If you want to start a money lending company, you’ll need to determine what kinds of loans you want to offer — payday loans, mortgages, or installments. You may choose to start a lending company with a group of investors or use only your own capital or resources. Starting a business by money lending will require you to draft a business plan and acquire the required permits from the authorities.
Even though microlenders charge higher lending rates than banks, consumers and small enterprises frequently use them. The first and most significant factor is the challenge of convincing banks to provide small loans. Second, banks can’t beat the instant cash provided by micro-lenders when the need is pressing Lastly, micro-lenders don’t usually require collateral, although banks typically need insurance before they approve the loan.
If you have the financial resources to start this type of business, continue reading this article. These are the actions you must do to have your own money-lending business.
Step 1: Complete Requirements
First, you will need to make sure that you comply with the obligations that govern lending practices. It is necessary for a company to be organized as a corporation in order to register with the Securities and Exchange Commission (SEC).
For instance, if you are a Filipino and you’re applying to have this business, you’ll need start-up capital of at least one million pesos. In addition to the SEC, you must also register with the City Hall, BIR, SSS, HMDF, Barangay, and Philhealth.
Step 2: Know Your Market
Examine your target market. This is important to direct where your company will be based, and your expenses for construction, marketing, and other matters. Know where the best opportunities and the least rivalry exist. Even the way the office looks should be in line with your target market’s income bracket. Also, your business research will be beneficial in determining what form of loans to sell.
Step 3: Draft A Business Plan
While drafting a business plan, you’ll force yourself to focus on the present likelihood of success as well as future opportunities for growth. A detailed business plan helps direct you toward your goals. The strategy should, at a minimum, include the following points.
- Executive summary – You’ll need to explain your business nature briefly and why you think it’s going to be successful. The executive summary will include your mission statement as well as information about the company. You should be focused, as a startup, on demonstrating how your experience and context can contribute to the success of the business.
- Description of the company – Explain the nature of the business, your intended market, and the market needs that you will fulfill with your lending business. For example, you might want to address your community’s small loan needs, which may be underserved.
- Marketing plan – Discuss your sales strategy as a whole and your growth plans. You can hope to grow geographically, for example, by offering your loans to a broader community. Or you might expect to grow by providing your current market with additional types of loans.
For more information about drafting your business plan, click here.
Step 4: Settle The Finances
A business strategy should include a section on funding. This topic, however, is so essential for a money lending company that you should spend extra time deciding how you are going to fund the loans that you are extending to borrowers.
Many money lenders have reached into their retirement accounts to fund their loans, using their IRAs and 401(k) accounts. Researchers are urging money lenders who do this to understand the risks they face. Loans might not be repaid, for example, in which case you would lose a large portion of the loan amount.
Conclusion
A good money lending company isn’t lending to just anyone coming into the office. Applicants must be evaluated according to a set of criteria. Once you start making loans, you’ll need to draft the requirements.
For more careers relating to loans and banking, click here.