Pawnshop as a business: a detailed action plan
How to open a car pawnshop: where to get money for opening, a step-by-step process of introducing a business, calculating costs and profitability, risks.
► Cost of opening a car pawnshop: from 600,000 thousand rubles ► Payback period: 1.5-2 years
Today, the car pawnshop as a business, in principle, like the pawnshop itself, is a profitable project.
Since there are more and more of them, it follows that such an enterprise has clients.
The pawnshop business is developing especially rapidly during the crisis.
Car owners in difficult situations are ready to leave them on bail in order to get a loan in a short time, albeit at a not particularly favorable interest rate.
Opening a car pawnshop is much more expensive than a regular pawnshop, which accepts equipment, jewelry, etc.
First of all, due to the fact that one car takes up a lot of space, and if the pawnshop works successfully, there will be many of them.
Therefore, the main costs will be spent on equipment for the placement of cars and rent, and maybe the purchase of premises.
All that is required from the owner of this business is the ability to work with finance and experience with cars.
How to attract investors to open a car pawnshop?
Automobile pawnshops have been successfully operating in the lending market for more than a dozen years. In Moscow, for example, there are more than 500 of them. The type of collateral business, to which Russians are accustomed, has a number of modern directions that make it even more in demand and promising this year.
Nowadays, more and more entrepreneurs are interested in whether they should open a car pawnshop and how to do it. The reason for the popularity of this business is the huge number of potential customers. Typically, they are middle-class car enthusiasts who are confident in their earnings in the long term, but are experiencing financial difficulties at a particular point in time.
There are many reasons for a driver to contact a car pawnshop - there is an opportunity to profitably purchase real estate, you need a budget to open your own business or the need for an urgent trip abroad. One thing unites pawnshop clients - they urgently need money. That is why motorists are ready to overpay for lending services, leaving one of the most valuable things as a pledge - their car. This business originated in America, and now it is popular and in demand all over the world. Widespread in Europe and Asia began at the end of the last century. Nowadays, the market of car pawnshops in Russia is actively developing, which makes the niche a promising and profitable option for entrepreneurs.
Should I open a pawnshop
The car pawnshop is a rather demanding type of business. To open a mortgage company, it is important not only to have qualifications in this or related fields, but also to find decent and disciplined employees on whom you can rely, as well as take a responsible approach to working with documents and have deep knowledge in the field of lending and the automotive industry. Thus, an automobile pawnshop is a business that is not suitable for every entrepreneur. In this matter, you need to be very responsible, as we are working with large sums of money and vehicles.
It is desirable that the entrepreneur opening the pawnshop has the skills and certification of a car appraiser and has practical experience in the field. In addition, a businessman needs to be able to work with loans and collateral, performing responsible actions. Even an entrepreneur who is going to play only the role of an investor in his own business should be able to control the business, since this niche is associated with certain risks and difficulties. A businessman needs to carry out independent checks on collateral and monitor how employees perform their duties.
How to open a car pawnshop - step by step instructions
The main requirement for an entrepreneur who is going to accept cars on bail is experience in working with finance (including lending) and car appraisal. In addition, it is desirable for a businessman to confidently navigate problem situations, thus winning controversial deals and avoiding losing ones.
An entrepreneur who is going to provide the services of a car pawnshop must be registered as a legal entity - an individual entrepreneur or organization. It should be noted that the name of the company must contain the word "pawnshop". This requirement is established at the legislative level.
Regarding the form of registration, it is recommended to register as a limited liability company. The experience of many entrepreneurs shows that an LLC for an automobile pawnshop is the best option for official registration. This form implies registration with a minimum package of documents, and, consequently, a minimum cost of money and time. At the same time, LLC management is as simple as possible.
At the stage of registration of a pawnshop, an entrepreneur is recommended to hire an economist-appraiser to the team, who will help with the paperwork. The Law of the Russian Federation "On Pawnshops" has some subtleties during registration and an abundance of routine work with papers. An experienced economist will greatly simplify the work of a businessman by taking on the responsibilities of drafting documents. In addition, he can help with the creation of job descriptions, daily routines and staffing tables for an automotive pawnshop.
In addition to standard types of lending, the pawnshop business has become widespread. Many entrepreneurs are wondering how to open their own car pawnshop. This option for receiving money is in great demand among Russians. The amount depends entirely on the value of the car, which is leased on the security of a loan On average, the amount paid varies from $ 5,000 to $ 70,000.
Step-by-step plan for opening a pawnshop
Experience is an advantage when starting a lending business. This will allow you to avoid problems and mistakes in the future when building your company. Step-by-step instructions on how to open a pawnshop are quite simple:
- First you need to create a quality pawnshop business plan. Calculate how much money will be required to open a business. It will help not only to obtain funds for its implementation, but also to attract potential investors.
- After a name has been invented, which necessarily contains the word "pawnshop" in its construction, you should proceed to registering a legal entity. It is optimal to choose an LLC organization, although the legislation does not prohibit the use of JSC or CJSC. When registering a limited liability company, it is required to collect a minimum package of documents.
- Find a parking place for cars that customers will leave on bail.
- Organize the work of your own service station.
- Choose a location for the office and equip it.
- Create internal documentation (contracts of employment, articles of association, orders and other documents)
- Hire staff.
- Organize an advertisement for a pawnshop.
- Hire security to secure the car park and office.
By following all the above steps, the implementation of the pawnshop business becomes achievable.
Documents to open a legal entity
To start a car pawnshop, you will first need to collect a package of documents for registration. The following must be submitted to the tax authority:
- application for registration of a car pawnshop;
- constituent documents or notarized copies of documents;
- agreement on the creation of a legal entity. person;
- receipt for payment of state duty.
The application is required to indicate OKVED codes. The car pawnshop can engage in lending, information, property storage and consulting. For this activity, codes are suitable: 62. 2., 67. 3., 74. 4. The optimal taxation system is general.
What internal documents need to be created
To open a pawnshop, you will need to additionally prepare internal documents, such as:
- Job descriptions.
- Employment contracts.
- Internal regulations.
- Lending documents.
Other documents required for full-fledged work can be added to this list.
Before opening a pawnshop business, you should carefully study this area of activity, because it differs in many ways from traditional entrepreneurship. The main difference is that its development in a number of cases conflicts with the main trends in economic development. For example, if crisis phenomena in the economy, as a rule, negatively affect business, then the pawnshop at this time demonstrates the highest profitability. Our car pawnshop business plan will tell aspiring entrepreneurs what steps need to be taken to create a successful lending institution and what are the legal and technical nuances of this company.
In Russia, the car pawnshop business began to actively develop in the early 90s of the last century, when the flow of used cars from abroad poured into the country. Later, when the economy began to emerge from the post-perestroika chaos and began to grow, many pawnshops began to close, although the percentage of car pawnshops closing was much lower. The reason for this discrepancy is that the car is the most demanded property for collateral.
Until about 2021-2021, Russian car pawnshops brought substantial profits to their owners, but then banks became serious competition for them. Auto loans were provided to the population on much more favorable terms than the car pawnshops could afford, which in some cases moved into the shadow economy.
2021 brought a serious test for them, when the national currency fell, and, consequently, a significant rise in the cost of all types of lending.
As of today, the auto business in the country has begun to grow. At the same time, given a rather difficult situation in the economy, pawnshops make up no more than 1.5-2% of the total number of such establishments. The largest number of pawnshops prefer to work with precious metals.
Assessing this situation, it should be recognized that such a direction in business is quite promising. Its advantage is also supported by the fact that, against the background of restrictions on bank lending, the demand for loans has grown significantly, many people consider the pawnshop as an attractive option for obtaining the required amount of money. Secured lending can be in demand not only by individuals, enterprises and organizations of medium and small businesses often turn to it.
The popularity of auto pawnshops is also explained by the fact that they provide an opportunity to use one of the fastest ways to solve financial problems without significant bureaucratic delays and on acceptable terms.
As practice shows, the car pawnshop market in Russia is rather closed. Representatives of this business do not consider it necessary to advertise their achievements and successes, modestly limiting themselves to brief comments that at the moment they do not lack clients. These comments are confirmed by statistics from the Federal Tax Service of Russia, according to which in 2021 the profit of car pawnshops increased by one and a half times compared to the previous year. According to experts, in 2021-2021, the total revenue of pawnshops in the country can grow 2 or more times. This forecast is based on the fact that in this market segment, as a rule, large sums of money are involved.
Opening a car pawnshop in our country is not a particularly difficult task, however, this type of activity is strictly regulated by the state, namely by Federal Law No. 249 "On Pawnshops" dated 02. 1. 007. Therefore, an entrepreneur, thinking about creating such a pawnshop, first of all, it is necessary to carefully study the current legislation in this area, draw up a detailed business plan for the car pawnshop with calculations and act in strict accordance with its provisions.
Economic feasibility and stages of project implementation
The creation of a car pawnshop, like any other business enterprise, has its advantages and disadvantages. As already emphasized above, its opening is a promising direction of economic activity, especially if it is capable of rapid diversification in the event of a sharp change in macroeconomic indicators in the country's economy.
Automobile pawnshops have occupied a special place in the lending market for many years. Such organizations practice modern directions and formats of activity, thanks to which the services of car pawnshops are popular and in demand among the population. The pawnshop business plan is presented in the format of a step-by-step guide on organizing and registering business activities, choosing a suitable office space and employing staff. In addition, the business plan of the project under consideration contains financial analytics of the revenue and expenditure indicators of the firm's budget.
Pawnshop as a business: the purpose and relevance of the project
The purpose of this business project is to organize a highly profitable automobile pawnshop. The relevance of this type of entrepreneurial activity is due to a combination of several factors. First of all, despite the exacting nature of this type of business, car pawnshops are widespread and, with a competent approach, can become a source of profit for a novice entrepreneur. In addition, the services of car pawnshops are in sufficient demand in the cities and regions of the country, due to which the flow of the potential target audience of the business project is huge.
Car owners turn to car pawnshops for a variety of reasons: the need to receive funds to open a small business, purchase real estate, travel abroad, and so on. The flow of the target audience of a business project is united by one goal - the need for funds. To achieve this goal, car owners are ready to pay interest on the received loan funds, as well as leave their own car as a pledge for fulfilling their obligations under the loan agreement.
At present, car pawnshops are quite widespread in our country, which makes the high level of competition in certain cities and regions a deterrent factor for a novice entrepreneur. At the same time, subject to the correct choice of the region for carrying out entrepreneurial activities and a competent approach to the practical implementation of the considered business plan, an automobile pawnshop is a promising line of business in the field of lending.
An automobile pawnshop, in addition to receiving income from the provision of lending services secured by a vehicle, can receive profit from a paid parking lot, as well as from issuing a power of attorney to drive a vehicle at the expense of the client.
What kind of cars are available for customers?
When determining the profitability of accepting a specific vehicle of the client as a security obligation, the technical condition of the vehicle and its market attractiveness should be taken into account. The combination of these factors determines the amount that a pawnshop client can count on. As a rule, at the expense of a car in excellent condition, a client can count on a loan in the amount of up to 90% of the vehicle's market value.
The interest rate for using a loan, according to statistical information, is about 5% or more when it comes to a loan term of more than one month. Automobile pawnshops are not limited to accepting only cars and motorcycles, they also accept special equipment, trucks and heavy vehicles.
How to determine the value of a vehicle?
Every car pawnshop must have a full-time qualified appraiser who will directly determine the final market value of the pledged vehicle. To determine the exact cost of a car, you should study the offers of the secondary market, finding out the average price for which it would be possible to purchase this car in a used form, and also identify the technical condition of the vehicle in question, thus adjusting the final cost of the collateralized car.