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How to set up a small loan business

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The small finance loan (sometimes called a payday loan) is a special type of loan in which the borrower will take the loan with a commitment to return it back on the day their next salary arrives. As a lender, this business can be really profitable because you can get high returns in a short span of time and with less capital — as people will mostly require small loans. Here are some steps to start the business.

1-Get experience of the business

It is important to get knowledge of any business before starting it. There can be many reasons for not jumping in and investing immediately, especially if you do not know much about this business or you do not have enough funds to start. In this case, you can join the affiliate program of some other company. You will not have to worry about taking the loans back or extending the cash to the borrowers as the company will give them loans. You will just have to give them the customers through an affiliate arrangement. Once the customer takes the loan, you will get your share of profit. It is a good way to get experience and earn money to start your own loan business.

2-Write a business plan:

If you have enough funds and you have got some experience in the finance industry, you can start to write the business plan. The business plan should answer all your business questions as given below.

– What will be the location of operations?

– How much capital is required?

– How will marketing will be done?

– How will you increase the loyalty of customers?

– What can be done if someone decides not to pay back?

– What will be your criteria for giving loans?

– What will be included in the contract?

These and many other questions must be answered by the business plan.

3: Choose a location:

It is really important to select a good location to start a business. If you select a location in an area where everyone is really poor or really rich, you will not find many customers. The better place can be a community where most of the people receive monthly salaries and belong to the middle-class financially.

4: Hire the right staff:

It is better to hire someone who will have your back when something gets difficult. At the start, you can handle most of the important work by yourself but you cannot handle the legal aspects of the business so you should hire a lawyer. They will handle the absconding cases and deal with the legality of the business. If you require it, you should also hire an accountant to deal with the financials.

5: Launch your website:

Launching a website is a really big thing in the loans business. Using this website, you can start your own affiliate network and get customers from all parts of the country. Some companies solely decide to give payday loans online so they increase their reach to everyone who has internet. However, this means you must set up strong validation processes for identity confirmation of prospective clients.

6: Management software:

There are many software packages in the market that can be used to organize the business. You can get enterprise software designed specifically for you, but this is often an expensive purchase for new businesses. Otherwise, you can view software like loan management software or Megasys finance 3.

7: Marketing:

After finishing your setup, use online tools like Facebook and Adwords or local advertising companies to promote your business as much as possible. As you can see, starting a payday loan business is not as hard as you might think. If you follow the steps given here, you can create a successful business which can give huge returns in a short time.

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1 Comment

  1. nyashwriter@gmail.com'

    james

    May 25, 2019 at 12:40 am

    Great piece. How can one conduct a detailed background check for the loan applicants, especially for small scale businesses? is there a way to show records of business capacity apart from bank statements?

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