Pawn Shops Industry Terminology

Acid Test

A quick chemical test using acids and a touchstone to estimate a gold item’s karat by observing reaction and streak color. It’s semi-destructive and should be paired with other checks (magnet, weight, hallmark).

We did an 18K acid test and the streak dissolved, so it’s not 18K.|Use the 10K acid first, then step up if the streak holds.|After the acid test, confirm with XRF before quoting a melt price.

Appraisal

A documented evaluation of an item’s characteristics and market value, used to set loan amounts, purchase offers, insurance values, or retail prices. In pawn, appraisals are oriented to liquidation/NRV rather than retail replacement.

The appraisal supports a $600 resale, so we can advance $250.|We need an in-house appraisal on this Rolex before writing a ticket.|Adjust the appraisal for missing box and papers.

APR (Annual Percentage Rate)

The total annualized cost of a loan, including interest and finance charges, expressed as a yearly rate. Some states require APR disclosure even though pawn charges are typically set monthly.

Our posted monthly rate converts to a 180% APR.|The receipt shows both the periodic rate and the APR.|APR helps customers compare costs across lenders.

Assay

A precise method of determining metal content and purity (e.g., fire assay or XRF). More definitive than an acid test and used for high-value or ambiguous items.

We’ll send this bar for assay before paying the premium.|XRF assay reports 91.6% gold, consistent with 22K.|For scrap lots over $10k, we require an assay certificate.

ATF Compliance

Adherence to federal firearms rules when pawning, buying, or selling guns, including FFL licensing, bound book entries, Form 4473, NICS checks, storage, and reporting of multiple sales.

Log the firearm into the bound book immediately for ATF compliance.|Don’t release without a NICS approval and a completed 4473.|Our ATF audit is next month—review procedures and storage.

Bill of Sale

A written document that records the transfer of ownership for items purchased outright (not pawned). It helps establish provenance and is often requested by police during investigations.

Provide a bill of sale to the customer for the guitar we bought.|Keep the bill of sale attached to the intake photos.|The detective asked for bills of sale for last week’s buys.

Blue Book

Any pricing guide used to estimate resale value, such as Blue Book of Gun Values, Kelley Blue Book (vehicles), or brand-specific guides for instruments and watches.

Check Blue Book of Gun Values for the Model 70’s range.|KBB shows $3,800 wholesale, so cap the advance at 50%.|The amp’s blue book value dropped since last quarter.

Buy-Hold-Sell Mix

The strategic balance between purchasing items outright, issuing pawn loans (holding collateral), and retailing inventory. Optimizing the mix affects cash flow, margins, and inventory turn.

Shift our mix toward more loans to boost interest income.|We’re overweight on buys; run a retail promotion to clear stock.|Monitor the buy-hold-sell mix weekly.

Collateral

An item pledged to secure a pawn loan; if the borrower defaults, the collateral is forfeited and may be sold to recover principal, interest, and fees.

The laptop is collateral for a 30-day loan.|Ensure the collateral description includes serial and condition.|Store jewelry collateral in the secured vault.

Compliance Program

A structured set of policies, procedures, and training to meet regulatory obligations (state pawn laws, secondhand dealer rules, firearms, privacy, AML/KYC, data security).

Update the compliance manual for the new state rate caps.|Annual compliance training is due this month.|Audit our reporting flow to the police database.

Condition Grading

A standardized assessment of cosmetic and functional condition (e.g., New, Like New, Excellent, Good, Fair, As-Is) that informs valuation, LTV, and retail pricing.

Grade the DSLR as Good due to the scuffed body.|‘As-Is’ items get a lower LTV and are final sale.|Include battery health in the condition grade for phones.

Counterfeit Detection

Methods and tools to identify fake or altered goods, including UV lights, loupes, magnification, weight and dimension checks, serial verification, magnet tests, and XRF.

The Cartier clasp font looked off—counterfeit.|The coin’s weight was low; we flagged it as fake.|Verify serials with the brand’s database before buying.

Customer Due Diligence (CDD)

Identity verification and risk assessment steps taken on customers to prevent fraud, theft fencing, and regulatory breaches; may include ID scanning, watchlists, and transaction monitoring.

Run CDD on first-time sellers with high-value items.|The system flagged the customer for unusual repeat sales.|Enhanced CDD applies to cash transactions over the threshold.

Default

Failure of the borrower to pay charges and redeem collateral by the end of the loan term (including any grace period), triggering forfeiture.

The watch defaulted after 60 days; move to inventory.|Call reminders before default to reduce forfeitures.|Default items must be repriced for quick sale.

Depreciation

The loss of value over time due to wear, obsolescence, or market changes; used to adjust valuation of electronics, tools, and fashion goods.

Apply steep depreciation on last-gen iPads.|The lens holds value better; lighter depreciation curve.|Factor depreciation into LTV for game consoles.

Due Diligence

The investigation performed before lending or buying, including functionality tests, serial/IMEI checks, lien searches, comps, authenticity, and stolen property queries.

Due diligence revealed a recall on that model.|We ran the IMEI and found it blacklisted—decline.|Document due diligence steps in the intake notes.

E-commerce Channel

Online sales outlets used to retail inventory (e.g., eBay, Shopify, GunBroker, Reverb), often integrated with POS for omnichannel operations.

List higher-end guitars on Reverb as part of e-commerce.|Sync POS inventory to Shopify daily.|Use platform comps to set online pricing.

E-scrap

End-of-life electronics sold for parts or recycled for commodity value when repair or resale isn’t economical.

Bundle dead laptops as e-scrap to our recycler.|Wipe drives before moving e-scrap out.|E-scrap prices rose; clear the back room.

Fencing

The criminal resale of stolen goods; a risk pawn shops mitigate via ID checks, police reporting, and holds.

The serial hit on the stolen list—potential fencing.|Strong CDD helps deter fencing attempts.|We reported suspected fencing to local PD.

FFL (Federal Firearms License)

A license required to engage in the business of dealing in firearms, including pawning and selling. Requires strict recordkeeping, storage, and compliance with ATF regulations.

Our FFL renewal is due; prepare the paperwork.|Only FFL staff handle intake of firearms.|Log the redemption in the bound book per FFL rules.

Finance Charge

The dollar cost of a pawn loan for the period (interest plus permitted fees). It’s the amount paid at redemption or to renew.

The 30-day finance charge on $300 is $45.|Post a finance charge schedule by loan size.|The finance charge differs from principal and late fees.

Forfeiture

The transfer of ownership of collateral to the shop after default, allowing the item to be priced and sold to recover costs.

Tag the ring as forfeited and move to retail.|Photograph forfeitures for the inventory system.|Forfeiture timing must follow state law.

GIA Certification

A grading report from the Gemological Institute of America detailing a stone’s 4Cs and other attributes; enhances resale value and buyer confidence.

With GIA cert, the diamond can command a premium.|Verify the report number before pricing.|Send ungraded stones for GIA to maximize value.

Gold Karat

A purity measure for gold expressed in 24 parts (e.g., 24K is pure, 14K is 58.5% gold). Used to set melt value and offers.

The chain stamps 14K; XRF confirms 58.5%.|Price the loan using 10K scrap rates.|Separate 18K from 14K before selling to the refiner.

Gram Scale

A calibrated digital scale that measures weight accurately in grams and troy ounces; critical for precious metals intake.

Calibrate the scale daily with a 100g weight.|Use troy ounces for bullion, grams for scrap sorting.|Record weights on the pawn ticket.

Hallmark

A stamped mark indicating metal purity, maker, or assay office; an initial authenticity clue for jewelry and watches.

The hallmark shows 750 and a maker’s mark.|The clasp lacks hallmarks; scrutinize further.|Compare hallmark fonts to known references.

Hedging

Reducing exposure to precious metal price swings by quickly scrapping, pre-selling lots, using refinery advances, or, for sophisticated operators, futures.

Scrap gold weekly to hedge spot volatility.|Lock in today’s price with the refiner’s pool.|Don’t sit on heavy gold inventory when prices drop.

Hold Period

A mandatory waiting period after intake during which items cannot be sold, allowing time for police checks and claims. Length varies by jurisdiction.

Guns require a longer hold; check city ordinance.|Tag all new buys with hold-release dates.|Don’t list hold items online yet.

Identification Verification

Confirming customer identity using a government-issued ID, scanning systems, and, where required, additional verification steps. Reduces fraud and supports compliance.

Scan the ID and capture a photo at intake.|The address on the ID must match the ticket.|Decline if the ID appears altered.

Interest Rate

The periodic rate charged on pawn principal, often expressed monthly and subject to state caps; distinct from APR.

Our monthly interest rate is 10% on loans under $200.|Interest accrues until redemption or default.|The sign must disclose the interest rate per state law.

Inventory Turnover

A measure of how quickly inventory sells, typically COGS divided by average inventory; higher turn improves cash flow.

Our jewelry turn is 5x; aim for 6x this year.|Discount stale SKUs to lift turnover.|Track turn by category and channel.

Jewelry Loupe

A 10x magnifier used to inspect stones, prongs, hallmarks, and workmanship; essential for intake and authentication.

Use the loupe to check for laser inscriptions.|The prongs are worn—note it on the ticket.|Loupe the baguettes for chips.

KYC (Know Your Customer)

Processes to identify and verify customers and assess risk, supporting AML, stolen property prevention, and chargeback reduction.

KYC requires a valid photo ID for all buys.|Apply enhanced KYC for high-value watch deals.|KYC data must be stored securely.

KYM (Know Your Merchandise)

Staff product knowledge of brands, models, market comps, and common defects, enabling accurate valuation and detection of fakes.

KYM training this week focuses on luxury handbags.|Build KYM cheat sheets for PlayStation SKUs.|Strong KYM prevents over-advances.

Layaway

A retail payment plan where a customer pays over time and picks up the item after full payment; useful for larger-ticket sales and seasonality.

Offer 90-day layaway on guitars over $500.|Nonrefundable layaway fees cover handling.|Layaway reduces online undercutting risk.

Lien Search

Research to confirm no existing liens or security interests on collateral, especially for vehicle title pawns; typically involves DMV or UCC checks.

Run a lien search before advancing on the car title.|The VIN shows a bank lien—decline the pawn.|Keep lien search proof with the file.

Loan-to-Value (LTV)

The loan amount as a percentage of an item’s net realizable or liquidation value; adjusts for risk, demand, and costs.

Target 40–60% LTV on electronics.|Luxury watches with box/papers can support higher LTV.|Drop LTV on slow-moving categories.

Lost Ticket

A situation where a borrower misplaces the pawn ticket; redemption then requires ID and, often, a sworn affidavit and fee before release.

Process a lost-ticket affidavit before releasing the laptop.|Charge the standard lost-ticket fee at redemption.|Verify ID matches the account.

Melt Value

The intrinsic value of precious metal items based on weight, purity, and current spot price, minus refining fees and spreads.

Calculate melt value before quoting the advance.|Separate stones; pay only for gold melt.|Our refiner pays 98% of melt on lots over $5k.

Merchant Category Code (MCC 5932)

The payment network code for pawn shops; affects processor risk settings, interchange rates, chargeback monitoring, and underwriting.

Some processors won’t board MCC 5932 accounts.|Expect higher reserves because of MCC risk.|Provide extra documentation during MCC underwriting.

Motor Vehicle Title Pawn

A secured loan using a vehicle title as collateral; the shop holds the title and may perfect a lien with the DMV until payoff.

Confirm the borrower owns the vehicle free and clear.|Perfect the lien immediately after funding.|Title pawns have different rate caps than general pawns.

Net Realizable Value (NRV)

Expected cash from selling an item, net of fees, refurb, shipping, and discounts; the key value base for LTV and pricing.

After fees, NRV on the camera is $220.|Use NRV, not retail MSRP, for loans.|Markdown stale items to raise NRV via faster sell-through.

NICS Check

The National Instant Criminal Background Check System query required before transferring firearms back to customers or buyers, unless an exemption applies.

Run NICS before releasing a pawned firearm.|A delay status means hold until proceed.|Log the NICS transaction number on the 4473.

Nondestructive Testing (NDT)

Testing methods that do not damage items, such as XRF for metal purity, UV inspection, and ultrasonic watch tests.

Use XRF as an NDT before acid testing.|UV revealed glue repairs on the handbag.|NDT preserves value on high-end pieces.

Ounce (Troy)

A precious metals weight unit equal to 31.1035 grams; used for bullion and scrap pricing, distinct from the avoirdupois ounce.

Quote gold in troy ounces, not regular ounces.|Convert grams to troy to set the payout.|The bar weighs exactly 1 troy ounce.

Pawnbroker

A licensed professional who issues collateralized loans, buys items outright, and retails unredeemed or purchased goods, operating under state/local regulation.

The pawnbroker assessed the guitar and offered $200.|A licensed pawnbroker must sign the ticket.|Experienced pawnbrokers spot counterfeits quickly.

Pawn Loan

A short-term, non-recourse loan secured by personal property; repayment returns the item, while default leads to forfeiture without impacting credit in most states.

Write a 30-day pawn loan on the leaf blower.|The loan is non-recourse; no collections after default.|Offer extensions for a fee if allowed by law.

Pawn Ticket

The receipt and legal contract for a pawn, detailing borrower info, item description, loan amount, charges, term, and due dates; required for redemption.

Ensure the IMEI is on the pawn ticket.|The customer must present the ticket or affidavit.|The ticket shows the next payment due date.

POS System

Point-of-sale software and hardware used to manage loans, buys, sales, inventory, reporting, and e-commerce integration; often includes ID scanning and police reporting.

Enter the item into the POS and print the tag.|Integrate the POS with our online store.|Use POS alerts for hold-period releases.

Provenance

Documented history of ownership, purchase, and service that supports authenticity and value, especially for luxury watches, art, instruments, and collectibles.

Box, papers, and receipts strengthen provenance.|Upload provenance photos to the item record.|Weak provenance lowers our offer.