Financial need is a common thing in the dynamic business world. At some point in time, most large organizations have struggled financially, especially during an economic recession. The best course of action in such circumstances is to opt for a loan. But where can you find a loan that suits your needs? Well, it depends on the type of loan you want, or rather your financial needs. For instance, if you need a standard loan, the best source will be a bank.
Nevertheless, when it comes to smaller loans, most banks fail to provide for the needs of borrowers.
In the business world, money controls nearly everything. A money lending business is one of the most lucrative ventures one can consider setting up. This is because not everyone has access to banks as well as other money lending institutions.
The good news is, individuals and institutions that can’t obtain bank loans can get help from small money lending institutions with favorable terms. Due to the ever-increasing demand for quick loans, money lending ventures have attracted many people.
Starting such a business can be a very profitable venture. However, it’s not as easy it sounds. You will be required to have a substantial amount of capital or a well-paying investment. You also have to take time to learn the basics and understand how to effectively get started.
With that in mind, here is a roadmap to help kickstart your journey, reduce any associated risks, and avoid losses:
Step 1: Get ready to start
Make a decision on the type of model. Generally, there two main types of models that dominate the money lending industry: 1) consumer; and 2) commercial. with the former, people lend either secured or unsecured loans; common loan types in this category include car loans, personal loans, and mortgages among others. The latter option involves the money lending institution and the business; the loans may be short-term or long-term, secured or unsecured.
Select a proper business loan. Be careful not to choose a name already taken. You will have to check with the registrar of companies to be safer.
Come up with a business plan. Drafting a business plan will help you be even more creative. You will be able to reflect on the chances of success along with the opportunities for future growth. Make sure your plan has the following key parts:
- The executive summary
- The description of the venture
- A market analysis that includes a description of the product line, final projections and a list of principal shareholders
Develop a marketing and sales strategy. At a minimum, you’ll need to:
- Decide on financing. Even though it’s an aspect of a business plan, financing is a very comprehensive subject in this regard and require careful consideration. There are those who have opted to use their retirement funds, while others choose to seek finances from investors. If you opt for investor funding, ensure you involve a lawyer. Remember to be realistic and consider all the risk. For instance, some borrowers may not repay.
- Design underwriting criteria. You don’t have to give loans to everyone approaching you for funds. Come up with an effective strategy for evaluating each and every applicant.
- Be open to learning. You can attend workshops and seminars for coaching.
- Consult with a lawyer. This is necessary to address any questions you may be having.
Step 2: Register the Venture
For registration, the following information will be of help to you:
- Incorporate. Your lawyer will help you obtain the necessary documents for incorporation required by law. You will decide on the form of ownership from the following options: sole proprietorship; corporations; limited liability entities; partnerships
- License the business. You must be permitted by the government to start this kind of business. To apply for a license, you’ll need to choose and register your business name. Next, you’ll need to list the business in Securities and Exchange Commission, and obtain a tax identity number.
- Familiarize yourself with debt collection provisions. This is necessary to avoid getting into problems during collection from clients; you’ll need to appoint a compliance expert who will help you always operate in accordance with the provisions of law.
Step 3: Launch!
Finally, in order to launch the venture, you’ll need to:
- Rent an office if it is not going to be a purely online business.
- Open a business bank account. This is where you’ll deposit funds and withdraw the cash you are using for lending purposes.
- Design contracts. Any applicant approved for a loan must sign a contract; your lawyer will help in drafting agreement contracts.
- Promote your business. This can take different forms, from word-of-mouth to audio-visual ads.
With careful planning, a money lending venture can be a very profitable business. If you’re planning to open one and in need of cash you need to examine the lender’s reputation online carefully. In order to compare the best loan interest rates, it’s always a good idea to consider various loan comparison websites; doing so can help you decide what is best for you.
Photo Credit: Zero Hedge