Money lending Business is a lucrative option if you want to start your own business. If you want to become a money lender, then you need to come up with a proper strategy to generate profits. You need to know the basics of money lending.
Difference Between Money Lenders And Banks
The principal difference between money lenders and banks is that the banks have a ceiling on the amount of interest which they can charge. In case of money lending, they can charge whatever amount of interest they want, and their terms are more flexible. You can either be a private money lender or a hard money lender.
Steps To Establish A Successful Money Lending Business:
Preparing To Start Your Business
To become a Licensed Money Lender, you need first to select a name for your business as it will create the first impression on the client. You need to check your state’s business filing office to know whether the name you selected is taken or not. A good business plan needs to be drafted, as it can determine whether your business will be successful or not. A good business plan will be able to direct you towards your goal. Your business plan should include an executive summary, description of your company, market analysis, product line, marketing, sales and finally financial projections. You also need to determine the source of funding for your money lending business. This will determine whether you want to be a private money lender or a hard money lender.
Although your criteria for issuing a role will not be as strict as that of a bank, you need to establish some basic ground rules. Thus you need to draft an underwriting criterion where you can assess the risk by gathering information about your client’s financial history. To establish your company, gather some advice from the veterans in this business. Try to attend their seminars as they will help your growth immensely. Since you will be dealing with money, you need to hire some lawyers as they will guide you thoroughly in case you need to take some legal action. In today’s world, you need to have a website for your company. The world is connected with just one click. So try to set up a website with your domain name.
Register Your Business
You need to be a Licensed Money Lender to establish your business. Unless you make your business legal, you cannot move further without landing in a serious problem. The first step towards making your business legal is that you need to incorporate your business. You can talk to your attorney regarding this matter. There are many corporate forms, but you need to select the right one for your business. You need to apply for a license to make your business completely legal. If you have selected a business name, you need to register it with the necessary authorities. If you are a hard money lender, your business will have investors. Thus you need to file with the appropriate security commission. If your business is not a sole proprietorship, you need a tax identification number; also known as EIN. Lending money can be a risky business, so you need to know the dos and don’ts of collecting money. Hire a compliance professional who will keep a check on your business, whether it is involved in legal activities or not.
Launch Your Business
After dealing with the legal matters, now it’s time for you to establish your business in the market. Unless you are an online money lender, you need to rent an office space. You need to open a bank account for your business. To open a bank account, you will need your Business Tax Identification number or Social Security number (if you’re a sole proprietor), your business name filing documents, articles of incorporation and business license. Before sanctioning a loan, you need to draw up contracts with the help of your lawyer. Your clients need to sign the contract before getting the loan. To increase your customer base, you need to advertise your business. The online advertisement will reach a larger audience, but you need to strengthen your local customers as well.