. "The amount of people who have rung up and asked will we take a horse. There was a guy on yesterday who wanted to give cattle in exchange for money. There are always people asking will we take a charge on a combine harvester. That is outside our terms of reference."
He sees first-hand which professions are hardest hit by the recession. "Architects, an awful lot of calls from architects. So many of them are out of work. A lot of people who have been made redundant, and self-employed people who are getting paid every 90 days instead of 30. We have had business owners in who couldn't get an overdraft with the bank and needed something to tide them over for wages or stock. I think we are going to see more of that. There are loads of people who borrowed huge amounts for houses and are trying to service this huge debt every month . . . they are nearly the new poor."
Many people with short-term cash-flow problems are attracted by the relative anonymity pawnbrokers offer. "With mortgage arrears, people's credit history is being impaired and the way the banks are at the moment, if there is so much as a blip on it, forget it. They will make you go through hoops. I don't care about all that, it doesn't matter, because we are giving a loan secured against a valuable they already own."
When a customer makes an inquiry about pawning an item, Cronin sets up an appointment and brings in David Dupuy, a jewellery valuer, to determine the amount the item would fetch at auction. When pawning an item, people can expect to borrow up to half its resale value for a period of four months. If the loan is not repaid, the item is sold at auction and the customer gets the proceeds minus the pawnbroker's costs. Around 95 per cent of people come back to reclaim their goods.
So, how does the pawnbroker make a profit? The BorroNow website has this example: "We advance a loan of €1,000 against a piece of jewellery worth €3,000 cash. You repay €1,240 in total at the end of month four and we return your item to you. Interest is charged at 6 per cent per month, an APR equivalent of 90.6 per cent."
How do people react when his profession comes up at, say, a dinner party? "Astonishment. They look at me with their mouths open. One woman who knew that I was in banking for 20 years asked what I was doing now. When I said 'Oh, actually I have started up as a pawnbroker', there was just silence. She had recently got engaged and you could almost see her hiding her ring. We had a great laugh about that."
Borro Now is at Ely Place, Dublin 2. See www.borronow.ie
