If you think this sounds like a pawnshop, you're right, but founder and chief executive Paul Aitken prefers the term private banking. Founded four years ago in Britain, and launched in the United States last year, Borro just passed the $75 million mark for loans made, which can range from $1,000 up to $1 million. Why someone who owns a Ferrari would need such a service lies at the crux of Aitken's business: Wealth isn't the same as cash, and even the well-heeled occasionally run short of hard currency.
Borro's clients "want liquidity quickly, because they have an opportunity they want to realize, or they have an issue they want to resolve like a tax payment" Aitken says, adding that small businessmen make up the majority of his customer base. "They have irregular cash flows, and they don't want to be tied down to the long-term lending of the bank."
By using whatever asset the client has, Aitken can turn a transaction around far faster than most banks, and to many customers with less risk and no penalties for paying off early. Compared to a bank or even a credit card, Aitken's loans don't come cheap: Interest rates run 2.99 percent to 3.99 percent per month, along with a set-up fee of 5 to 7 percent for appraising whatever item will back the loan, although frequent customers can get a discount.
The average Borro customer takes a six-month loan averaging about $17,000 — compared to the $150 average of an everyday pawnbroker — although repeat clients tend to borrow even more. And Aitken has to use his costs to pay for appraising, storing and caring for the valuables his clients hand over, from cars to paintings to a few well-known Hollywood award statues and even Olympic gold medals. Most of the 150 or so vehicles Borro stores at any given time run to the upscale modern exotic — "quite a lot of Ferraris," along with Bentleys and Porsches — but Aitken says the company often lends against rare classic cars if it feels certain about a vehicle's true value, like the Formula 1 car it once took in Britain.
There's another way in which Borro stands apart from your downtown pawnbroker and the "Pawn Stars" of America: It doesn't typically lend against gold, the prices for which can change drastically over a few months, and which has fallen steeply in the past few weeks. And while Borro has a New York office, it will make house calls to complete many transactions.
Aitken says the company's loans fail at a rate of 10 percent to 12 percent, but Borro always makes a full recovery — and because it operates under New York state lending laws, it has to return any extra proceeds to the original owner if its forced to sell one of its goods. Try going to Vegas and getting that deal from Rick and Chumlee.
- Paul Aitken