The US consumer lending industry is worth $34 billion. If you are planning to add to the 13,500 establishments existing today, you have to understand that starting a lending business takes careful research and sufficient capital to begin with.
Over the years, with the introduction of social media and various lending business software, payday loan businesses have evolved, making loan management a whole lot easier and secure. If you are new to the whole lending business, starting a payday loan company can be an intimidating task for you. Here’s a guide on how to get started on a payday loan business.
Start off with a business plan
First, you need structure. If you are looking to take out a small-business loan, a clear and strong business plan is one of the most important requirements. After all, they want to make sure that your business will enable you to repay what you owe them. Generally, a good business plan includes the following:
- An executive summary of the business, which is basically a snapshot of your company
- A description of what you do
- A briefing on your industry, market, and competitors
- The structure of business and management
- The services you offer
- Your marketing and sales strategy
- The amount of money you need for the next 3 to 5 years
- Financial projections
Choose a location
A payday loan business really does not need that much of office space. At the very least, what you need is a storefront and a counter or receiving area where you can conduct your business. A good location would greatly help your business. Most payday loan offices are located in low-income neighborhoods and underserved communities, as the clientele of a payday loan business is likely on the lower end of the income spectrum.
Familiarize yourself with State and Federal regulations
Every state has its own set of rules and regulations on payday loans. For example, borrowers can only loan up to $300 from payday lenders in California, while they can borrow up to a thousand dollars in Delaware. As for federal law, there is the Truth in Lending Act, which requires lenders to disclose the terms and costs (finance charges, annual percentage rate, etc.) in writing before the borrower signs for the loan.
You will be dealing with contracts, loan agreement, and large sums of money, so it is imperative that you have legal counsel at your disposal. Your lawyer will draft or review your contracts to make sure that there are no loopholes that may cause your borrowers to have legal reasons not to pay you back. Your lawyer will also be a big help as you work on the legal requirements of putting up your payday loan business.
Have your own website
Nowadays, people go to the Internet first when they need anything. Make sure that your company is visible every time a borrower types in search keywords like “best payday loans” or “loans near me.” To do this, you need to register a domain name. You can either hire a web designer or do it yourself if you can. Create blogs and use search engine optimization strategies to drive traffic to your website regularly. Use your website for marketing, but utilize traditional marketing strategies, as well, such as signages, posters, and fliers.