How Do You Start a Micro Lending Company in Massachusetts?

In order to issue small loans and start working in this area, you need initial capital. Where can you get it? You can take a loan from a bank, but then the profit will be less due to the payment of interest on the loan. You can find an investor, but in order to convince him to invest in this business, you need a business plan. Let’s consider both options. We will start with a bank loan. Initially, in order to start a small business in Massachusetts, you need an amount of about $30,000.

Find a room

The room shouldn’t be big, you are not going to open a big bank branch, but it should be comfortable. The room must be located near the metro or large shopping centers so that it can be easily found. Rent will cost you about $500 per month, the contract can be concluded immediately for half a year, so you make the entire process hassle-free.

Search for workers

Let’s say, the working day in your small lending company will be 12 hours from 9 am to 9 pm. This means that workers must be recruited taking into account the shifts, let’s say the schedule is two days on, two days off. As for the staff, you need a manager, the telephone operator, the security service, the security guard, the cleaner and the cashier.

There will be 2 managers in the schedule, guards too, but you can hire a person of the near abroad as a security guard, then he will work every day from 9 am to 9 pm seven days a week.

The cashier can and should make a schedule from 9 am to 6 pm, every day. There should be no problems with the employment of personnel, only with the security service. You need a person who has worked in the authorities and has connections in order to “punch” the person.

Business registration

The suitable form of ownership for a small lending company is an individual entrepreneur. By the way, in our time, there are a lot of companies that help open an IP and in the future offer accounting support at a discount. Let’s set aside $700 per year for registration, plus an accountant. Everything is included in this amount. Besides, you will need to register a business name in Massachusetts.

Software and salary costs

Further, the computer support will cost you about $1,500, including the costs of communication, the Internet, alarms in the room, video cameras at the checkout.

Let’s allocate an amount for wages at the rate of $8 per hour.

It is wiser to take out a payday loan online for bad credit because it is easier to access and pay off. Although a payday loan comes with a high interest rate, an overpayment will be small since the loan is small and short-term. That is, for a person who wants to use such a service, the amount will not be sky-high.

Business development plan

The maximum payday loan amount is $1,000 with a maximum term of 4 weeks. You can pay weekly, or you can pay at once. You choose both cash and non-cash payment methods. You can conclude contracts with e-service providers. It is convenient for both borrowers and lenders.

Since all our profit is the interest that borrowers pay for using the loan, the lender will make the interest affordable. The terms and conditions are usually standard and do not differ from those offered by other payday lenders in Massachusetts. Important: you should repay such a loan in a timely manner and avoid delays since loan default is fraught with fines, increase APR and penalties.

How do you attract customers? Of course, the best advertisement is a recommendation from a person who has already used a loan and liked everything, that is, the so-called “word of mouth”. Basically, potential clients of payday companies are people aged 18-35 years old, you cannot lend money to younger customers by law; older people, as a rule, prefer to borrow from friends. Accordingly, advertisements should be placed on various Internet portals, forums, pop-ups and other means on the Internet. For these purposes, it is better to hire a competent specialist who, possibly, will make and promote the site. One-time payment, as a full-time employee, you do not need it. Well, let’s roughly allocate $400-$700 for this work.

If on average you issue loans in the amount of $1,500 per day, which is 10 people, then the profit can be up to $6,000 in the second month.

The amounts are huge, the risks are huge, the investments are not as big as it seems at first glance, but the competition in this area is growing rapidly.

Consider this option, the investor provided you with the start-up capital. In this case, according to the terms of the contract, he will most likely first take his amount of money with interest, and only then you will be able to make a profit if you spin up.

Risks associated with payday loans

Don’t forget about the risks. related to non-repayable loans. In this case, it is worth concluding an agreement with a collection agency, they are usually professionals in their field. There is no need to allocate a significant amount for the services of a lawyer to draw up contracts, again, this is a one-time job, you do not need a permanent lawyer in your team.

Naturally, there will be such borrowers who simply will not repay the loan – you can sue them, but this can take months. Even if you win the trial, you can get nothing from a person if he or she does not work or simply the bailiffs will not find him or her. But if you hire good telephone operators and security, the non-refund rate shouldn’t be high. In any case, the profit will cover the bad loan.

Category: General Issues

Tags: Business, finance, loans, loans online, Massachusetts