How Much Does It Cost to Start a Pawn Shop?
- Nate Jones, CPCU, ARM, CLCS, AU
- 6 days ago
- 2 min read
Updated: 24 hours ago
Starting a pawn shop can be a profitable business, but understanding the startup costs is essential before you dive in. From licensing and permits to inventory, security systems, and insurance, the initial investment can vary widely depending on location and business size.
In this guide, we’ll break down the major expenses involved in opening a pawn shop and how to budget effectively.
Average Startup Cost for a Pawn Shop
Most pawn shops require $50,000 to $150,000 in startup capital. This range covers licensing, inventory, equipment, and operational setup. Here’s what you need to consider:
Key Cost Components
1. Licensing and Permits
Pawn shops are highly regulated. You’ll need:
State Pawn Broker License
Local Business License
Second-Hand Dealer Permit
Federal Firearms License (FFL) if you plan to sell firearms
Read more: SBA Guide for licensing requirements
Estimated Cost: $1,000–$5,000 depending on state and local requirements.
2. Inventory and Loan Capital
You’ll need cash to provide loans and purchase items for resale. Initial inventory often includes:
Jewelry
Electronics
Tools
Collectibles
Budget: $10,000–$50,000 for inventory and loan reserves.
3. Security Systems
Pawn shops handle valuable goods and cash, so security is critical:
Cameras and alarms
Safes and vaults
Access control systems
Estimated Cost: $5,000–$15,000 for a robust security setup.
4. Store Setup
Costs include:
Lease or purchase of retail space
Furniture and display cases
Point-of-sale and inventory software
Budget: $10,000–$30,000 depending on location and size.
5. Staffing
Employee salaries and training are ongoing expenses. Plan for:
Customer service staff
Appraisers
Compliance officers
Initial Payroll Reserve: $5,000–$15,000.
6. Insurance
Insurance is essential for protecting your investment. Coverage should include:
General Liability Insurance: $500–$1,200 annually
Commercial Property Insurance: $1,000–$3,000 annually
Commercial Auto Insurance: $900–$2,500 annually per vehicle
Workers’ Compensation: $0.75–$2.50 per $100 of payroll
Equipment Insurance: $300–$800 annually
Other Costs
Marketing and advertising: $1,000–$5,000
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Professional fees (legal and accounting): $1,000–$3,000
Compliance and recordkeeping systems: $500–$2,000
Final Thoughts
Starting a pawn shop requires careful financial planning. From licensing and inventory to security and insurance, costs can add up quickly. A well-prepared budget and the right insurance coverage will help you protect your investment and set your business up for success. Wexford Insurance can guide you through the insurance process so you can focus on growing your pawn shop.
Contact us today.
