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Posted: May 01, 2012

Business as usual: Payrolls met with Rolexes and diamonds

Mike Taylor

Pawngo founder and CEO Todd Hills has gone online with what he calls the oldest form of borrowing – the pawn shop – and his biggest customers are small-business owners who need to make payroll, fund improvements or finish a job.

Launched in June last year, Centennial-based Pawngo.com is an online pawn shop that specializes in jewelry – luxury watches, diamond earrings, gold rings and the like.

To a large extent, it’s a sign of the times: cash-strapped business owners, maxed-out credit, tight lending standards. Hills, 48, who built the largest pawn business in Denver before selling the 30-store operation to publicly held EZ Corp. in 2000, saw a need and filled it.

Whereas the average loan at a brick-and-mortar pawn shop is about $150 with a monthly interest rate of 20 percent, Pawngo’s average loan is for $3,000 at a monthly rate of 3 percent to 6 percent. Hills says small-business owners account for about half of Pawngo’s online traffic and 75 percent of the money Pawngo loans.

"Their needs are typically $10,000 and up," he says. "Usually their business has been great in the past, and their credit’s been great. When they were knocking it out of the park, they were spending money on luxury assets. Now they’ve had some kind of cash-call on their business. So we line up real well."

Hills admits Pawngo’s loans aren’t cheap. A monthly interest rate of 3 percent comes to 36 percent annualized. A $15,000 loan at 3 percent monthly comes to $450 a month. But, he says, "$450 a month to make a payroll or keep a small business in business, that’s a pretty small price to pay."

To date, Pawngo has loaned about $6 million, including several individual loans of more than $100,000. Besides business owners, Hills says his customers are people dealing with "unexpected life events." A recent example is a woman who pawned eight or 10 pieces of jewelry for $3,500 to help pay for her daughter’s wedding. Another business case was a produce trucker in Boston whose three trucks had broken down. He needed $15,000 to get them back on the road.

"He gave me a couple diamond rings for the 15 grand," Hills says. "He got his trucks fixed and back on the road, and in 90 days those trucks made enough money for him to get his diamonds back."

The success of Pawgo isn’t merely a reflection of tough economic times. It’s also a recognition by Hills that jewelry is well suited to online commerce.

"We figured out through the years jewelry was the most profitable asset to deal with, and they were the best customers to deal with," he says. "It was the easiest asset to liquidate, the easiest asset to store, the easiest to keep track of."

The company got a national boost in late March when NBC profiled the company. Within the next 24 hours, the Pawngo.com website had 50,000 hits.

"That really blew us up," Hills says. "We did more business the next week than we typically do in an entire month."

Hills doesn’t talk so glowingly about an earlier surge in publicity. In fact, he doesn’t talk at all about it. After the Super Bowl in which New England wide receiver Wes Welker dropped a pass that likely cost the Patriots the game, Pawngo delivered 8,000 Butterfinger candy bars to Boston’s Copley Square. A sign bearing the Pawngo logo next to the Butterfinger pile said, "Thank you Wes Welker."

"You know, I think enough’s been said about the Butterfinger stunt," Hills says. "It’s done, it’s over with. Good stuff and bad stuff there."

For Hills, who grew up on a horse and cattle ranch in Brighton before his family sold it – "it’s called Buffalo Run golf course now," he says – the pawn business came naturally.

"I grew up in the livestock business," he says. "I’ve been buying and selling things since I was old enough to walk and talk."

When a second ranch his family owned went bankrupt, he was 21 with a ninth-grade education. So he took a job as a salesman at Mile High Pawn. Some 15 years later he owned it.

"What drew me to this industry is it’s climate-controlled," he says. "It’s warm in the winter and cool in the summer. And you can take a vacation. In the livestock business you never get a vacation because livestock never rests."

Mike Taylor is the managing editor of ColoradoBiz. He writes about small-business money issues and how startups are launched. Email him at mtaylor@cobizmag.com.

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