Pawn shops specialize in offering short-term loans to customers in exchange for securing their property as collateral. Some pawn shops also purchase merchandise outright for resale purposes. If you're interested in opening a pawn shop, you need to be aware of the regulations for doing so in your state. In Ohio, pawn shops are regulated under Chapter 4727 of the state revised code and Chapter 1301:8-5 of the state administrative code.
Things You'll Need
- Pawnbrokers license
- Business license
- Start-up capital
- Start-up inventory
- Business location
Choose a location. You may choose to rent a space or purchase a commercial building. When choosing your location, consider the type of traffic the area receives and whether there are any competing businesses nearby. You will also need to check local zoning laws to ensure that your location is suitable for opening a pawn shop.
Purchase pawnbroker's insurance. You will need to get a policy to cover your inventory, your building site, your employees and yourself for personal liability. Typically, your policy will cover your property for theft, loss or damage due to fire, wind or lightning. Depending on where you live, you may be able to secure coverage for hurricane, wind or flood damage. You will also want to insure the building structure, including its internal and external fixtures.
Apply for a business license. You can obtain a business license application through the Ohio Secretary of State's office. The fee for a license will vary depending on whether you plan to do business as a sole proprietorship, a partnership, a limited liability company or a corporation. You will also need to apply for a state and federal tax ID number.
Obtain an Ohio pawnbroker's license. Application materials are available through the state Department of Commerce. As of 2011, the fee for a pawnbroker license in Ohio ranges from $500 to $800. As part of the licensing process, state law requires you to complete 12 hours of continuing education in a program approved by the state superintendent of financial institutions. To complete the application, you will need to provide information related to your criminal history, your previous experience operating a pawn shop and your prior employment; and a financial statement of assets and liabilities. State law requires a separate precious metals dealer's license if you plan to purchase items containing gold, silver or other precious metals. If you plan to sell firearms you will need to apply for a Federal Firearms License.
Build your resale inventory. You will want to have merchandise on hand available for purchase when you open. You can find items by attending yard sales, auctions and estate sales, or by visiting online auction sites. When purchasing items, consider their potential resale value to ensure you're creating the largest profit margin.
Market your business. You can advertise your pawn shop through television and radio ads, through print ads in your local newspaper, in the local phone book and online. Consider distributing fliers locally or asking neighboring businesses to display your business cards.