pens like mont blanc There’s nothing seedy about the new pawn industry
‘You can’t use Andy Warhol as a doorstop!’
The two Warhol screenprints are heavily wrapped but Paul Aitken, the CEO of Borro, a very modern incarnation of one of the oldest professions in the world, is alarmed by how close they are to the meeting room doorway.
The meeting room itself has been filled for us with riches, objets d’art and golden trinkets retrieved from the company’s Chancery Lane vault: there’s a first edition Stratocaster guitar, 200,000 of watches and diamonds and enough desirable Swiss chronometers to reduce the England football team to a quivering wreck.
Right now business is very good.
According to the National Pawnbrokers’ Association, the 500 million a year market has grown at over ten per cent per year for the last five years, with 15 per cent growth in the last year alone.
While our high streets swell with downmarket brokers offering loans on Xboxes and work tools, it is firms at the upper end of the market that are experiencing the biggest expansion in business; making money available to middle class families, investors and business owners who have seen loans dry up in the credit crunch and turned to pawnbrokers to fund everything from school fees to company wage bills.
Launched in 2008, just before the collapse of Lehman Brothers, Borro prefers to be called a ‘high end asset lender’.
It’s based predominantly on the internet; valuations are handled in a modern central London office.
Once your item is valued, Borro is able to arrange loans from 1,000 to 1 million in a matter of hours (up to 70 per cent of your asset’s value).
The terms of the loan will include a fixed but meaty interest rate (two to six per cent per month), which commonly runs over a six to 12 month period.
Should you default on the loan payments the lender can legally recoup its losses by selling your goods, though any profit made from the sale above the initial valuation of the item must be returned to you by law.
Aitken says that Borro is filling a gap left by banks, which he claims have simply stopped lending.
Although 75 per cent of its loans are for amounts between 2,000 and 20,000, much of Borro’s business is conducted with affluent clientele made up of City traders, entrepreneurs and small to medium sized business owners needing between 50,000 and 250,000 to complete business deals.
‘People associate the types of lending we do with distress situations but that isn’t the case 62 per cent of our customers are small business owners using us to provide working capital.’
One such businessman is Malcolm Hills, from north London, who used his collection of Mont Blanc pens to help fund legal fees: ‘I had actually considered selling them, so I’d already got a quote from an auction house when I heard about asset backed lending.’
Hills explains that he approached Borro on a friend’s recommendation. Based on the collection’s combined value of 14,000, he was able to borrow 7,000.
‘I felt more comfortable borrowing because I did want to keep the pens.
‘I’ve just had to extend the loan, so I’m paying back the interest, but to me it’s still better than having to sell them,’ he adds.
In the month prior to our meeting, Borro made loans totalling more than 2.5 million, drawing capital from private investment funds.
Clients are also referred to them by private banks unwilling to offer loans on assets below a million pound value.
Its biggest loan ever was for 1 million, covered by a couple of pieces of art that Aitken estimates are worth nearer 5 million.
Left to right: DAMIEN HIRST: Valuation 6,000; Loan 3,000; BRONZE STATUE: Valuation 2,000; Loan 1,000; FENDER GUITAR: Valuation 14,000; Loan 7,000
The company lends mostly against gold, watches and jewellery, but in one instance loaned 58,360 on two 1kg gold bars, and in another 60,000 on a Porsche Cayenne Turbo.
Because the variety of items extends beyond the usual pawnbroker fare of watches and trinkets, they use a team of valuers from the leading auction houses, including Sotheby’s, Christie’s and Bonhams.