Operating Capital Needed to Start a Pawn Shop Business

Pawn shops are unique businesses in that they operate as both a retail store and a lending institution. Clients bring in valuable items as collateral and receive a temporary cash loan. If the loan is not repaid as agreed, the shop keeps the item and offers it for sale. The operating capital needed to start a pawn shop business is often a significant amount, since business owners will need to fund both the retail portion of their shop as well as enough capital to cover loans and other financial transactions.

Bonds and Lending Capital

Since pawn shops are regulated in much the same ways as other financial lending institutions, you may be required to submit a bond to your local or state licensing agency to cover the items customers provide as collateral. Usually, the minimum bond amount is $5,000, but can be higher for shops that do a greater volume of business. Additionally, you will have to prove to the licensing agency that you have an adequate amount of lending capital to open -- meaning you must furnish documentation verifying your credit worthiness and existing financial assets. There is usually no set minimum amount of lending capital or assets your pawn shop business must have to open, and the licensing board reviews each situation on its own merits, but generally you need anywhere from $5,000 or more in lending capital at startup.

Licenses or Permits

Each state's Department of Financial Institutions sets its own fees for each type of business it licenses, but you can expect the licensing fee for most pawn shops to be between $1,000 and $2,000, at the time of publication. Note that this may not cover the expenses for background and credit checks, and your state may require you to pay for these separately. In addition to your pawn license, you may also need local business licenses and zoning or occupancy permits, which usually cost from $20 to $50 each.


As with most other businesses, location is a key consideration in opening a pawn shop. You need an area that will supply good traffic, yet is low risk for burglary or other crime. The amount you spend on your actual physical location depends entirely on your area and whether you choose to lease or purchase the building. However, you can reasonably expect to pay in the thousands each month for your rent or mortgage, so plan accordingly. Also remember to consider the cost of utilities, such as electricity, heating, water and trash, and factor those into your monthly rent/mortgage.


Although you can operate your pawn shop business using a paper ledger method, it is often easiest to keep electronic records. For that, you need a computer and printer, which can cost anywhere from $400 to $1,000 -- or more if you need more than one. If you want to research the value of unique items online, you'll also need a modem and Internet service. Ensure you have electronic security software and backup systems to protect customers' information, and be aware that may cost another couple of hundred dollars. You will also need a security system installed in your building to prevent theft. Cameras, alarms and other devices can cost a lot, so shop around for competitive prices.

Other Considerations

Pawn shops a well known as a quick means to borrow cash, but you must advertise and promote your shop to be successful, just as you would in any other business. Signs, commercials, flyers and newspaper ads will cost you, so you need to prepare an advertising strategy and factor this into your startup budget. Other expenses you may need to consider and budget for include hiring and training employees, obtaining and installing shop fixtures and becoming a member of professional associations like the Better Business Bureau or the National Pawnbrokers Association. The costs for these things will vary significantly based on your location and your unique business needs, but it is important to research costs ahead of time and save yourself a financial crisis later.