As the economic downturn bites, people are looking for extra cash and turning to the sign of the three balls. Steve Pratt reports on the first online pawn broker which is lending money on jewellery, luxury cars and even yachts.

THREE golden balls no longer hang outside the shop. Now they’re depicted on an advertising sign.

That’s not all that’s changed about pawnbrokers as the credit crunch bites and borrowers turn to the oldest form of lending – putting up valuables as equity in exchange for a quick injection of cash.

It worked for Christopher Columbus, whose voyage of discovery to the Americans was funded largely by pawning Queen Isabella of Spain’s jewels, and for the Renaissance Medici family.

The three balls image was taken from their coat of arms when the family split into two factions – one went into banking, the other into pawnbroking. Which I suppose makes Paul Aitken a modern-day Medici as the founder of the first online pawnbroker borro.com.

Most companies give loans against jewellery and diamonds. His company does that but also has been known to lend against expensive Swiss watches, fine art, luxury cars and even yachts.

He’ll tell you that it’s cheaper to swap your car for cash for a few months as the interest payments are cheaper than parking charges in central London.

Borro.com launched at the end of August and has “grown quite quickly”, he says. “Pawnbroking as an industry only really started to make a comeback in the Seventies and then there were only about 100 shops in the High Street.

“Now there are 950 or 1,000, so they’ve grown quite rapidly in that time. The reason existing pawnbrokers have not done online is because they have their hands full and being online brings a different set of challenges.

“Pawnbroking does have a stigma that puts people off but, when you take off the top layer and look beneath the surface, it’s the oldest form of lending – people release equity to resolve their short term cash issues.”

That bad image was fostered back in the 19th and early 20th Century when there were nearly as many pawnbrokers as public houses, lending money on everything from bed linen and cutlery to father’s Sunday best suit.

The Eighties credit boom led to an upsurge in the industry’s fortunes and now the economic squeeze is sending people to the pawnbrokers to top up their income.

This became apparent while he was researching the idea for an online pawnbroker, he says. “The credit crunch was starting to bite and we’d been on a spending spree, acquiring assets we don’t particularly need. I took the view that now was the time for people to use those assets to solve their short-term credit issues.

“Fifteen years ago swathes of what we call the middle class wouldn’t consider using a corner shop or newspaper to sell things but are happy to use eBay now. There’s a certain kudos to doing a deal on eBay.

“The other challenge for us is one of making people believe and trust you. It’s just something that will evolve over time. We spend quite a lot of time and effort in how we connect with clients and make it comfortable for them.

“It’s a new route for people to access pawnbroking and make it more convenient for people, who can do business by telephone or online.

We’re going to be around for the long haul.”

He reports that 75 per cent of Borro.com’s clients haven’t been to a pawnbrokers before.

And 65 per cent of their customers are women “because that’s who has control of the household expenditure and the type of assets that can be used”.

The majority of the online business is, in common with traditional pawnbrokers, in jewellery.

They also handle what he calls “quirky bespoke loans at the higher end”.

He reports a significant increase in the past two months in business owners, property developers and city financiers “plugging their credit gaps” by securing loans of £10,000-plus against expensive jewellery and watches, luxury cars including Ferraris and Lambourghinis, fine art and even yachts.

These are used to bridge financing to close deals already in progress, from providing capital to buy while assets remain relatively cheap to covering late customer payments.

“Loans run from everyday jewellery to bags of diamonds, gold bars, high-end art and luxury cars. If you get a 20-grand loan from us, it’s cheaper to have us take the car away, put it in storage and pay the interest on the loan than pay parking fees in central London,” he says.

But the majority of customers are taking loans of up to £600 to meet household expenditure, compared to the average High Street loan of £100.

Pawnbroking as a whole grew by 35 to 40 per cent last year, so he acknowledges that the more traditional lenders are very busy. He thinks there is room for everybody in the business.

Those others include Ramsdens Financial, founded in Middlesbrough in the Fifties and now the largest independent pawnbroker in the country with 35 branches, mainly in the North-East and Yorkshire.

How does he get on with the other pawnbrokers?

“Don’t know, don’t speak to them,”

says Aitken.

“The reality is that the pawnbroking industry has done a lot to change people’s perception of it. If you look at the press coverage in the past year, it’s been positive because it provides a very worthy service.”