With our buy now, pay later society Britons seem to be getting more and more in debt. We expect to be able to borrow money to tide us over, buy that luxury item we want or just to go on holiday to get away from the stress of our debt!
Of course with the poor credit rating some people have, getting credit is not easy so there’s an increasing number of small businesses offering small cash loans. While it’s not a business idea that appeals to me (I’m generally against getting into debt and I believe what we should all be doing is cutting back on spending to live within our means, consolidating any debt and paying it of as soon as possible) I do see the opportunities there are.
It’s a fairly simple business model, you lend out cash each week and collect a percentage repayment plus interest each week from then on until the debt and interest is repaid in full.
On the plus side it’s a very simple “sell” as most of the clients will self select and are probably what marketers call distress purchasers so you won’t have to be the world’s best salesman to make a success of it.
There are downsides however, you will need to be morally comfortable with encouraging people to get into more debt and given that a high percentage of your customers are going to be coming to you with an adverse credit rating you do run the risk of them defaulting on their loans. You will also need to be prepared to visit your clients on a weekly basis to make collections and issue new loans. People skills are a must!
To get started you just need some capital (which is what you’ll lend out at first), a little cash to buy leaflets for marketing and around £135 for a Consumer Credit License (CCL). If you’re new to the business I would also suggest you either consult someone already in the business or buy one of the manuals about the business (There’s a good thread on Singing Pig about one such system), however I have no personal experience of these manuals so can not recommend any of them over any of the others. You will obviously need to be based in an area with a sufficiently large population.
The level of capital investment required will depend on your target income, the more you lend out the more interest you’ll be collecting. I advise you to limit the amount you lend out until you are comfortable running the business - always minimize your downside risk.
To get started read the article on Singing Pig and decide if you want to try the manual mentioned there.
This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
Well where do I start? I run the website mentioned in this article http://www.briteways.com I would like to address the matter of morality when contemplating a business of this nature. The Return on investment for this type of business is not as high as people may believe. On a £100 loan you would make £30 profit if you copy our model, and that is before any overheads or bad debt from none or slow payers is incurred. This amount of ROI is comparable to many retail situations where you might buy stock for £100 amd resell it for £150 or £160. Of course we also make sure that the people we lend to are not overloaded with too much debt. Why would you kill a golden goose? Unlike the mortage companies (who I presume most people think of as the “respectable” face of borrowing) none of our customers will ever have to repay hundreds of thousands of pounds in interest. In fact the profit from one individual customer amounts to only a few hundred pounds a year. The real profits are accrued from the numbers of customers you can serve. This can run into thousands if you use self empoyed collectors to share the work load. So do the maths! if one customer makes you a profit of £200 a year. Times that by 1000 and obviously you are making £200,000 a year!! This is a simple business model on the surface, but there are many pitfalls for the ill informed lender. For what our manual costs compared to the potential losses I would advise you to buy the manual, but there again i would say that wouldn’t I?
Vinny,
Thanks for commenting. I for one do not believe that the morality of the business is defined on the ROI, in fact I tend to believe that many of the high street banks and mortgage companies are some of the worst offenders when it comes to debt.