Licensing Process
To apply for a license, submit supporting documentation to the Texas Office of Consumer Credit Commissioner, including proof of insurance, a copy of your Assumed Name Certificate, a criminal background check with fingerprints, financial statements, proof of lease or ownership of your business property, zoning verification and a statement summarizing your experience in the pawnshop industry.
Eligibility for a pawnshop license requires the applicant to have good moral character, meet net assets requirements, and show the pawnshop will operate lawfully and fairly under state regulations. The applicant or applicant’s owners and managers must demonstrate financial responsibility, experience, character, and general fitness.
How Pawnshops Operate
When you get a loan from a pawn shop, you give up an item of value for 30 days until you repay the loan with interest. The pawn shop keeps your item safely until you return.
To start a pawnshop in Texas, first choose your business structure – sole proprietorship, LLC, partnership or corporation. Next, select an available business name and register with the secretary of state. Finding a suitable location is also key, as pawnshops have strict distance requirements from schools. Leasing an old pawnshop can minimize zoning issues.
Pawnshops must obtain licenses and permits to operate legally, including a state pawnshop license. Income sources are interest on loans and profits from retail sales of unclaimed items. Many pawnshops target 15-25% profit margins.
Pawnshop Regulatory Authority
Who regulates pawn shops in Texas?
Pawn shops in Texas are licensed and regulated by the Commissioner of Consumer Credit. The Texas Pawn Code is available at Texas Constitution and Statutes search database under Title 4 > Subtitle C > Chapter 371 > Subchapter A.
Licensing and Regulatory Authority: Commissioner of Consumer Credit
Items Pawnshops Buy
What do pawn shops pay the most for?
Pawnshops almost always buy:
- Jewelry
- Gold
- Watches
- Gold coins and silver coins
- Precious metals
- Firearms
- Electronics
- Computers / laptops
- Smart phones
- Sports equipment, including bikes
- Tools and yard equipment
Profitability and Regulations
How profitable is owning a pawn shop?
Income sources for pawnshops include earning interest on loans and profits from retail sales. Startup costs range from $15,000 to $50,000 or more, depending on the shop size and initial inventory.
Federal rules and regulations applicable to pawnshops aim to prevent money laundering, restrict interest rates and fees charged to military personnel, and outline credit terms.