Some books and infomercials make it sound like you can get started in the payday loan business with little money and a simple office and just rake in the cash. That was about 10 years ago. Now with the increased scrutiny and burdensome regulations, the payday loan business got a lot harder. In addition there is a lot more competition, both online and in many locations, with sophisticated marketing and business development. There will be a lot of time, effort and money to go into starting this business. While the rewards can be great, don’t fool yourself that the payday loan business is easy to start and be successful. Here are some tips on how to start a payday loan business.
A payday loan business by itself isn’t as profitable as it has been in the past and relying on only one stream of revenue will be mediocre at best. People need more than just loans in their daily life, so why not find additional services to give them a reason to come back for all of their financial needs? As long as you are building positive relationships with the payday loans, once these people get on their feet, they will be likely to come back for more advanced services such as ATM machines, Coin Stars, money orders, buying gold, tax returns, etc.
The biggest areas of failure for the payday loan business is having insufficient capital to provide loans, loose loan approvals and not following/staying on top of the regulations and laws which can result in serious fines and possible closure.
The return on investment is very high (in most states as of this writing) but is not without significant risk. To stay in business you have to be tough on who you lend too and be very quick to find out why a payment was missed or late. The longer you wait or more exceptions you give and your money will not be coming back. Be sure to take time in the beginning to write a business plan to plan your future before you start a payday loan business.
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