When people have an unexpected financial emergency or crisis, they may need money as soon as possible. Sometimes their paydays may be a week or two away, and they are unable to get a loan from family and friends. Payday loans are a convenient way of getting cash to these people to carry them over until their next payday. Starting a payday loan business is not only profitable, it can also help people who are in need.
- Skill level:
- Moderately Challenging
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Determine if you would like to have a payday loan company that operates online solely or a storefront, or both. The procedure still operates the same way. A customer will provide you with proof of employment, income and a current account, and you provide them with the loan. It is your decision to determine what criteria is sufficient for approving their loan request. One of the benefits of payday loans is they rarely check credit, which justifies the higher rates of interest and approval.
Consider your start-up capital. You will be loaning customers money, therefore you need to have upfront cash to loan. If you do not have money saved, you will have to create a solid business plan and have good credit if you hope to obtain a loan from the bank. Also, consider purchasing a franchise as there may be a payday loan franchise that does all the marketing, advertising and training for you and all you have to pay is a franchise fee.
Next you need to ensure that your business is legally structured. You would need insurance, most likely errors and omissions, and also you will need to check with your state to determine what licenses and credentials are required. Have a business telephone line, fax machine, computer and database software like QuickBooks, and/or Excel to maintain information on your customers and records. One of the most important things to have for your payday loan business is a company current account because your job is to consistently wire money to your customers or issue a check. Your certified public accountant and/or lawyer can assist you with establishing your business properly.
Finally, you need to advertise. Finding customers that are in need of a loan should be effortless if you properly advertise. Find places where your target market will most likely frequent. You can do this by setting up a website and having banner ads. You can also place ads in your local newspaper, grocery stores and even pawn shops.
Tips and warnings
- Payday loan companies can become popular by word-of-mouth advertising. Offer incentives to your current customers who refer their friends or family members to your company.
- Research and investigate in which states you plan to operate your payday loan business either physically or online. Some states will not allow payday loaners to solicit their residents due to predatory lending laws.
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