Starting a career in money lending? Important steps to consider
Today, many people want to venture into the world of money lending! Over the years, there have been various banks and financial institutions that have granted standard loans. But when it's a smaller amount to fund a start-up, banks at times fail to understand and cater to the borrower need. Or even if the borrower loans out a certain sum of money, the loan repayment terms and interest are not very easy.
This scenario has compelled many people to start their career in money lending! The thought is exciting, and the business reviews suggest that it's a profitable business. But when you get to work, you know that effective planning is essential.
Building a career in money lending or starting a money lending business careful planning. Before you start, you can read about successful companies who have established their names in the money lending arena. To know more about this, you can read more on Liberty Lending.
Also, you need to follow some essential steps to get started. You can refer to the crucial steps mentioned below.
- Raise the lending capital
You need to acquire sufficient capital from somewhere to start your money lending business. Earlier, there were ace venture capital investors who helped interested business persons to get started. And unless you are into pay-day loans, you need to source out money beforehand. Today, raising the lending capital has become simpler. However, it still is one of the most challenging aspects. To expand your business, you require a talent pool of capital markets. It will make sure that you are equipped with sufficient lending capital, which doesn't cost much.
The reputed banks today have their deposits, which source from people’s savings account. And for this, they pay even lesser than 1% every year. On the other hand, prominent non-banks can borrow money at the same rates. Hence, any start-up will always be at a disadvantageous position here. It is because they need to borrow at a very high rate. The other option is they might lend from their balance sheet.
Additionally, cheap capital is essential. However, it's not a necessary ingredient to succeed as the reputed market players are paying close to nothing for the capital. Hence, it is essential to connect with people who want to pay a huge amount for you to loan money. It is one of the pre-requisites to start a money lending business.
- You need to acquire the customers
The moment you have enough capital to start your business, you need to hop to the second step! You have to begin customer acquisition. Sometimes, it is a costly process. But to get started, you need a correct and distinctive customer acquisition strategy. It is the secret to your money lending business start. Make your strategy unique to your set of needs and business objects. That makes gives the plan its distinctive "trait" and makes it hard for any other start-up to copy your strategy. Useful customer acquisition channels usually come from the following:
- A particular customer profile
Do you have a customer segment? If not, you need to create that right at the start. You can have students, budding artists, aspiring business owners, and entrepreneurs as your target audience. It will enable you to advertise on the main channels that come cheap. Try and customize the marketing materials to sync in with the target customer profile. So, when you finally advertise on the main channels, the conversion rates are more instead of the conventional lenders. Also, when you have your specified target customers, you get an underwriting edge as well. It will enable you to lend at lesser rates as compared to any other.
- Consider the location
It indicates that you can provide the loans in a site which isn't accessible to other lenders. It generally is a blend of business relationships and technology. An excellent example would right during a conversation with an ace contractor for a home remodeling project.
- Underwriting the borrowers
The process of underwriting is another way to outshine the reputed lenders. When you opt-in for excellent underwriting it helps in two things:
- You can lend to those customers who others have rejected
- Providing improved interest rate to a chosen category of people
You can get this done via distinctive data sources, superior business perspectives, and insights, and implementing an excellent business model. Also, you need to provide excellent facilities for the customers for repaying loans.
- Retaining your customers
It is essential to keep your customers to grow your business. For this, you need to set up an excellent customer care department, which can take in customer queries and address it to their best capacity. Also, you should try and loan out small amounts that small start-ups might require. Usually, reputed and big banks decline the small start-ups. When you provide them better loan scopes and interest, it will act as word of mouth publicity for you. Your existing customers will stay, and the publicity will fetch you more clients. You can also revise the penalties and not make it as harsh as other established banks or financial institutions.
- Get the technology correct
If you want to be a success in the money lending business today, you need to get a website. It will be a point of reference for your existing as well as potential clients. Make sure that your website contains the necessary loan and your contact details. Also, mention your business objective and the loan acquiring process. It will make your website reach to the correct candidates. Upload any forms and documents that your customers must read before applying for a loan. Also, keep a customer query channel or mention an email address, where interested customers can write to you. You should also secure your website with the correct encryption method so that users can navigate through a secure site.
These are some of the essential steps that you need to follow for establishing a money lending business. You can start small, but it's essential to maintain quality service and be steady at your game. You can keep on implementing the best business practice that other leaders in the business have done to become successful.