How to Set Up a Private Lending Business
The economy thrives on private lending businesses. Every consumer is not able to borrow from major banks so that is where private lending businesses come in. These private lending agencies are vital to the financial successes of small and large businesses.
- Draw up a business plan for your private lending business. No matter what kind of business you are starting, you need to have a business plan. A business plan includes short and long-term goals for your company, start-up costs and an advertising strategy.
- Gather funds to start your private lending business. Since you are starting a lending company, you cannot simply borrow money from a bank. A bank does not lend out money to an individual wanting to lend money to other consumers. There is no collateral for this type of business so banks are not the place to ask for a business loan. Instead, you need to ask friends, family and potential investors. Having a business plan at this point is also vital because potential investors need to see it.
- Decide on a potential loan contract for your customers. You need a plan in place for those wanting to borrow money from your private lending business. In this contract, decide how much interest needs to be paid based on the rate you are charging. Each contract will vary by person, but it is okay to have a contract started and to make changes as you see fit. You need to screen applicants in a careful manner due to fraud. Check credit scores and references for potential borrowers.
- Market your private lending business. Have an open house for your potential customers and show them your new business. Make customers feel welcome and invited. Share with your budding customers what makes you stand out from other lenders.