How do you start a lending money business? Now in this video, I'm going to break down the Start cost, expenses and also profit of starting this business. And then also a step by step guide to getting started.
- Oh and no I'm not talking about lending club or prosper or any other site. I'm telling you how to actually starting your own business.
Remember theirs a legal way to do this business and an illegal
way where your breaking kneecaps every Sunday. And in this video Im going to show you the legal way,
how to start a money lending business legally | Profit 1246 a week
Start-Up cost:
LLC Formations: free if don’t correctly
Licenses: depends by State ( new York charges around 3k plus other permits depending on the type of collateral being used)
- You want this if your going to be lending 50k or less and will charging more than 16% a year
Lawyer: varies by quality ( Have them on a retainer or on a need basis)
Accountant ( Have them on a retainer or on a need basis )
Compliance professionals: Anywhere between $750 an hour to $85 an hour
Actual Money to Lend:
Creating and marketing a website
Expenses:
Court fees ( Can have the person that owes the money pay for this)
Defaults on loans:
Collections fees
Team fees: lawyer, accounting compliance officer and so on
Office space ( not needed)
Employee ( not needed in the Beg)
Profits:
Depends on the volume
Example: if you have 50, 1000 dollar loans charging on average of 16% per year. Then your total income would be: $666 dollar per month
- However, you could charge more interest depending on the state and laws
- You could also take assets if they don’t pay also
Example: they need 10k, and they use their new Mercedes as collateral, they don’t pay, and you take the car and resell it for 20-30k.
Step by step of how to do it
1. Grunt Work
- Create a team: Lawyer, accounting, compliance officer
- Create an LLC and get a domain, business accounts
- Get Necessary licenses: Money lending license from your state ( check online or ask an attorney every state is different)
- Also Local or municipal licenses also
- If your business has investors, you might need to register with the SEC ( attorney)
- Learn about debt Collection Laws ( harassment is forbidding, abuse is forbidden also - however lawsuits and wage Garnish are not)
- Create Contract for the lender and Approve rules ( like this much income and credit score etc.)
- Create a Customer generating method, word of mouth, ads, or door to door ( never lend to friends or family )
- Decide the type of loans you want Secured or unsecured
- Pick Your Market
Questions:
If they Don’t pay
- garnish wages by getting a court order, you’ll to find out what bank they bank with, this is info you should know before lending money
- How much interest to charge: I’ve seen rates of 6.95 - 25% ( the key is to be competitive, and to contact your lawyer to break down the law per state )
- How do you check the persons credit, you make a request
You should request it yourself, sometimes they photoshop reports
Tips:
1. Stay local ( and focus in on a niche to show expertise; however you can also have another (department that handles the other areas and its still you)
- Especially when advertising
2. Charge fees ( origination fee, late fees, prepayment fees)
I don’t recommend charging any fee ( except a late fee, for noncommunication, late exempt if proof of the emergency is shown and depending on the borrower)
3. Pick a target market by understanding your loan capacity ( 1000 or 1million)
4. Be 1000% transparent and upfront about what you do and what you can offer them and what you expect from them
5. Build a connection with other lenders and refer to build goodwill
- Example if you focus on cash business and a real estate guy comes in, then refer him to someone else
6. Make sure the assets being used as collateral have insurance just incase
7. If lending to someone that hs a business, you’ll want him to sign a good guy guarantee so if his business fails then his still liable for the cost
Legal LoopHole;
You can lend with promissory notes and just lend at the state lending rate, and in New York, that’s 16% without having to have a license
- Once beyond 25k then you need a license
* PRO TIP*
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