You can’t get a bank loan, investors aren’t interested, and you’ve bled your friends and family dry to get your startup business off the ground. Why not hock your boat? (You don’t have time to sail it anyway.)
Paul Aitken is the founder and CEO of Borro, the company that can make that happen. In 2008, right before the market crashed, he saw access to credit narrowing, and the need for it escalating. “I took the view that people had been on a spending spree acquiring luxury assets,” he says. Why not help people borrow against them?
Today Aitken says Borro counts among its customers “a lot of small businesses and independent entrepreneurs, restaurants, bars, small construction companies, plumbers, property developers, sports stars, and musicians” who secure short-term loans against luxury goods.
With operations based in London and New York City, Borro relies on a team of 10 in-house appraisers and a network of another 300 independent ones to value the assets that would-be borrowers are willing to trade against. The minimum loan is $5,000, and the average is $50,000 at 3.5 percent interest, Aitken says.
In 6 years, the company has made loans amounting to $180 million. Most borrowers—90 percent, in fact—pay off their loans and interest within 6 months to reclaim their pawned items, Aitken says. Borrowers come to him with full confidence that they will take back their collateral. That 10 percent that doesn’t? “Five percent never intended to, and something unforeseen happened to the other five percent.”
Aitken also claims that, by virtue of his loan sizes and the range of assets he loans against, there is little comparison to pawn shops, many of which won’t make loans over $1,000. “Our loans are too big and too complicated for even a high-end pawn shop, we don’t have a retail presence on Main Street, and we loan against assets that include fine wines, classic cars, and private planes,” he says. Also unlike pawn shops, many of his customers are referred by wealth managers, financial advisors, real estate brokers, trust and estate and divorce lawyers, and “anyone you might go to if you need access to liquidity.”
The business works like this, Aitken explains: “You come directly or get referred to us; either way you inquire on our website. If you’ve got assets such as a diamond ring or a watch, you can get a quote online. With more expensive stuff, you can phone us, and we give an indication of what we’re prepared to lend on that asset.” (For jewelry, he says, a typical loan is 70-75 percent the value of the item.)
He says Borro handles all of the logistics and fees required to acquire physical assets from clients. Once the items are on site, he says, “We authenticate and appraise the value, and we make an offer online or by phone. If they agree, we do an identity check for anti-money laundering purposes. Then they accept the contract online and we wire them funds.”
He compares it to making a purchase on Amazon: “It’s just in reverse. You have to give us the goods before we give you money.” And if the borrower rejects Borro’s appraisal? “We return the item for free,” Aitken says, adding, “Half the time they come back to us anyway when they realize we were on the money.”
Aitken says the company has made loans against an Oscar, a Rolex watch collection, instruments used by famous musicians, contemporary art, yachts, helicopters, and private jets. “If you need money quickly or you want cash to invest in something that’s a great return, we’ll give as much of a loan as if you sell it at a firesale. Our interest for one year is as much as the cost to sell the item at auction.”
Another plus for borrowers is that Borro is interested only in the value of the asset, not in their creditworthiness or business books. Aitken says that’s especially valuable to small business owners whose personal and business credit is blurred or cash flow is erratic.
“We have very strong repeat business rates,” Aitken says. “People like that they can turn us on and off like a tap, and we take care of their assets. We’re not the first option, and we’re not the last option, but we are one. To borrow for a short period of time, we’re a very good option.”