Payday loan are useful, and they provide borrowers with short-term cash loans during an emergency. Although payday loans involve certain risks, they continue to gain widespread popularity, and new cash advance stores open every week.
- Skill level:
Research different payday loan franchises. You can open your own payday loan company or buy a franchise. Franchises are costly. However, you’ll receive a host of training materials and everything you need to start the business. In addition, some payday loan franchises include advertising expenses in the franchise fee.
Become familiar with your state’s regulations. Payday loan laws vary from state-to-state. Before going into business, contact your state’s business regulation office or an attorney and inquire about payday loan business laws. State laws govern how much interest you can charge borrowers, and how to handle delinquent payments. In some states, it’s illegal for a payday loan company to garnish wages.
Write a business plan. You’ll need capital to start a payday loan company. Banks, credit unions and financial institutions have strict lending guidelines. To qualify for a loan, you’ll need a business plan that clearly defines how you plan to operate the business.
Improve your personal credit score. Before approaching a bank and applying for a loan, check your credit score and make necessary improvements. Paying off a few creditors or reducing debts can increase your score and help you qualify for a lower interest rate.
Apply for a business loan. To start or buy a payday loan franchise, you’ll need between £16,250 and £107,250. This pays the franchise fees, and provides you with sufficient capital to write short-term loans.
Create a loan contract. Payday loans don’t involve credit checks or collateral. Still, you’ll need to write a contract and get the borrower’s signature. The contract outlines the terms such as loan amount, finance fees and due date.
Look for a location. Find a good location for your payday loan company, preferably in an area that receives a lot of traffic. This may include a shopping mall or a location off a major roadway.
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