Starting a money lending business is undeniably a strong and solid opportunity to make amazing profits. The opportunities are great and it’s only up to your professional and marketing knowledge to make your plans work.
This is all risk and reward – you could end up losing your investments or winning an impressive amount of cash flow. Below are 6 essential tips to get your money business running.
1) Decide on Your Business Model
Basically, there are two business models that dominate this kind of industry: consumer lending and commercial lending.
– Consumer Lending
This is where an individual borrows money from a lender in either secured or unsecured terms. Common examples of consumer loans include auto loans, personal loans, student loans, refinances, mortgages, credit cards and others.
– Commercial Lending
This is a form of a debt-based funding agreement between a bank and a business. It is usually short-term, payable within 30 days up to one year and can be unsecured or secured by collateral. Consumer loans are widely used by businesses to cover the expenses for machinery, equipment, capital, and operational costs.
2) Understand and Obey the State Laws
Being a loan provider requires you to know the laws that govern the state where you belong. It is needed to avoid any criminal liability. Make sure that before you start your business, you are given permission by the state, legalizing your lending business.
Once you get the license to operate, you can now do things smoothly. You also need to register your business name to a state agency or local government and to the Securities and Exchange Commission.
3) Prepare a Business Plan
Without a plan, it is impossible to achieve your goal. Spend enormous time drafting and writing your ideas and how they are going to work. This serves as a blueprint of your business; how it will grow, what projected time frame, who is involved, and other factors that will constitute it.
A comprehensive business plan for your money lending business should include basic components such as:
– Executive Summary: describes the nature of your business, mission statement, and company information. Since you’re just starting out, it’s also great to include your background experience and how it will define the success of your business.
– Business Description: This is where you tell your intended market, interest rates, operational costs and lending strategies.
– Market Research and Analysis: this answers the questions on how you will market your services, how you will build your brand, potential challenges, projected revenues, and growth opportunities.
– Product Line: this tells about the loans you want to offer, including your competitors and what makes your business different from them.
– Key Members: if you have a team working with you, this is the section that tells about this bio and roles.
– Marketing and Sales: reveals your marketing plans, how you will grow your business, generate profit, and future expansion.
– Financial Projections: consists of a comprehensive report of financial statement of your first three or five years in the business.
4) Settle Your Funds
You need finances to operate. It’s time to put your business plan into action. You may reach out to your social network of family, relatives, and friends and tell them of your objectives. There are also investors and lenders who are willing to lend you money to fund your required capital. They may be even interested to help you on starting your endeavor.
5) Set up Your Site
Aside from renting an office space where borrowers can get to you directly, going online will be of great help in marketing your services. We are in the technology age and people are using the internet to look for products and services every day.
If you re on the web, people can find your business. A web developer is the one who creates the website and you might consider hiring one to do the work for you. There is a lot of cheap options that can get your domain name and web hosting ready.
6) Have a Reliable Partner
This refers to a compliance professional whom you can fully trust regarding the operation of your business.
A lawyer may help you with doing paperwork, answering questions, and reviewing the practices of your business. He can also guide to in drafting and creating loan agreement contracts, notes, and other important documents.