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Business Loans You Can Get with Bad Credit

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  • Borrowers with good credit can usually access bank loans with favorable terms and low interest rates.
  • Less creditworthy businesses might have to turn to alternative lenders that offer more expensive financing options.
  • Using financing to stabilize your business and repair damaged credit scores is possible but risky.

Every business needs funding, and many turn to loans. Unfortunately, not every business has the sterling credit required to receive a loan from a bank with favorable terms and low interest rates. If your business doesn’t qualify for a bank loan, where else can you turn?

There is an entire industry of alternative lenders that aim to fill the gaps where banks are unwilling or unable to lend. However, accepting money from alternative lenders requires business owners to be savvy, lest they dig themselves deeper into debt.

What do lenders look for when considering a business loan?

When many businesses require funding, their first stop is the bank or some other conventional lender, like a credit union. These financial institutions offer a variety of financial products, including term loans and SBA 7(a) loans.

What does it take to qualify for a loan from a conventional lender? Typically, these financial institutions look for several things, including:

  • Credit score: For a business, there are two types of credit scores that matter: your business credit report and your FICO credit score. 
    • A business credit score is tied to your Employer Identification Number (EIN), which can be registered with Equifax, Experian or Dun & Bradstreet. Each organization has its own method of calculating business credit scores; for example, Experian considers factors like credit utilization, size of the business, length of time in business, public records and the owner’s personal credit score to calculate a score ranging from one to 100. 
    • A FICO credit score is your personal credit score, which ranges from 300 to 850. The FICO credit score is tied to your Social Security number and is calculated by three credit reporting bureaus: Equifax, Experian and Transunion. A FICO credit score is calculated using several factors, including debt repayment history, outstanding debts, length of credit history and whether you have any new lines of credit open. 
  • Debt-to-income ratio: Your debt-to-income ratio is a percentage that expresses how significant your required debt service payments will be in comparison to the money you bring in. For example, if you owe $30 and your income is $100, your debt-to-income ratio is 30%. Generally, lenders will look for a debt-to-income ratio in the mid to low 30s, though sometimes businesses with a debt-to-income ratio up to 43% can be approved for a loan.
  • Cash reserves: At a bare minimum, lenders want to see businesses maintain several months’ worth of expenses in cash reserves. Depending on the lender you are working with, they might expect three months of cash reserves to be kept on hand, while others prefer six months or more. Cash reserves assure the lender that even if unexpected expenses arise or a slowdown in sales occurs, your business can still cover loan repayments.
  • Collateral: Lenders will also consider the assets your business holds as collateral to back the loan in the event you don’t have money available to make your payments. Common assets used as collateral include equipment or machinery, land and other real estate.

As part of your loan application, you will likely have to provide several months’ worth of bank statements so lenders can understand your business’s cash flow. However, few elements are as important to a conventional lender as a business’s credit score and the personal credit score of the owner.

 

Editor’s note: Looking for a small business loan? Fill out the questionnaire below to have our vendor partners contact you about your needs.

 

What is the credit spectrum?

Lenders look out upon the vast sea of potential borrowers and see a credit spectrum that ranges from very bad to very good. Depending on a business’s position in the credit spectrum, certain types of funding might be unavailable to them. Businesses with great credit can usually obtain long-term loans at low interest rates, but less creditworthy businesses might have to pursue more expensive and risky funding options.

“On the one hand of the credit spectrum is someone who can walk into a major bank and borrow money on the business’s credit, not a personal guarantee,” said James Cassel, co-founder and chairman of Cassel Salpeter & Co.

Those borrowers can expect low interest rates ranging from 2% to 5% on a term loan. Of course, Cassel added, that’s only true for “stellar businesses with great history.”

“On the other side of the rainbow are businesses that can’t get money from any kind of institutional lender,” Cassel said.

And just as there is a broad spectrum of credit scores for potential borrowers, there is a spectrum of financial products. Some, like bank loans or SBA 7(a) loans, are available to creditworthy borrowers, while businesses with decent credit might require a guaranteed loan.

What types of business loans can you get with bad credit?

What can businesses with bad credit do when they need funding? If their credit history isn’t good enough to obtain a loan from a conventional lender, businesses often turn to other types of financing, often provided by alternative lenders or private lenders. While the flexibility and speed with which these loans can be approved are useful to borrowers with bad credit, the terms can also be restrictive and the loans expensive.

“The further down you are in the credit funnel, the worse the rates are,” Cassel said. “With great credit, it could be 5%; with bad credit … it could be the equivalent of 40%.”

Some of the most common loans available to businesses with mediocre or bad credit scores include:

  • Short-term loans: Short-term loans include both term loans that are repaid in three years or less, as well as lines of credit repaid within one year. Businesses with good credit will also leverage short-term loans because of their low cost and easy approval process. For businesses with credit issues, short-term loans can be useful because lenders often prioritize cash flow over credit score. So long as you have enough revenue and reserves to support a short-term loan, a lender will likely approve your application.
  • Hard money loans: Hard money loans include several different types of loans that are backed by a collateral asset rather than a credit score. Most often, the assets used as collateral are real estate, such as a building or plot of land. A bridge loan, for example, is a type of hard money loan that is often used when redeveloping a property. The loan is secured by the value of the real estate upon completion of the project, allowing the lender to foreclose on the property if the borrower defaults on the loan.
  • Invoice financing: Factoring,” or invoice financing, isn’t truly a loan. Rather, a business owner essentially sells their accounts receivable to a factor at a reduced rate (typically ranging from 70% to 90% of the total value.) Once the outstanding invoices have been sold, a factor typically begins collecting the payments owed directly from your customers. Invoice factoring can be useful for seasonal businesses or when you need growth capital. However, using this option to cover operational expenses is a risky maneuver. 
  • Merchant cash advance: A merchant cash advance is also not technically a loan. Instead, it is a form of financing that is backed by credit card sales (or sometimes just revenue in general.) Based on your sales volume, a lender will offer a lump sum payment in exchange for a portion of every credit card sale until the loan (plus fees) is repaid. Merchant cash advances can be very expensive and are considered a financing option of last resort.

Before accepting any type of funding, do your homework. Research the lender thoroughly to ensure they are a reputable brand and not a predatory lender. Closely review any agreements before signing; have your attorney and accountant review them as well, if possible. Only accept money that you can realistically pay back in the specified time. Otherwise, financing could expedite the demise of a financially troubled business.

How to qualify for a short-term loan with bad credit

Short-term loans are a type of small business loan that closely resembles a conventional term loan in many ways. Short-term loans carry an interest rate and require repayment of both principal and interest within a certain period, just like a bank loan. However, because the term is less than a year, short-term lenders are more concerned with a business’s cash flow than its credit score.

“Banks ask for all types of collateral, and personal credit is very important to the bank,” said Michael Baynes, co-founder and CEO of Clarify Capital and a  business.com community member. “What’s important to us is cash flow [demonstrated] through six months of bank statements. If we feel [a business’s] bank balance can support our funding over the next four to 12 months, we’re comfortable lending to them regardless of personal credit score.”

Generally, Baynes said, alternative loans require a one-page application along with a minimum of three months of bank statements. That’s all an alternative lender needs to approve or deny a potential borrower’s loan application. But what exactly are alternative lenders looking for in a loan applicant?

“The most common reason we reject an application is due to a business being overleveraged,” Baynes said. “If they already have existing debt … and we feel additional payment would overleverage them, we would turn the business down.

“The other reason an application would be declined would be low revenue and low daily bank balances,” he added. “We need to see $10,000 to $15,000 per month in revenue or deposits. If they struggle with overdrafts or negative days in their bank account, we’re not confident they can make the payments.”

The approval process for these types of alternative loans tends to be much faster than conventional banks, which generally take weeks or months to approve or reject a loan application. If approved, funding for alternative loans can often be delivered within a few days at most.

To expedite approval, it’s important to maintain good financial documentation. According to Cassel, keeping detailed, accurate books is one of the most important things a business can do.

“Make sure your financial house is in order,” he said. “Every business needs to have monthly financials. They need to be available no later than 10 to 15 days after the end of month. Some businesses don’t get them until 90 days after the month. Then you’re 90 days further in the hole, and it’s too late to correct it.”

Good books not only help you avoid financial trouble, but they give lenders the insight they need to make a decision as to whether or not to extend financing to your business.

How can you begin repairing bad credit?

There are advantages to repairing a damaged credit score even if you do qualify for funding. According to Baynes, an improved credit score can avail your business to better terms and rates. While rebuilding credit can be a long and arduous process, you should do so if your financial situation has stabilized.

“Obviously, first and foremost is staying current on your personal credit payments,” Baynes said. “These are things like auto loans and credit cards. Maxed out credit cards drive down your credit score. Missing payments or just making minimum payments brings down your credit score tremendously.”

According to Cassel, business credit rehabilitation can be extremely difficult and requires a detailed plan. While maintaining your personal credit score, you also need to keep an eye on your business’s debt service.

“When businesses get into trouble, they should put together a 13-week cash flow [projection] of expected funds in and expected funds out,” he said. “This helps them manage cash and decide what to pay for.”

There are some ways a business can seek relief to help stabilize their financial situation as well, such as raising prices. Many small business owners are reluctant to raise prices, Cassel said, because they are afraid of losing customers. In many cases though, there is more room to hike rates than entrepreneurs realize.

Businesses can also ask suppliers to extend payment schedules. If you are a good customer who has remained current in the past, a vendor is likely to work with you; after all, they don’t want to lose you as a customer.

If you’ve partnered with a lender before, they might be willing to lend a bit more to your business if they see you are legitimately on the road to financial rehabilitation. This is known as an “airball,” Cassel said. If things become truly dire, a business can usually call in a restructuring firm to reorganize how the business operates.

“Sometimes it is a vicious cycle that is impossible to get out of,” Cassel added. “As things get worse, the cost of borrowing goes up, so you have to figure out how to stabilize the business. Once you stabilize, you can focus on repair.”

Unfortunately, when financial troubles become pervasive enough, there are times where business owners have to reckon with a hard truth many entrepreneurs find difficult to face. The best option, Cassel said, is sometimes to cut your losses and stop the bleeding.

“You’ve got to look at the viability of the business,” he said. “Business owners have to be honest with themselves about long-term viability.”

Ultimately, securing financing should be a way to get your business to a better place in the credit spectrum. That way, the next time you need funding, you can successfully pursue a financial product with better rates and more favorable terms. If financing doesn’t support that type of forward progress, then it could just be digging your business into a deeper hole. For struggling businesses, Cassel had this advice:

“Be honest, try to get a loan and, ultimately, get back to a better lender,” he said. “Some businesses never do, and owners start to feel like they’re working for the bank.”

Financing can be a great tool in an entrepreneur’s toolbox, but taken irresponsibly or out of desperation, expensive loans can be the death knell for a cash-strapped business. Always have a plan for any money you borrow and keep an open line of communication with your lenders. If you do, you could be well on the road to repairing your credit.

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Are There Mileage Limits on Rent to Own Cars?

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Rent to own cars, also called lease to own vehicles, don’t come with mileage restrictions. They can be a good option for bad credit borrowers who need a car fast. We cover how these agreements work, and how they’re different from other vehicle buying options.

Rent to Own Cars and Mileage Limits

Are There Mileage Limits on Rent to Own Cars?Traditional leased cars come with mileage limits, but rent to own vehicles don’t come with this restriction. Traditional leasing companies place mileage limits on their cars to preserve their value, typically so that they can be sold at a later date as pre-owned vehicles.

Many people think that leasing and rent to own cars are similar, but the truth is that they’re very different. Leasing involves making payments on a vehicle for around two to three years, and then returning it at the end of the lease. With rent to own cars, the main goal once you make all the payments is ownership.

Another large difference between leasing and rent to own vehicles is that leased cars are almost always brand-new vehicles. Rent to own cars are always used.

How Rent to Own Vehicles Work

To get into a rent to own vehicle, you need to find a dealership that offers in-house financing, also called buy here pay here (BHPH) used car lots. These dealers are also lenders, so they don’t rely on third-party lenders for financing. This also means that you usually get to skip the credit check.

Since there typically isn’t a credit pull, borrowers with poor credit may have a better chance of qualifying for a rent to own vehicle than a traditional auto loan or lease. The biggest factor that determines your eligibility for these agreements is your income. Some rent to own cars don’t require a down payment, but the payments are likely to be higher than an auto loan in the long run.

You also don’t have to worry about interest charges because rent to own agreements aren’t loans. You’re not borrowing an amount from a lender to pay for a vehicle – you’re making payments on the car to the dealership until you’ve paid what you owe.

Bad Credit Auto Loans vs. Rent to Own Cars

A big downside to rent to own vehicles is that there sometimes isn’t a chance for credit repair. If the dealer didn’t check your credit reports to determine your eligibility for the car, then they may not report your on-time payments. Anything that isn’t reported on your credit reports doesn’t impact your credit score, so it doesn’t help improve it.

Bad credit auto loans from subprime lenders, however, are always reported. These lenders do check your credit reports, but they consider more than that. Sometimes, credit reports can’t tell the whole story, so subprime lenders use other facets of your situation to determine your ability to repay a car loan. They examine your income and residence history, require a down payment, ask for personal references, and more.

Subprime auto loans are crafted for bad credit borrowers who want to get on the road to credit repair. While rent to own vehicles are a good short-term solution, it doesn’t usually solve the bigger issue: bad credit.

Repair the Root of the Problem With a Car Loan

When you’re struggling with poor credit, it’s tempting to go for a quick solution like a rent to own car. But if you want to repair your bad credit, consider subprime financing. These lenders are signed up with special finance dealerships, and we can help you find one in your local area.

Here at Auto Credit Express, we have a network of special finance dealers all over the country. Get matched to one near you by filling out our auto loan request form. There’s never an obligation, and we’ll get right to work!

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Pawn and loan stores aren’t doing great in the Covid-19 economy

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Perry Lewin has been in the pawn industry for 28 years, but he’s never quite seen a year like this one. Sales have skyrocketed at his store, Decatur Jewelry and Antiques, in central Illinois. Early on in the pandemic, people were scooping up TVs, guitars, gaming systems, laptops, whatever they could to stay occupied and educated at home.

“We couldn’t keep a bicycle in the stock to save our life,” Lewin said. Tools were flying off the shelves, as many households decided it was the “perfect time for a honey-do list.” He estimates his gun and ammunition sales are up by 500 percent. “You know what it was like back in March and April, scared as hell,” he said.

But that doesn’t mean the pawn business has been good in 2020. Even the Pawn Stars pawn stars are struggling. This, at its core, is a money business, not a stuff business. The bread and butter is in loans.

“What happened is our inventory started depleting rapidly, and that was the result of consumers not needing the services of a pawnshop,” Lewin said, explaining that his central loan operation has been way down for much of 2020. “They were not bringing items in to us either to sell or get a loan on, but they were mining everything from us.”

Pawnshops are a longtime fixture in the capitalist economy — one pawnbroker told me pawning is the second-oldest industry in the world. (He asked me if I knew what the oldest was; I assured him I did.) But they remain relatively misunderstood by much of the public, especially those who don’t use their services.

I spoke with pawnbrokers across the country about what the business has been like in this unprecedented year, and the picture that emerged was a microcosm of the economy that flies under the radar for many. Pawnshops, which were deemed essential during the pandemic, experienced panic-buying trends — guitars, guns, and gold — in real time. They also felt the impact the CARES Act had in getting money into people’s pockets and small businesses’ cash registers because it meant people didn’t need their loans.

“We have loans where customers who have been with us for a very long time — 10 years, 20 years even — are now redeeming stuff completely, which they’ve never done before,” said Eric Modell, president of Modell Financial, which owns a chain of jewelry stores and pawnshops in New York. “And they don’t say, ‘I have money from the government, here I am,’ but 20 years you’ve been paying interest.”

But now that much of that support has ended, loans are ticking up again. People are heading back to the pawnshop.

Guitars, gold, and guns

When the pandemic hit, a lot of people had similar ideas on how to pass the time at home and what they needed to buy to do it. They turned to Amazon, sure, but also pawnshops. Brokers say they couldn’t keep at-home entertainment items, musical instruments, laptops, and tablets on the shelves.

But people haven’t just been making their purchases to stay entertained and educated. They’re also buying to ease their panic.

Gun sales have been through the roof in 2020, and some of the pawnbrokers I spoke to said they’ve truly never seen such a sustained boom in gun and ammunition sales as they have now, especially among first-time buyers.

Troy Farr, who owns Texas Pawn & Jewelry outside of Austin, recalled going to one of his stores on a Saturday during the spring to see how things were going and discovered 42 guns had been sold, “which is a lot for a pawnshop.” Forty-one of them had been to new gun owners. “I don’t know why they wanted a gun for a virus that was spreading, but I didn’t ask them,” he said.

Supply chain problems in the pandemic have complicated what gun sellers would otherwise see as a pretty positive increase in firearms sales, especially when it comes to ammunition.

Rob Barnett worked at his family’s pawn operation in Huntsville, Alabama, before starting up his own shop in Fayetteville, Tennessee, and he has spent decades in the firearms business. He says he’s never seen supply in worse shape, and perceived hoarding has only made the situation worse. “Once people start perceiving there’s a shortage in the industry, people start to worry and start buying things they don’t want,” he said.

Guns aren’t the only thing people buy when they’re nervous — they’re also buying gold, the price of which has increased fairly steadily for much of the year.

“Even though the prices of gold had gone up on account of Covid, people still felt the stability of gold and were investing in gold,” said Jordan Tabach-Bank, the owner and CEO of the Loans Companies, a high-end pawn brand that operates in New York, California, and Chicago. When people think the world might be going to hell — and 2020 has given them plenty of reasons to think that — they buy gold.

“That is a trend that has happened since the beginning of time,” he said.

Loans are a much bigger part of the pawnshop business than you probably realize

Everybody knows the Hollywood pawnshop tropes — the creepy guy smoking behind the counter in a seedy corner store, taking a stolen television off someone’s hands, probably so they can go buy drugs. But that’s not the reality. For one thing, it’s easier to sell stolen items online because pawnshops are pretty heavily regulated. But in recent decades, the industry has also made an effort to remake its image.

Pawnshops are a collateral, non-recourse lender, which basically means loans are made not on someone’s credit history but on the value of an item — a TV, a ring, a hammer, whatever. The length of a loan and the interest rate on it often depends on the state.

For example, in New York, shops have to hold on to pawned items for four months and can’t charge more than 4 percent interest per month; in Texas, it’s one month at a 15 to 20 percent rate for most items. People can sell their items to pawnbrokers directly as well, but that’s generally not the business model and not what most people do.

Basically, you bring in your watch, get a loan on it, get a ticket for it, and come back to redeem your watch at some point in the future, paying off the loan plus interest. If you don’t come back to pay off your loan — or at least keep paying the interest payments (some people leave items with the pawnshop for years) — the pawnbroker gets to keep your watch and can sell it.

“Absolute worst-case scenario with us, you lose your ring, you lose your watch. We do not garnish your wages, we do not ding your credit, we don’t prevent you from owning a home,” Tabach-Bank said.

According to the National Pawnbrokers Association, there are about 10,000 pawn stores nationwide that employ about 35,000 people and serve about 30 million customers annually. The stores run the gamut from publicly traded pawn companies, such as EZCorp and FirstCash, to small mom-and-pop operations. Many pawn businesses are multigenerational not only in ownership but in customers.

Pawn loans are “like clockwork for a lot of our customers,” Modell said. “There are people who live and breathe with the pawnshop.”

The NPA estimates that pawn loans average $150 for 30 days and that about 85 percent of loans are redeemed. That can vary, depending on the item — people are likelier to retrieve a family heirloom than they are a buzzsaw.

Pawnshops generally serve people without credit or with bad credit, though there are exceptions. They get compared to payday lenders, which are often predatory and suck people into cycles of debt. Are the interest rates pawnshops charge great? No. But on the scale of options for people without a lot of options, they’re not the worst, either.

“Pawn loans are, of course, one of the more expensive forms of credit, but they are often less costly than a payday or car title loan and are far less likely to trap consumers in long cycles of debt,” said Charla Rios, a researcher at the Center for Responsible Lending. “You do have instances where people are bringing in items, and they’re on loan for quite some time.”

She also noted the industry hasn’t really been growing. “Prior to Covid-19, the revenues for pawn loans were kind of flat,” she said.

Financially underserved consumers spent an estimated $189 billion in fees and interest on financial products in America in 2018, $9.2 billion of which went to pawnshops. By comparison, $25.4 billion went to overdraft fees.

“It’s a mixed story,” said John Caskey, an economist at Swarthmore College and the author of Fringe Banking: Check-Cashing Outlets, Pawnshops, and the Poor. “It’s not a complicated transaction where people are being swindled.”

Covid-19 has not been great for pawnshops

Whenever Tabach-Bank, the high-end pawnbroker, runs into people lately, they ask him about what they assume must be a boom in business this year. “People are like, ‘Business must be amazing, you must be crushing.’ But for most pawnbrokers across the nation, it’s been quite the contrary,” he said.

According to Cyndee Harrison, director of marketing and public relations at the National Pawnbrokers Association, members have reported loans falling by as much as 40 percent this year, and some shops have been forced to close down altogether. “When you have a 40 percent decrease in the core area of your business, that’s going to pinch,” she said.

There’s no single answer for what’s going on, but most pawnbrokers and experts have a two-pronged explanation. One is that people are staying home and spending less — they’re not going out to restaurants and bars, they’re skipping vacation, etc. The other is that the CARES Act, the $2.2 trillion stimulus package signed into law in March, got money to a lot of people by way of stimulus checks, expanded unemployment benefits, and Paycheck Protection Program loans to small businesses. Eviction moratoriums and forbearance on mortgages and student loan payments are also factored in.

In other words, people and businesses had more money, and they didn’t need to resort to the pawnshop to pay rent, float their payrolls, or even just go to the bar on Friday night. And it’s not just that they weren’t taking out new loans; they were also able to pay off their existing loans and redeem their stuff.

Kerry Rainey, board president of the NPA and owner of Bayou Pawn and Jewelry in Louisiana, described the situation as “complete madness and a complete change of our business structure.”

“Our pawns went way down, our redemptions went way up,” he said. And with all the extra cash, pawners turned into buying customers. “Now we’re having a hard time restocking the store and getting our inventory back up because of all of the sales that we’ve done.”

It’s an experience shared across the industry, among high-end shops and more typical operations, in blue states and red states.

“The way it’s turned out has been quite different than what we had anticipated, not only for us, but from some of the discussions we’ve had in other pawn stores in Las Vegas,” said Andy Zimmerman, the general manager of Gold and Silver Pawn in Las Vegas, made famous by the television show Pawn Stars.

Zimmerman said in their case, it’s not just about the stimulus and savings; it’s also the decline in casino traffic, especially earlier on in the pandemic. In Las Vegas, it’s not uncommon for gamblers to pawn items for money to bet with.

“When we’re at normal times … especially when big events happen in town and people are well-to-do, they have expensive jewelry, and they’re not very lucky at the tables. Because we have a pretty decent-sized bandwidth to take in expensive items, during those times, the loans would typically pick up,” he said.

Many of the measures from the CARES Act have ended or are about to. The extra $600 in weekly federal unemployment ended in July, PPP loans have been used up, and rent and mortgage payments put off are coming due. Pawnbrokers say that’s started to show up in their business now, too, as customers old and new are again in need of their services.

The publicly traded pawn company FirstCash reported that loans fell by 60 percent in the month of April, and while they began to improve, pawn balances were still down 30 percent at the end of September from the prior year, meaning people are still pawning things less and able to pay off existing loans more. In its third-quarter earnings report, the company indicated it expects the rebound to accelerate.

“We are starting to see people who are in need of short-term cash,” Hyde said. “The big question, of course, is what happens next, and none of us has a crystal ball.”

The negative effects on lower-end financial services aren’t limited to the pawn industry. The payday loan industry has seen a steep decline in business, too.

Pawnshops are an outgrowth of capitalism. If people had more money, they wouldn’t need them.

When asked, most pawnshop owners acknowledged that they were in an awkward position: Many people have been better off financially, at least when government stimulus was flowing, and that’s been bad for business. But shop owners countered that business overall is generally better when the economy is doing better than it is when it’s doing poorly, an assertion that experts backed up.

While the impression of pawnshops is that they are only there for people in moments of desperation, that’s not always the case. People will also pawn an item to buy a concert ticket or get that last bit of money they need for a vacation. And in good times, they tend to feel more optimistic they can pay it off.

“A pawnshop tends to do best when the economy is good and rolling and people feel safe and secure with pawning their extra item — a laptop, jewelry, television, a watch — something like that so they can just get the temporary loan because they know they’ve got their next payroll check coming,” Barnett said. A one-time government loan doesn’t provide the same kind of future assurances.

For many people, the pawnshop is just a part of their financial lives, and some of their possessions are just a part of their budget. They build up relationships with brokers and will come in to get a loan time and time again.

Lewin, the Illinois pawnbroker, told me about a widow in her 70s who has been coming to him every month for years, getting a $200 or $300 loan on a nice piece of jewelry to tide her over before her next Social Security check comes in. When she comes to pick up her jewelry, they clean it for her, give her a cup of coffee, and catch up.

Yes, pawnshops charge high interest rates that more traditional financial institutions don’t. But they are also a lifeline for people who often don’t have access to more traditional financial institutions or just need to figure out a way to get by.

Wendy Woloson, a historian at Rutgers University and the author of In Hock: Pawning in America From Independence Through the Great Depression, noted that throughout history pawnshops have been vilified in an effort to downplay the broader flaws their existence exposes. “The exploitative practices that capitalism relies on would not have worked if it were not for the pawnbroker to help people get by week-to-week,” she said.

If people had more money in their pockets, if the capitalist system worked better, then they wouldn’t need pawnbrokers as much in the first place. 2020 has been a case study showing just that. But while more help is not on the way from the federal government, it’s still going to be there from the pawnshop.

“There would be a lot of people in a world of hurt if pawnshops didn’t exist,” Farr said.

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Third of Brits feel depressed following mortgage rejection

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Of those who have experienced rejection when applying for a new mortgage, a third claim they were left feeling depressed according to a survey by new specialist mortgage broker platform Haysto.

More than half (53%) felt marginalised, unfairly treated and with a sense of injustice as a result, whilst 21% said the process had left a long-term negative effect on their mental health.

Haysto has recently launched to make mortgages possible for those who may have previously been told they won’t be able to get one.

They specialise in bad credit, self-employed and complex mortgages.

Haysto’s research also showed that over a third of Brits (35%) feel they couldn’t get a good mortgage deal for themselves, wouldn’t want to go through the stress of applying or are unlikely to apply at all for fear of being rejected.

Furthermore, 90% incorrectly assumed taking a COVID-19 mortgage payment holiday could negatively affect their credit score, despite the Financial Conduct Authority (FCA) and lenders ensuring that credit reports won’t be affected.

More than 50% of mortgages for people who are self-employed or have bad credit aren’t available directly from lenders and are only accessible through specialist brokers.

Haysto is working to raise awareness among those in complex situations that they could still qualify for a mortgage, even if they have been previously rejected, and that the process needn’t be as daunting and negative as they may assume.

Over half of Haysto’s customers have been rejected for a mortgage elsewhere.

The company is also working to tackle the psychological impact of applying for and being rejected for a mortgage.

Because of this, they’ve pledged that for every mortgage they help complete for someone, they’ll donate a percentage of their profits to the mental health charity Mind, so they can continue to support people struggling with financial worries.

Paul Coss, co-founder of Haysto, said: “It’s disappointing that the entire mortgage process remains shrouded in misconceptions and confusion as this is having a significant and often unnecessary impact on mental health.

“Self-employment and poor credit histories are on the rise in the UK so a growing number of people applying for mortgages simply don’t fit the traditional eligibility mould.

“Many are rejected by traditional lenders and online platforms that can’t see past their situation, while others are put off from applying at all.

“Haysto doesn’t rely on automation.

“We believe strongly in: no more computer says “No”.

“Our platform provides the market’s most personalised mortgage experience by matching customers to specialist mortgage brokers based on their unique situation.

“We want to help everyone access their dream home.

“Even if they have been rejected before, there are specialist lenders and brokers specifically for self-employed and bad credit mortgages who can help.”




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