Very often consumers are unable to bridge the gap between their monthly incomes and expenditures, leaving them short of cash for purchases of relatively lesser value nonetheless important things like groceries, utility bills, and even the EMI on the car. Payday loans come in extremely handy for such consumers who perhaps may not have access to a credit card. As the name suggests, the loans are repayable come payday with the paycheck of the borrower. Thus, these loans are for just a few days but being unsecured and given without any sort of credit checks, they are usually very expensive. Consumers who are in dire straits do not mind paying the steep rates of interest, because often they do not seem to be much in dollar terms due to the very short lending period involved, however for the lenders, the business is extremely lucrative. If you have money that is just idling, starting a payday loan business can be very rewarding for entrepreneurs. A quick look at how you can make a career with your own payday loan business:
Decide Your Business Structure
The chief ingredient of a payday loan business is capital; however, even if you do not have the necessary funds to start lending to consumers against their paychecks, you can still set up a payday business. When you are a novice in the payday loan business, it may be better for you not to risk your capital but instead focus on learning the ropes. You can participate in the affiliate marketing programs of some of the established payday businesses whereby you can earn money by referring customers to them. Typically, the companies pay a fixed sum per customer referred to them by their marketing affiliates. While the earning may not be substantial by this method, it is a very good chance for you to learn how the business operates and how to deal with customers without risking your funds.
Location of Your Business Is the Key to Success
You need to have an office that both your employees and customers can access easily. Ideally, it should be in the commercial hub of the city so that it is easily accessible by people using the bus. Keep in mind that many people who need the money to ensure that they can eat till their next paycheck arrives are unlikely to be having or using their cars. If you locate your office close to where offices and factories are, the chances of you getting more customers are automatically increased than if you were sitting in the suburbs. However, if you are starting small as a marketing affiliate for an established lender like you can even start a home office and market your services in the neighborhood using inexpensive advertising methods like flyers and word-of-mouth.
Structure of a Detailed Business Plan
The business plan is the blueprint of your payday business. It will detail every aspect like a marketing plan, the target audience, and the business objectives. Every business plan should start by defining the target audience in terms of demographics, location, and psychological factors. Unless you know your target audience intimately, you will not be able to find out what they need and how you can satisfy their needs better than anyone else in the market. The best way of establishing the profile of your customers is by conducting primary research using experts, however, if you do not have the budget to support this kind of activity, you should research by yourself. You can conduct the interviews, initiate group discussions or undertake online surveys to find out what your target audience does when they run short of cash before the next paycheck is due. The next step is to frame out a detailed description of your business, list out its activities and objectives, and how it aims to fulfill the needs of its target audience. This will help you to crystallize your thoughts and focus on the business better.
Form a Company
Payday loan businesses are required to be in the form of a corporation in most states of America so you should go ahead and establish a company, preferably an LLC (limited liability company) so that your personal assets can be protected if you make a business loss. Getting a lawyer to take care of this is the best solution. You can keep a lawyer on a retainer so that he can attend to myriad other legal stuff that you will need to run your business such as a watertight payday loan agreement that has to be signed by all your customers. You should also have a surety bond that can protect the business from getting sued or help you out in case of legal disputes.
Advertise Your Business
Unless prospective customers know of your existence, they will not approach you to take out payday loans so apart from having your business sign outside your office, you should engage in as much publicity as is possible within your limited budget. Make it a point to have a vibrant social media presence with the contacts of your local business listed and distribute flyers and put up posters advertising your business to the maximum possible. To encourage first-time customers, offer an incentive like a special discount for each referral, and rates that are very competitive and designed to encourage trials. Keep the application process simple and quick so that people are encouraged to try you out.
Install Cloud-Based Payday Loan Management Software
Using professional loan management software ensures that you are always on the ball as far as keeping track of your cash flow, delinquencies, and monitoring customers are concerned. Using robust software, especially a web-enabled one will let customers repay you digitally at their convenience; generate cash flow statements, and other financial statements online from any location of your choice. Using advanced software will free you from keeping and managing paper-based records and reconcile your accounts with the utmost ease.
According to Bloomberg, the size of the short-term bridge loan market in America is more than $90 billion annually. Payday loans are used by as many as 12 million Americans every year and despite the presence of many players, the untapped market remains huge. It can be a very attractive destination for entrepreneurs willing to set up a payday loan business.