How to Start a Pay Day Loan Business
Payday loan businesses are one of the fastest-growing new businesses in this millennium due to the recent economic downturn. Credit scores are on a downward spiral, forcing consumers to take high-risk loans. The payday loan business is lucrative due to high interest charges passed on to the desperate consumer. The payday loan industry is currently one of the largest industries in not only the United States, but in Canada, Australia, Costa Rica, South Africa and England as well.
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Things You'll Need
- Office space
- Attorney
- Start-up capital of $15,000 or more
- Computers
- Office furniture
- Bookkeeping tools
- Security system
- Local permits and licensing
- Insurance
Instructions
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Decide whether you want to be independent or set up a franchise. Though a franchise can be expensive, it will provide you with all the necessary paperwork and support that you will need to run your business.
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Consult your attorney to familiarize yourself with local laws regarding payday loans and regulations including licensing and zoning. You will have to follow state laws and regulations for maximum interest and other business requirements. Also, have your lawyer draw up your payday loan contract that you will give to your customers. This contract should outline all of your loan terms.
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Gather your start-up capital by either applying for a business loan or accessing your own resources, liquid or otherwise. You will need at least $15,000 to start a payday loan business. If you will be borrowing money from a lending institution, you will need to create a solid business plan. In addition, you will need to be sure that your personal credit is stellar. In today's economic state, there are strict guidelines for qualification for small business loans.
You may also find it helpful to visit with a small business association to assess if you fall under any categories that would qualify you for government grants or assistance.
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Find a location that has plenty of foot traffic. You will want to place yourself in busy areas of town that attract many visitors on a regular basis, such as strip malls. You may want to consult with local government agencies such as the Urban League to obtain local demographic reports, which may assist you with locating your target consumer group.
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Choose a name and slogan for your business. Once you have done so, you can begin creating marketing materials, purchasing your office furnishings and preparing for your grand opening. This will vary depending upon whether you chose to franchise or go solo.
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Tips & Warnings
It is important to have a collection process in place as these are very high-risk loans and you are sure to have customers who do not pay back according the agreement issued by your company.
You may find it helpful to consider starting your business online to reduce start-up costs.
Before beginning any business, you should consult with an attorney.
References
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