Paul Aitken, founder and CEO of Borro, doesn't like to refer to his company as a pawnshop.
"We're more similar to a private bank than a pawnbroker," he says in response to the "p" word.
Still, the business model is akin to that of a pawnshop: People who need quick cash come to Borro with valuables and put them up as collateral for a loan. When they're ready to pay back the loan, they get their items back.
But you won't see anyone bringing in their old guitar from college so they can borrow a hundred bucks to get through to their next paycheck. Instead, Borro offers loans that range from $1,000 to $1 million, and its clients are more likely to pawn a piece of fine art or a classic car and walk out with a five- or even six-figure loan.
Yes, the rich have cash-flow issues too.
"[Our clients] are high risk-takers -- they're self-employed or entrepreneurs, so their incomes are fairly erratic," says Aitken. "They're people who often have opportunities that need to be jumped upon quickly."
A typical Borro client, then, might be a serial entrepreneur who needs quick seed money for his next startup and decides he'd rather pawn a painting than try to sell assets or secure venture capital funding. One testimonial comes from celebrity tailor Michele Savoia, who used a classic motorcycle as collateral for a $5,000 business loan.
A full-time staff of appraisers evaluates Items, and clients can rest assured that their prized possessions will be taken care of: The company contracts with specialized facilities to store cars, wine and fine art, and will even polish jewelry and watches in its care.
Borro's success -- it has made loans totaling $75 million in the four years it has been in operation -- shouldn't come as any great surprise. The economic downturn has squeezed individuals and families who might not otherwise consider pawning, and banks aren't as liberal with their lending as they used to be. Meanwhile, the popularity of the History Channel's Pawn Stars has helped the practice enter the mainstream.
Taking advantage of this new normal have been online pawnbrokers like Pawngo, which serves up loans averaging $2,000 to middle-class clientele.
But if Pawngo is the destination of choice for the average family willing to hand over a modest jewelry collection or a nice watch to get a few thousand dollars, Borro is very much the choice of high rollers and upper-middle-class families. Here are a few of the items that Borro clients have put up for collateral, along with the loan amount:
Maserati Gran Turismo: $15,000
1 KG bar of gold bullion: $30,000
Case of 1989 Chateau Petrus wine: $23,000
14-ct diamond ring: $75,000
Custom 1958 Harley motorcycle: $5,000
Borro isn't the only pawnbroker targeting high earners: New York's Provident Loan Society offers loans up to $100,000, and Beverly Loan Company in Beverly Hills, Calif., bills itself as an "upscale collateral lender."
But even high rollers should be aware that the interest rate they'll pay on the loan might be tough to swallow. Borro offers interest rates of 2.99 percent to 3.99 percent per month, with a typical loan period of six months. In addition, fees to cover appraisal and other logistics range from 5 percent to 7 percent.
By way of comparison, credit card expert Beverly Harzog notes that that the average credit card carries an interest rate around 2 percent per month on a cash advance, and a transaction fee of about 3 percent to 5 percent.
That said, your credit limit might make it tough to swing a five-figure loan. If you've got good credit, another alternative is a personal loan from a bank, which Harzog points out has a much better rate.
Still, Aitken says, Borro's clients like the speed and simplicity they gain by skipping the bank.
"There's complexity in dealing with the bank, and a big time lag," he says, noting that the appraisal process is completed within a day.
Whether that speed and simplicity is worth the rate is up to you. But we suppose if you're rich enough to have a house full of expensive art, fine wine and classic cars, you might not care if you're paying a little bit more in interest.
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.
Ways to Get Rich Quicker
Don't Call It a Pawnshop: Where the Rich Go for Quick Cash
Risk level: High
What do success stories like Henry Ford, Steve Jobs and Mark Zuckerberg have in common? They all made their mark (and their millions) by coming up with a better idea and running with it. Starting a business is a proven path to wealth, and the best way to get there is to start small and scale up -- which usually means being bought out by a larger company, selling franchises or licensing your product.
An ambitious goal is critical if you want to expand your business, says Barbara Findlay Schenck, a small-business strategist and author of Selling Your Business for Dummies.
Before you apply for loans or sign up investors, polish your business plan. And don't overlook sources of free help. For example, you could tap your alma mater's alumni network for potential mentors. You can also get advice from more than 13,000 small-business volunteers through Score, a nonprofit organization supported by the Small Business Administration. (For more, see Six Steps to Starting Your Own Business.)
Risk level: Medium
Creating a product and licensing it or selling it through retailers is another route to making money from your good idea.
One of the biggest mistakes that aspiring inventors make is to create a product before they've determined whether there's a demand for it, says Sidnee Peck, who teaches classes in entrepreneurship at Arizona State University's W.P. Carey School of Business. She encourages her students to talk to potential customers in person before they develop their products.
Nancy Tedeschi came up with the idea for SnapIt, an eyeglass-repair device, after her mother used an earring to jerry rig her broken glasses. Convinced that she could improve on the tiny tools contained in most eyeglass-repair kits, Tedeschi invented a small screw with a snap-off extension. Tedeschi got the attention of Walmart (WMT), the nation's largest retailer, by entering its "Get on the Shelf" contest, an "American Idol"-like competition for aspiring entrepreneurs. She was one of two runners-up, and her product is now available on Walmart.com.
Online surveys and social media provide an easy way to reach a lot of people, Peck says, "but you don't get to see people's eyes light up." Tedeschi also attended housewares and hardware trade shows, where she introduced her product to representatives of other big retailers. Those contacts helped her get SnapIt on the shelves at Walgreens (WAG) and Ace Hardware.
Risk level: High
You can make a lot of money fixing up run-down houses and selling them for a quick profit, but you need cash to venture into this business. It's tough to get a mortgage for a property you plan to flip, but a home-equity line of credit against your primary home is a good source of funds for first-time flippers. Short-term bridge loans from private lenders, known as hard-money loans, are a higher-risk way to get the cash -- and charge higher interest rates.
Look for ugly ducklings in upscale neighborhoods where the market has picked up. Before buying a property, research recent sale prices for nearby homes to get an idea of what you can make, and find out how long the homes were on the market. Successful flippers usually sell their properties in 30 to 60 days, says Letitia Patterson, a real estate agent who has invested in properties in the Detroit area.
Don't forget to factor in the expenses you'll incur while you're holding the property, along with closing costs. Justin Pierce, a real estate investor who flips properties in the Washington, D.C., suburbs, says he starts by estimating the sale price of a fixed-up home. Once he comes up with that number, he subtracts buying and selling costs (typically 10% to 15%), a profit margin of 15% to 20%, and the cost of repairs. With those numbers in hand, he can determine how much he will offer.
Risk level: Medium
The average interest rate for a 30-year, fixed-rate mortgage on a rental property is only about 4%, according to mortgage Web site LendingTree. That means your monthly rental income should cover the mortgage, which wasn't possible when rates were 7% or higher, says Michael Corbett, an adviser to the real estate Web site Trulia and author of Before You Buy! Plus, the National Association of Realtors projects that average apartment rents will increase 4.6% this year, following a 4.1% increase in 2012.
Once you've purchased your first property, you can use the equity to buy additional properties, typically through a cash-out refinancing, says Doug Lebda, chief executive officer of LendingTree. Most lenders won't let you take out more than 80% of the equity you have in the property.
Fayz Khan, a former auto engineer, ventured into the rental market in 2008 because he believed he could earn better returns in real estate than he could get from the stock market (see "What It Takes to Be a Landlord,"). He now owns eight rental properties in the Baltimore area, and the return on his investment has far exceeded his initial expectations. Khan and his business partners are exploring opportunities in North Dakota, where the oil boom has led to an acute housing shortage.
Risk level: Low
You don't need talent or money to cash in on YouTube. In fact, all you need is a camera, something unique to share and plenty of luck. "A lot of people make over six figures a year on YouTube," says Ross Ching, a commercial and music video director.
A good one-off viral video is under three minutes and it gets you hooked within the first ten seconds. But it's tough to be a one-hit wonder. A more reasonable goal for amateur filmmakers is to score viral fame with a YouTube channel. That means making a series of videos, each of which can run a little longer than three minutes. Try highlighting a specific skill or theme -- say, cooking or standup comedy. Your videos will drive traffic to one another while you perfect your craft and earn "subscribers."
Reach out to media outlets and bloggers with a link to your video. Don't expect your audience to find your video without some direction. A link-back on a popular site can skyrocket views.
You can earn cash with YouTube advertisements, which can run about $2 per 1,000 views. But the real money is in endorsements and product sales. Industry experts estimate that Korean pop star Psy earned about $8 million in 2012 from his addictive YouTube music video "Gangnam Style." As his video accumulates views, his single racks up iTunes downloads and he picks up lucrative contracts, such as his pistachio-promoting Super Bowl commercial.
Risk level: High
If you can withstand 12-hour workdays on an oil rig in the North Sea or maintain your composure during military coups, you may be rewarded with free housing, a six-figure salary and the chance to see the world.
According to Rigzone, an oil and gas industry data provider, entry-level workers on a rig earn more than $68,000, on average; the pay ratchets up dramatically as you gain experience, which is easy to do in an industry that believes heavily in on-the-job training, says Rigzone president Paul Caplan. Drilling positions are most lucrative, with an average salary of $126,471.
If physical labor isn't your thing, you could get a gig with the State Department. The harsher the environment, the better the incentives: Foreign Service jobs add up to 70% of base salary for certain field positions in Iraq and Afghanistan.
A bonus: Hardship posts in a remote locale afford few opportunities to spend -- so there's not much to do with your money but watch it grow.