Pawnbrokers take fine wine so rich clients gain liquidity

NEW YORK -- Some U.S. pawnbrokers are taking liquid assets -- literally.

Fine wines are among the items they will accept as collateral for loans, along with jewels and fine art, as a practice common in Britain and France catches on across the Atlantic.

Liquidity issues, or a cash shortage, can be found on most rungs of the economic ladder, the pawnbrokers said.

"You'd be amazed by how many wealthy individuals have terrible credit ratings. And besides, if you go to a bank, it can take weeks or months to get a loan. When we make a loan, it's usually the same day," said Jordan Tabach-Bank, head of Beverly Loan Co.

In an office above a Bank of America Corp. branch in Beverly Hills, Calif., home to some of Hollywood's biggest stars, the pawnshop for the prosperous lends to hedge-fund managers, bankers, lawyers, doctors, and occasionally to Oscar winners.

"Most people have a vision of pawn shops as sad sites. But that's not the case here," Mr. Tabach-Bank said. "I have a lot of people who come in who have a business opportunity and they need an infusion of cash for business purposes."

USGoldBuyers.com, an online pawnbroker with an office in New York City's diamond district, will also accept fine wines as collateral, spokesman Jose Caba said. While the wealthy like their "expensive toys, unfortunately, sometimes they don't have the liquid assets so to speak, to keep up their toys. That's where we come in."

About 90 percent of the loans made have been repaid, Mr. Caba said.

Interest rates and length of the loans vary widely.

A British-based pawnbroker, borro.com, with an office in New York recently lent $120,000 in exchange for 128 bottles of Chateau d'Yquem. The golden Sauternes were worth an estimated $250,000.

Within the last three weeks, borro.com had taken a case of 1989 Chateau Petrus, valued at about $38,000, for a loan of $24,000, Chief Executive Paul Aitken said. His clientele, whose net worth ranges from $1 million to $10 million, use the loan "for liquidity -- no pun intended. They're mostly small business owners who basically are just waiting on payments and managing cash flows."

Three publicly traded U.S. pawnbroking firms operate in Canada, the United States, and Mexico.

None takes fine wines as collateral, "though it is an interesting business model," said Tom Welch, general counsel for EZCORP Inc., which has 670 storefronts.