Starting a loan company

[julien515]

I'm trying to start a loan company, its going to offer short term consumer loans to people similar to a payday loan. does anybody know if any licences are required to issue loans to people? does anybody have any advice or tips about the loan business? any help would be great

[Mariusz]

in which country u want operate ?

[new wave]

Have at least half million dollars and expect to have a loan default of 30% or more. 10% of your loans will have to be written off because borrowers simply won't or can't pay it back. The other 20% will have late payments or long term defaults . If you sell these loans to a collection firm, you'll sell for pennies on the dollar .

You'll need a constant flow of cash and new blood to offset the 30% loses. Why do you think financial firms are so cut throat and aggressive?

As far as a license, you'll need to contact the state banking dept and ask about what contract is needed. Here its called a " differed presentment license" but they have different names .

[julien515]

500,000 are u serious? there's payday loan stores all over the country, ur telling me all these people had that type of money laying around to start their business?

[new wave]

yes. If you think you can bankroll this with 100k or less you'd be wrong. Oh and get ready to shell out about 5000 or more for some good loan origination software.

[julien515]

Do you know how I could go about getting a loan? or maybe some VC funding?

[new wave]

If you got a loan that wouldn't help you. Suppose you get a loan with payments at 6%, and you take that money and re-loan it out at 17.5% (industry standard ), you're making a net of 11.5%. Now what are you going to do when your payments are 30,000 a month (assuming you borrow 500k) and 30% of your customers dont pay?.. now you have a $9,000 dollar gap you have to make up for. Is that coming out of your pocket?

It doesn't make sense to get a loan and re-loan money. You'll be torn between the bank and the i-dont-give-a-fuck customers.

[new wave]

Why do you want to start this type of business anyway?

if you want to get into something like this, go into the rent-to-own business model. Buy a pallet of big screen tv's for a few grand at least. Start a website and let customers rent your tv's for x amount a month (until they pay it off). If they default, charge high rates and take back the item and re-rent it to someone else. Have a lawyer draft a contract .

[julien515]

That could maybe work but what if someone defaults on their payment? how am i supposed to retrieve the T.V."or any other product"? My business will be headquartered in maryland, if some in texas orders a T.V. from me and then don't make the payment who will retrieve it for me?

[new wave]

you dont sell the tv in texas. its all local. But because you're not lending money, it should be easier to start form a regulations stand point. Thats just my guess anyway.