Do you want to start a payday loan business and want to know the cost? If YES, here is a cost breakdown to open a payday loan firm and the profit margin/ROI. Payday loan firms are businesses that offer payday loans, installment loans and other related financial services. They may also cash checks, drafts or money orders for the general public. It is important to state that banks and firms that operate exclusively online are not part of the Payday Loan and Check Cashing Services business.

Basically, payday loan services are small business operators servicing a wide range of clients. If you are considering starting a payday loan business in the United States, you are likely not going to get it wrong because there is a ready market for the services you will be rendering.

Estimated Cost Breakdown to Open a Payday Loan and Check Cashing Business

When it comes to starting a payday loan and check cashing services business, the major areas that you look towards spending the bulk of your cash is in renting or leasing an office facility in a conspicuous location and pooling cash together that will be used as your operation.

Aside from that, you are expected to pay your employees, pay your utility bills, maintain and fuel your official cars. These are the key areas where you are expected to spend your startup capital on;

  • The total fee for registering the business in the United States of America – $750.
  • Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines and other software) – $3,300.
  • Marketing promotion expenses for the grand opening of the payday loan and check cashing services firm in the amount of $1,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $1,580.
  • The total cost for hiring a business consultant including writing a business plan – $2,500.
  • The total cost for the purchase of insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
  • The cost for payment of rent for a small office space for 12 months at $1.76 per square feet in the total amount of $10,600.
  • The cost for remodeling the office facility (construction of racks and shelves, painting and beautifications) – $3,000
  • Operational capital – $100,000
  • Other start-up expenses including stationery ($100) and phone and utility deposits ($500) – $600
  • Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $9,000
  • The cost for start-up inventory (stationery, printing papers, and refillable ink jacket et al)- $800
  • The cost for store equipment (cash register, security, ventilation, signage) – $750
  • The cost for the purchase of pool cars (2) – $10,000
  • The cost of purchase and installation of CCTVs: $800
  • The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al): $4,000.
  • The cost of launching a website: $600
  • Miscellaneous: $2,000

From the rough estimate as listed above, you would need a minimum of one hundred and fifty – three thousand six hundred and eighty USD ($153,680) to establish a medium – scale but standard payday loan and check cashing services firm in any city in the United States of America. Please note that this amount includes the salaries of all the staff for the first three months of operation.

Please note that this is a rough estimate and we usually advise our readers who are interested in starting a payday loan and check cashing services firm to go to the market or directly contact wholesalers and suppliers of all that you would need in order to get the real time prices of these items. The truth is that if you are a good bargainer, you can get a better deal that will help you beat down the estimated price as listed above.

7 Factors That Determine How Much It Cost to Open a Payday Loan Business

The truth is that some of the factors may not apply to you, because the business model and of course the picture of the kind of business a person wants to build would also affect the overall cost of the business. These factors are unique to each individual and this article may not cover such. Having said that, here are 7 factors that will influence the cost of opening a payday loan business in the United States of America;

1. The Cost for Registering the Business

The cost for registering the payday loan business is no doubt one of the major cost that will influence the overall cost of opening a payday loan business in the United States of America. As a matter of fact, you cannot legally operate any business in the United States or most countries of the world.

Although, the cost of registering a business an obtaining all the needed document that will give you the leeway to operate without any obstacle is affordable, it will no doubt add to the overall cost of opening a payday loan business in the United States of America.

2. Your Working Capital

Another major factor that will determine the cost of opening a payday loan business in the United States of America is your working capital. The fact that payday loans are designed for people who need a quick injection of money before their next paycheck means that anyone who is interested in opening a payday loan business must ensure that they have working capital because it is from their working capital that they can issue out short – term loans. In actual sense, the purpose of a payday loan is fast, easy money to take care of life’s little emergencies.

A payday loan is a short-term, high-interest loan. The usual amount of the loan is between $50 and $500 but overall, the average payday loan is $350 on a two-week term, according to the CFPB. But payday loans can range from $50 to $1,000, depending on your state’s laws.

Currently, 32 states allow payday lending with a capped maximum loan amount. Please note that you are expected to check up with your state law to know the minimum capitalization required from anyone who is interested in starting a payday loan business.

3. The Cost for the Required Insurance Policy, Licenses and Permits

In the United States of America, you cannot open a business such as a payday loan business without first applying for the mandatory license and permits and also buying the required insurance policy covers. Of course, you would need building license, zonal permits, and signage permits amongst others that may be unique to different cities and states.

As expected, these license ad permits cost money and it will influence the overall cost of opening a payday loan in the United States of America. Please note that there may be several inspections you must pass before you can be issued your licenses and permits and begin operation – this will also cost you money.

In order to get the overall cost of licensing and permits associated with opening a new payday loan business in the United States, we will advise that you reach out to your city government to find out what you need for your payday loan business. You also need to consider state and federal requirements, so do your homework long before you set a date for the grand opening of your payday loan business.

4. The Cost for Renting/ Leasing, Furnishing and Equipping the Payday loan Office Facility

Another factor that will determine the cost of opening a payday loan business is of course, the cost of renting / leasing, furnishing and equipping the office facility. You will quite agree that aside from the basic facilities that are expected to be found in an office facility, an investor that wants to open a payday loan business may decide to spend more than expected to furnish and equip the office facility to look unique.

As expected, before you can open a payday loan, you should budget and buy computers, printers, internet facility, office furniture (table, stools and sofas), telephones, filing cabinets), office equipment (cash register, security and fire alarm and protection gadgets, CCTV, ventilation, signage), fire and projector amongst others. All these will cost money and it will influence the overall cost of opening a payday loan business in the United States of America.

5. The Cost of Hiring and Paying a Business Consultant and Attorney

As expected, if you want to get your business started on the right foundation, it will be a wise decision to hire the services of a competent business consultant and perhaps an attorney. For example, a business consultant will help with drafting a workable payday loan business plan document for the business, a marketing plan and strategy, comprehensive SWOT analysis for the business, and other advisory or things that will help you with opening the business.

So also, an attorney will help you with registering the business, drafting contract documents and offer you all the legal expertise that will help you start the business on the right foundation. Of course, you will agree that these services will cost you money and it will indeed influence the overall cost of opening a payday loan business in the United States of America.

6. The Cost for Branding, Promotion and Marketing of the Payday Loan Business

The cost for branding, promoting and marketing the payday loan business is yet another key factor that will determine the overall cost of opening a payday loan business in the United States of America. Trust me, if you need massive results as it relates to competing and winning a fair share of the available market in your city, then you must be willing to pay for effective branding, promotion and marketing of your new payday loan business.

As a matter of fact, it is not cheap to come by an expert in branding, promotion and marketing that will help you compete with brands that are already determining the market direction of the Payday Loan and Check Cashing Services industry in your city. So, if you add the cost of paying a branding and marketing expert, it will sure increase the cost of opening your payday loan business.

7. Cost of Recruiting and Training Your Staff and Grand Opening of the Payday Loan Business

The fact that you are opening your payday loan business as a new business means that you are expected to recruit and train your staff to conform to the picture of the kind of payday loan business you want to operate. The training will help you sell the corporate culture of your organization to the new employees.

As expected, it will cost you money to hire expect trainers that will help you train and bring your new hires up to speed and that will add to the overall cost of opening a payday loan. So also, in recent times, no business opens its door for business without first organizing an opening party to officially launch the business.

This means that the cost of grand opening of a payday loan business is part of the factor that will determine the overall cost of opening a payday loan business in the United States of America.

You can choose to do a soft opening if you operating on a low budget or you can choose to go for grand opening party for all and sundry in the location where your payday loan office will be located. The bottom line is that it is a cost that must be part of your budget and this cost will influence the overall cost of opening the payday loan business in the United States of America.

In Conclusion,

These are some of the factors that will determine the overall cost of opening a payday loan business in the United States of America.

Please note that there are other factors not listed above that will sure influence the overall cost of opening your payday loan business like buying a payday loan franchise. Which is why we will advise that you work with a result driven business consultant in your city to give you the needed guide and info as it relates to the unique factor in your location that will influence the overall cost of opening your payday loan business in the United States of America.

Solomon. O'Chucks