If you are considering starting your own payday lending company there are a few things you should consider before you start. Becoming a payday lender can be a fruitful financial venture, but it’s not without its risks. We have broken it down into 10 simple steps to help you become a payday lender and start your very own payday lending company.
Reasons to become a payday lender
Recent developments in the field of payday lending have made becoming a lender significantly easier. Payday lending software now allows you to manage your loans significantly more easily, not to mention that social media has made advertising and reaching clients easier than ever.
Because a payday loan lender traditionally lends small amounts of money for short periods of time, you won’t need to wait long to see a return on your investment. Unlike the majority of new businesses this means you could quite easily be profitable even in your first year.
However, the US is currently home to more than 23,000 payday lenders, which is more than double the amount of McDonald’s restaurants in the USA. This means wherever you start up you will likely have some stiff competition. This doesn’t necessarily mean but it’s a bad idea to become a payday lender, but it does mean you need to consider your choice carefully before entering into the world of payday lending.
10 steps to becoming a payday lender
1) Have a clear and realistic business plan
A business plan can you make or break a business, it is as simple as that. If you have not properly considered how you will make money, the overhead costs of your business, the current market alongside a whole host of other things you will be starting a business blind. A clear and realistic business plan is your best tool for success.
2) Consider your business structure
This may have been part of your business plan, but if not consider carefully how your business will be structured. You are planning on lending your own money to customers, you will need a large amount of money to start making money. If that doesn’t seem like a viable option for you, there are other routes into payday lending that don’t involve having a large amount of money upfront. You might want to consider becoming an affiliate with another payday lender, who will pay you a fixed amount for every customer you direct to them. What is your area or your niche? Are you looking to offer loans to people with bad credit? Or might you prefer small loans, or good credit loans too?
3) Form a corporation
Most states in America require payday loan businesses to be legal corporate, so you will need to start a corporation to launch your business. It is also a good decision to form an LLC (limited liability company), in order to protect your personal and business interests.
4) Consider a secure business location
If you want the running costs of your business low, you don’t need to go out and purchase a commercial location for your business. Especially if you are planning to start an affiliate business, you can do so from your own home. However, you might wish to in order to help protect your business interests. Consider finding a commercial location in a busy area near transport links, so that potential customers without cars can get to you.
5) Launch a payday affiliate site
However you plan to run your business, a professional looking website is an essential tool in your arsenal. Make sure that your site contains all the relevant information and gives people the opportunity to get in contact with you about a payday loan. Make sure your brand is clear and that your website looks professional.
6) Market yourself
Customers are always looking for payday loans that can meet their financial needs. Marketing is the best way to get a customer to choose your loan over another company’s. Make sure that your marketing material emphasizes the advantages of a payday loan and your company’s commitment to privacy. Another attractive feature will be a quick and simple application process. Ensure that your marketing material links clearly to your site so the potential customers can apply for a loan.
7) Hire a lawyer, possibly full time
A lawyer is probably one of the most important steps in starting a payday loan business. The contract that your customers sign needs to be completely airtight and clear. A lawyer can be a great asset in making sure that this happens. You will need to ensure there are no loopholes in your contract that would allow customers to take you to court.
8) Invest in payday loan software
Today, there are lots of options for payday software that you can choose from. These will make loan management significantly easier to handle and a very secure. With the right payday loan software payments can be accepted easily online in minutes. There are plenty to choose from so ensure that you do your research and find the perfect software for your company.
9) Communicate clearly with customers
Just as your customers must know exactly what they are getting themselves into, you must know who you are entering into an agreement with. It’s important that you know who you are lending your money to. Good communication with customers will lead to less difficulties in your future. Knowing your customers well as essential and good communication with customers means that they will reach out to you if they have a problem. Many people who borrow money using a payday loan will be feeling unstable, and borrowing from a company that communicates with its customers clearly will give them peace of mind.
Once your business is up and running make sure that you are advertising regularly. Services like Google ads make advertising online incredibly easy. Make sure that you set aside money each month to continue advertising your business. This will allow you to reach new customers and get back previous customers. Advertising online means that you will be reaching customers who have searched for companies like yours. However there is always the option to do it the old-fashioned way and print advertisements to circulate around communities.