How to Open a Pawn Business

February 14, 2020 - Pawn Resources

How do you start a pawn business and make sure it’s successful?

At PawnGuru, we interact with thousands of pawn shops, giving us unique insight into the industry. Many of our readers ask us how pawn shops actually get started, so we put together a basic guide. We suggest you consider the points mentioned below if you want to know how to start a pawn shop.

Develop a Business Plan

You’ll need considerable amount of investment to get your pawn shop off the ground because you need to purchase or lease property, get merchandise, and hire people. At minimum, aim to have a comfortable amount of cash to account for all operational costs, like the ones below. You’ll need money for:

• Licenses
• Insurance
• Software and hardware
• Display cases and storage
• Storefront, backroom, and warehouse
• A comprehensive security system
• And enough cash to provide loans to customers

You need to do some research regarding how much start-up capital you might actually need before you start planning how to open a pawn shop.


Pawn shops have to adhere to a certain set of rules that are in place to control potential issues that vary based on state legislation. You need to establish your shop a certain distance away from schools and other such institutions. You also need to deal with zoning approvals and permits and this varies from state to state. That’s why it’s a good idea to lease or purchase an old pawn shop rather than try to establish a new one. You should also ensure that your lease is flexible in case you don’t get approval from the state.


You can’t operate a pawn shop without a proper license and permits, so that should be your first concern after you get your finances in control and choose a location. You’ll need to establish your shop as a limited liability company and register it with the state because you can’t run your business without a license and permits. Some government establishments also provide kits that tell you how to start a pawn shop legally. You’ll need:

• Sales tax permit
• Federal tax identification
• Federal Firearms License from ATF if you want to sell guns and firearms


The state will demand several documents from you to establish your suitability, legal, and financial history. They will need:

• Personal affidavit
• Employment history
• Financial statements
• Personal questionnaire
• Background checks
• Finger prints

Knowledge and Skills

Unless you’ve been a part of the pawn industry before, you have a lot to learn. You need to understand the value of popular merchandise, know how to examine items for authenticity, and learn how to negotiate and be firm. You also need to know the common tricks and methods pawn shop owners use to determine the price of a particular product. One of the best ways to do this is to look at eBay auctions.

After this comes the fun part, you will have to collect items from garage sales, flea markets, craigslist, etc., to fill your inventory. You can contact us at PawnGuru if you want to know more. Just fill in this contact us form and we’ll reply as soon as possible.

If you have any questions comments or concerns, please send them to We’re eager to help!
David Stiebel
David Stiebel

David Stiebel is one of the cofounders of PawnGuru. David was educated at MIT, where he studied Math. He subsequently worked at Bain as a data scientist before starting PawnGuru in 2015. He started PawnGuru to build a better tool for pawn shops and consumers to connect.

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