How to start a payday loan business? The consumer loan sector in the US is worth $34 billion. If you are planning to grow the 13,500 branches out there today, you need to understand that starting a lending business requires careful research and enough capital to get started.
Over the years, with the introduction of social media and various loan business software, the payroll loan business has evolved making loan management much easier and more secure. If you are new to the whole lending business, starting a payday loan business can be a daunting task for you. Here is a guide on how to start a payday loan business.
Start with a business plan
The first thing on how to start a payday loan business is you need structure. If you want to take out an SME loan, a clear and strong business plan is one of the most important requirements. After all, they want to make sure that your company will allow you to pay what you owe them. In general, a good business plan includes the following:
- A summary of an executive business, a snapshot of your company
- A description of what you do
- A briefing about your industry, market, and competitors
- The company structure and management
- The services you offer
- Your marketing and sales strategy
- The amount you need for the next 3 to 5 years
Choose a location – how to start a payday loan business
A company with a personal loan does not need a lot of office space. What you need at the very least is a display case and a counter or reception area where you can conduct your business. A good location would help your business a lot. Most payroll lending firms are located in low-income and underserved communities, as a payroll lending company’s clientele is likely to be at the lower end of the income spectrum.
Familiarize yourself with state and federal regulations
Each state has its own rules and regulations regarding payday loans. For example, borrowers can only borrow up to $300 from payday lenders in California, while they can borrow up to $1,000 in Delaware. As for federal law, there is the Truth in Lending Act, which requires lenders to disclose the terms and costs (financial charges, annual fee, etc.) in writing before the borrower signs the loan.
Lawyer Up – how to start a payday loan business
You will be dealing with contracts, loan agreements, and large sums of money, so you should have a lawyer at your disposal. Your attorney will draft or review your contracts to make sure there are no loopholes that could cause your borrowers to have legal reasons for non-repayment. Your attorney will also be of great help in going through the legal requirements to open your payroll loan business.
Have your own website – how to start a payday loan business
Nowadays people go to the internet first when they need something. Make sure your business is visible when a borrower types in keywords such as “best payday loans” or “loans near me.” To do this, you need to register a domain name. You can hire a web designer or do it yourself if you can. Create blogs and use search engine optimization strategies to drive regular traffic to your website. Use your website for marketing, but also use traditional marketing strategies such as signage, posters, and flyers.