If you are reading this article you are most likely looking for information on two things – either you are considering starting your own payday loan business so you want to do some due diligence or you are trying to find out how this industry works, or you are already very familiar with payday loan industry, either way, you have come to the right place. In this article, you will be learning some important things that will be useful for the future of your business.
How to Start a Legitimate Payday Loan Business
You don’t need a lot of space to set up a payday loan business, all you need is a storefront with a counter area and you are good to go. Most payday loan companies are located in low-income neighborhoods; this is usually because most payday loan clients are on this earning spectrum. It is important to find a space for your business in a suitable neighborhood.
Create a Business Plan
When you are trying to get a loan to start your payday loan business you might need a loan to get started. Most lenders would usually require that you have a solid business plan to get approved. It is important for your business plan to clearly explain the idea behind your company. You should also include in your plan those you expect your client to be, your financial details, and a comprehensive explanation of how your business will have enough cash flow to cover ongoing expenses and the new loan payments.
This business comes with decent legal requirements as well as regulations. You should understand what these are before you start. The truth is each state has their own regulations for payday loans; this helps to prevent individuals from the risk inherent with payday loans. Furthermore, lenders have been mandated to disclose the total cost of the loan to their borrowers according to the Federal Truth in Lending Acts. This law requires payday lenders to tell borrowers the charges and annual percentage rate in writing before an applicant sign for the loan.
Consider Hiring a Lawyer
You should consider hiring an experienced lawyer to help you to draft the loan agreement you will use for your new business. Payday loan business comes with many legal requirements and regulations, it is important to get started on the right ethical and legal foot. The terms and conditions as well as the date of maturity for the loan, interest rates, and the follow-up action in the event of default should be spelled out in the loan agreement.
Determine Borrower’s Eligibility
Another thing you should consider when starting a payday loan business is deciding how you will determine an applicant’s eligibility for a loan. Most payday lenders will require a copy of lost year’s tax return and a recent slip. You can also decide to make a copy of an applicant’s social security card and photo I.D.
Advertise and Open for Business
If your business is in the right neighborhood, the signage you put out is enough to draw in customers. You can also consider advertising payday loans online in weekly newspapers or at bus stops. Open the doors and start helping people to get the loan they need when you are ready to go.