South Africa’s elite are turning to discreet secured lending providers to unlock their wealth to meet their modern finance needs.
Luxury pawnbroking is on the rise, as cash-strapped professionals are turning to a faster, more discreet solution to combat the challenges of financial woes and unlock liquidity in their assets, according to Lamna Financial.
“In the last year we have seen a 20 percent increase in first-time clients and a 30 percent increase in the value of our loan book for the same period,” says co-founder and CEO of Lamna, Charles Meyerowitz. “Over the last decade we have serviced over six thousand clients with over R2-billion advanced.”
Meyerowitz attributes the increase in luxury pawning to the fact that it is now seen as a viable loan option, gone are the days that it is now a last resort. “We’re seeing a massive increase in our services specifically when it comes to pawning luxury items,” he says. “I think everyone will agree that in the current economic climate, liquidity is spread thin.
“Around 28 percent of all our loans are secured against luxury watches, cars and art and we’ve even had a yacht and hearse come through our doors,” he adds. “Smaller luxury items are usually valued at anything between R30,000 and R350,000 with some of the luxury cars coming in at over R5-million.”
Meyerowitz adds that non-traditional financing options like Lamna are capturing more market-share from traditional lenders because of the ease. “We’ve seen incremental growth in the past several years, which we attribute to the fact that clients can unlock and get access to their money within a day with very little paperwork.
“More often than not we’re advancing loans against luxury goods to our clients who require fast access to their money mainly for business and on occasion for personal reasons,” he says.
“The loan terms are short term in nature and the advanced value of the item is determined by professional valuers,” he explains. “The sharp rise in interest rates, and stringent lending requirements from the banks make traditional banking route mostly unattractive for our clients, especially when they’re sitting with lazy assets that can create liquidity fast through a pawnbroking service.”
He points out that in addition to the bank’s lending policies being a barrier for their clients, a fair proportion of their clients’ businesses are reliant on large government contracts and tenders. “These entrepreneurs or SMEs, often have contracts worth millions of rands but processing on payments of these contracts often fall short of their deadlines and our clients look to us for an interim solution.”
He continues: “Pawnbroking offers our wealthy clients an effective plan when their cash flow is a little thin, albeit reliable and is a viable alternative option.”
“We’re regulated by the National Credit Regulator (NCR) and offer flexible and shorter-term loan periods from 2-12 months which means that our clients are not locked into long-term loan agreements.”
When it comes to credit checks and the client, Meyerowitz says that the checks are done against the items they are loaning against. “The worst that can happen is you lose the item due to defaulting on your loan which only happens very rarely. There is no recourse to the borrower – no legal fees, no lawyers, no judgements”.
This he says is why this type of lending is seeing an increase in growth amongst South Africa’s wealthy. “It’s virtually risk-free giving you fast access to your own money,” he adds.
The question you should be asking yourself Meyerowitz says, is why shouldn’t you have access to your money as a short-term solution? Undoubtedly, he concludes that we will see luxury pawnbroking becoming more prevalent as a financial solution over the next few years.
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