If a person wants to own a small business, then setting up a payday loan operation may be the perfect opportunity. Consumer demand for such a service is increasing due to many families still recovering from economic failures. Fairly easy and quick to develop, a payday loan operation really can offer a better sense of fulfillment by helping others when they really need it the most.
A payday loan is typically structured to be a dollar amount up to $1,000 and repaid within two weeks. Therefore, the first step is to identify the source of the capital and how much is available for lending. Solutions could vary from personal monies, angel investors or small-business loans. Regardless, you need to determine a solid starting dollar amount and close on the funds.
The next consideration has to do with operating costs and risk assessment. Many payday loan operations are store fronts where business is conducted one on-one. If this is the preference, then expenses such as rent, utilities, insurance, equipment and furniture need to be identified. Taking a virtual approach on the Net could be a huge money saver so be sure to investigate this methodology for additional comparison.
One concept to understand is to reach out for help from other professionals. Not too many owners of a new business know everything about running an operation smoothly. To minimize profit loss, talk to an accountant, similar business professional or any person great with numbers. What you are trying to accomplish is determining the thresholds of pain, meaning, what loss ratio can the company thrive upon? One unavoidable challenge to this industry is some consumers do not pay on time or stop paying altogether. So, it is always smart to plan for worst case scenarios.
With any business, rules exist to protect the consumer and direct a business to operate ethically. Therefore, develop a relationship with a reputable attorney and consider keeping him on retainer. Questions need to be answered accurately during the start to eliminate future business or lending regulation issues. For instance, what can you and can you not require from a person during the loan origination process? Also, if a problem develops during the business day then the retained attorney can address it quickly so your business day is not disrupted. Additionally, this attorney can also consult with the formation of the loan contract. The verbiage used with any agreement is critical so it is always best to have it reviewed by an industry professional.
Now is the time to contemplate how you are going to obtain customers. If the business turns out to be of brick and mortar style, then a more traditional style of advertising is best. Reach out to your newspaper, radio and TV representatives and request rate cards. Gather all the pricing information and determine what type of advertising budget is available. An additional strategy is to reach out to an advertising agency and cross reference costs and capabilities to determine if you want to do the work or have it outsourced. This same philosophy applies to virtual stores where if you are not comfortable with the requirements of a solid e-commerce campaign, then consider using third-party providers.
- Fonthip (Guest Writer)