The payday loan industry is one of the newest and fastest growing businesses in the United Kingdom. The payday loan industry is worth around £2 billion ($3.1 billion) in the UK. In a payday loan company, you will make loans against a person's payday check, pension check or Social Security check. The business involves high profits and, hence, high risks as well as tight competition. Successful companies such as Wonga make hefty profits. To start a branded payday loan company, you will need to buy an existing business or become a franchise.
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Devise a business plan. Include your mission and vision statements, operating expenses, projected revenue, funding sources, and ways to make profits and attract more customers in the plan. Identify competitors in your locality and assess your funding requirements. The start-up costs typically include a retail shop, office furnishings, Internet connection, computer and a reasonable amount of cash to lend. Since you are buying an existing business or a franchise, you can easily get an estimate of the above and obtain the necessary funding.
Conduct a search of the current branded businesses. You can check the link in the Resources section to get an idea of the existing businesses for sale. Evaluate these businesses by considering factors such as client base, brand, profitability, reliability, honesty and others. Inquire among friends, relatives and peers. The client base is the most important factor, since many of these clients can be retained for a good period of time.
Learn about regulations in starting such a company. Contact a local solicitor and accountant to acquaint yourself with the current laws regarding the interest that you can charge and the methods you're allowed to use to deal with delinquencies.
Enhance your personal credit score before approaching a bank, credit union or financial institution to get a loan for your start-up funding. Franchises are normally costly, but they assist you and offer training to start and operate the company efficiently. You may need a minimum amount of £30,000.
Hire and train your staff so that they treat your clients well and efficiently. Build a good rapport with your staff as well as your clients to avoid risks.
Create loan contracts and get your clients' signatures, even though you do not require credit checks or collateral. The contract will specify terms such as interest, the loan amount and due dates.
Identify a good location for your franchise, one that involves a lot of traffic.
Promote your business. It is common for franchises to include advertising expenses in their franchise fee. However, you must devise your own marketing plan in your locality for success.
Tips and warnings
- Be tough to your clients and quick to identify the reason behind a delayed payment.
- Conduct a good pre-loan interview to minimise your losses.
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