As traditional banks tighten their lending criteria, small business owners in the UK are increasingly turning to pawnbrokers to secure the funds they need. H&T, the largest pawnbroker in the country, has observed a significant rise in entrepreneurs pledging personal jewellery and watches as collateral for loans.
Chris Gillespie, CEO of H&T, noted that many small business owners, including shopkeepers and builders, are finding it difficult to obtain loans from banks. Consequently, they are turning to alternative financing options, with pawnbroking becoming a popular choice. ‘We’ve seen a noticeable increase in shopkeepers and builders using our services due to the lack of funding from other sources,’ Gillespie stated.
These loans are critical for covering essential business expenses such as purchasing stock, buying materials, or paying VAT bills and wages. Gillespie highlighted that a substantial portion of H&T’s customers come from ethnic minorities, particularly the Asian community and Eastern Europeans, who are more familiar with pawnbroking as a mainstream financial practice.
The average item pledged at H&T is valued around £200, with loans typically being less than that amount. However, there has been an increase in larger loans, with approximately 18% of H&T’s loan book now consisting of loans of £5,000 or more. Entrepreneurs are increasingly pledging high-value items such as Rolex watches and expensive jewellery to secure these larger sums.
Gillespie explained that banks are more reluctant to lend than they used to be, often requiring personal guarantees or charges on property, and making overdrafts harder to obtain. This shift follows years of tighter lending criteria from banks favouring more straightforward business loans over riskier, unsecured lending. When unsecured loans are available, they usually come with stringent conditions that make business owners personally liable for their debts.
The reduction in alternative lending options has further contributed to the rise in pawnbroking. Regulatory crackdowns by the Financial Conduct Authority have led to the closure of several doorstep lenders and controversial payday lenders, pushing more customers towards pawnbrokers like H&T.
H&T’s pledge book increased to £105 million for the six months ending in June, up from £101 million in December. The company’s income grew by 11% year-on-year to £55.8 million, with pre-tax profits up by 12.5% to £9.9 million. Jewellery and watch sales also saw a significant boost, rising by 27% to £29.3 million compared to the same period last year.
Founded 125 years ago, H&T continues to adapt to changing market demands. In response to growing weekend shopping habits, the company is piloting Sunday trading hours in 10% of its stores to meet increased demand.
As traditional financial avenues become more restrictive, pawnbroking is emerging as a lifeline for entrepreneurs in need of quick, accessible funding, enabling them to maintain and grow their businesses in a challenging economic environment.