Setting up a loan business requires an understanding between the borrowers and the lending company. it is not easy but it is fulfilling because you get to help a lot of people who are in need of financial help. Short term loan company is a good way to multiply your capital.
Keep in mind that any short term loans company upholds stricter lending policy so you will not get in trouble and getting things out of control. Below are the things you should follow when you want to venture out into loaning business:
Step 1: Identify the business entity you want develop
You should legally create your loan business. You can structure the company as limited liability company (LLC), sole proprietorship, or corporation. Your lawyers or even CPA can help you with this process.
Step 2: Organize your business funds
In order to put up your loan business company, you must have an immediate access to funds. Surplus of funds for defaults are also necessary when operating short term loans kind of business. Finance people advise that you should decide ahead of time the extent of delayed repayment by borrowers and possible defaults you can withstand and survive in your business. Alternate source of funding is also a must in this kind of business if things get out of control.
Step 3: Find out the necessary licenses and permits
Before you set up the physical location of the business, determine the needed permits and licenses in operating loans company. You can check or visit the local government to inquire about these necessary documents.
Step 4: Determine the legal aspects of the business
You should familiarize yourself with the legal aspects of your loan company. With your legal counsel, you should know all the necessary regulations that apply to your kind of business. Start by drafting a loan agreement with the help of your lawyer. The agreement should explain the terms and conditions, the interest rates applicable, the date of maturity for repayment and the follow up action for default. Put up the license and display the number clearly on your website and every document. In addition, present the fairly guidelines for your customers and it should be carried out properly and legally by your staff.
Step 5: Set up the location of the business
It is recommended that you have a small and yet easily accessible office outlet where people can walk-in and inquire about the service you are offering. A good amount of office space with a counter, chairs, and tables for people who would inquire is also a must. You should also have a space for disbursing short term loans and record keeping. Office location should be ideally where a lot of people pass by. An alternate place for your business is online that comprises a ‘front-end website’ where customers can see who you are, what you do and also make an application online. Online counterpart should have a back-end system to process the applications.
Step 6: Buy the important office equipment
Office equipment is also necessary in running the business smoothly. One of the essential office equipment you should have is desktops or laptops for faster transactions since all information are being saved on computers and it makes it easier to pull out important date for the business. Another necessary office equipment are fax machine, printer, copy machine and filing/storage cabinet to successfully service your customers.
Step 7: Market and publicize your loan business
Create a marketing plan to entice potential and initial customers for your peer to peer lending company. You can try advertising on dailies on your local area. In addition, you have an option to put your ads on the internet. Business cards, fliers, and magazine ads are also helpful in letting the public know about your business and services. Remember to work on your budget when advertising your company.