How to Create a Payday Loan Business

Opening a payday loan store can be a lucrative move.

For those experiencing financial problems, a payday loan can be a lifesaver. Payday loan businesses offer short-term loans to their customers, in amounts ranging anywhere from $100 to up to $1,500 at a time. Owning your own payday loan business can be a smart and lucrative move, as long as you follow all the laws and regulations that apply to payday loans in your state.

Instructions

1. Check to see if you are legally permitted to open your own payday loan business within your state. You can find the information regarding this by going to the Federal Truth in Lending Act. Learn how much cash you are allowed to loan at once, the maximum APR you can charge, whether you can permit extensions on the loan and issues on defaulted loans. It may help to speak to a lawyer regarding the many laws within your particular state.

2. Find a surety bond agent that specializes in payday loan companies. This agent reviews the business plan you have drawn up for your company and sends along this information to the underwriter. Help this process along by having a solid business plan before you meet with the agent, detailing how and where you will open the store, your target customers and other details.

3. Apply for any needed financing for the store. Again, have a solid business plan handy when you talk to lenders, either at your local bank or credit union, about getting a loan. Consider a partner who can help you out either financially, or who can co-sign a loan with you. Make sure you have enough money to open a business before you begin.

4. Apply for a new tax ID number. This number is not related to your Social Security number, and can help you open a line of credit for your company, if need be. This is helpful for when you need credit for your business, now or later.

5. Secure your lending license by applying for it with your state's department of financial institutions. This department will require you to supply your financial report and disclosure papers, and prove that you have a surety bond. Additionally, proof of any liquid assets will be needed.

6. Find a location for your new business. You will want to find a spot visible to traffic, in an easy-to-see area. Avoid high-crime areas as much as possible. A payday loan company can be an easy mark for robbers, so it is important to install the best bulletproof glass, both on the outside windows and inside to protect your employees. Security systems are a must, as well as bright lights both night and day.

7. Hire professional employees who have been trained in payday loan laws and rules. Every employee should submit to a drug test, background check and criminal check to qualify for employment. Employees should be very friendly and courteous to those they wait on, as many customers are repeat borrowers.

References

• Truth in Lending Act
• Surety Bonds
• Payday Loan Laws by State