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The rise and fall of pawnshops

The pawnbroking business does not often make it into the classroom, yet its business model provides an excellent illustration of the need for financial and operational control. The story of Albemarle & Bond (A&B) is also a fresh example of how businesses try to cope with external factors

In December 2011, Barry Stevenson, chief executive of Albemarle & Bond, hailed the ‘age of the pawnbroker’. New pawnshops were popping up everywhere, pawnbrokers were on television and A&B’s share price was edging close to 400p. Just 2 and half years later, however, those same shares were worthless.

A pawnbroker lends money (secured loans) to people, using items of their personal property as collateral for the loan. The pawning process begins when a customer pawns an item for a loan. The broker may agree to lend the customer a fixed amount of money based on the value of the item. The precise contractual period of time and the rate of interest for the loan will differ but customers are able to redeem their items if they repay the full amount plus an agreed-upon amount for interest in the allotted time.

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