As traditional banks tighten lending standards, a growing number of UK entrepreneurs are turning to pawnshops for vital funding.
H&T, Britain’s largest mortgage lender, has reported a rise in the number of small business owners, including shopkeepers and builders, pledging personal jewellery and watches for loans.
Chris Gillespie, chief executive of H&T, which operates 282 stores across the UK, said many small business owners were finding it increasingly difficult to secure loans from traditional banks. This had prompted them to look for alternative financing options, with mortgages emerging as a popular option. “We’ve seen a significant increase in shopkeepers and builders using our services due to a lack of funding from other sources,” Gillespie said.
These loans are often used to cover basic business expenses such as buying stock, purchasing materials or even paying VAT and wage bills. Gillespie noted that a large proportion of H&T’s customers are from ethnic minorities, particularly Asian and Eastern European communities, who are more familiar with mortgages as a mainstream financial practice.
The average value of an item pledged to H&T is around £200, and loans are usually less than this amount. However, there has been a marked increase in larger loans, with around 18% of H&T’s loan book now made up of loans of £5,000 or more. Entrepreneurs are increasingly pledging high-value items such as Rolex watches and expensive jewellery to secure these larger sums.
“Banks are more reluctant to lend than they were in the past,” Gillespie explained. “They won’t lend you money for your watch, and they often ask for personal guarantees or a lien on your home. It’s also harder to get overdrafts these days.”
The shift comes after years of tightening lending standards by banks, which have moved away from riskier unsecured lending in favor of simpler business loans. When unsecured loans are available, they often come with strict terms that make business owners personally liable for their debts.
The decline in alternative lending options has also contributed to the surge in mortgage activity. Tough regulatory action by the Financial Conduct Authority has shut down several controversial direct lenders and fast-track lenders, pushing more customers to mortgage firms like H&T.
H&T’s pledges rose to £105m in the six months to June, up from £101m in December. The company’s income rose 11% year-on-year to £55.8m, with pre-tax profits up 12.5% to £9.9m. Jewellery and watches sales also saw a big boost, rising 27% to £29.3m compared with the same period last year.
Founded 125 years ago, H&T continues to adapt to changing market demands. In response to growing weekend shopping habits, the company is trialling Sunday opening hours in 10% of its stores to meet the increased demand.
With traditional financial methods becoming increasingly restricted, mortgages have become a lifeline for entrepreneurs who need quick and easily accessible financing, allowing them to maintain and grow their businesses in a challenging economic environment.
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