Do you want to start a cash advance company from scratch? Or you need a sample cash advance service business plan template? If YES, then i advice you read on.
Being an entrepreneur is all about discovering a challenge in your city and then proffering a solution. Loads of people would be willing to pay you when you offer solutions to their problems.
One of the challenges people go through is the challenge of raising finance to take care of their emergencies when it arises. For this reason, if you know that you have the financial strength and you can easily access loans from your bank, then you should consider starting your own cash advance business.
Cash advance business is a business that involves giving out quick loans to people who can’t approach the bank because they don’t have the required collateral or those who need the money urgently and can’t wait for the full circle of processing loans from the bank. Of course the interest rate for cash advance varies, but it is often higher than what one can get from the bank. This is so because of the risk involve in this type of business.
No doubt starting a cash advance business requires huge start – up capital, the fact remains that it is a profitable venture. It is important to state that cash advance business is a highly risky venture, because you stand the chance of getting your money trapped by those who for one reasons or the other won’t be able to pay back the loans they got with interest.
Not withstanding the risk involved in this type of business, you can start a Cash advance business and make some good money from the business because a lot of people are always in need of small cash to sort out some bills before the next pay check arrives. Let’s look at factors to consider before starting a Payday loan business and how to get started with the business:
3 Factors to Consider When Starting a Cash Advance Business
- Risk Involved-: I mentioned earlier that there are some risks involved in a Cash advance business. For instance, owing to the fact that you don’t carry out a thorough financial check on your Customers before issuing them the loan and Customers do not drop any form of collateral before you issue them the loan, there are higher chances that they will do away with your money without paying back when the agreed time comes.
Always know your risk bearing ability and set your maximum amount accordingly. If the maximum amount you can afford to loose for a single transaction is $1,500, then make it the maximum amount any Customer can advance at a time.
- Capital-: This business is kind of cash intensive; you will need to have a lot of money within your disposal to advance to your customers. Apart from the money you advance to customers and the money to rent a shop, you may not need to spend a lot of money to run the business.
- Interest Rate-: The next factor, you have to consider before you venture into this business is the interest rate. Some States stipulate an interest rate of between 10% and 35%; but the annual interest rate goes as high as 450% or more. You have to consider the interest rate stipulated by your State to know if it can cover the cost of running the business and the risk of bad debts before you set up your business.
Now if you are sure that this is the right business for you, then you need to follow these 10 steps to establish your own cash advance business and then grow it to profitability within the shortest time possible;
Starting a Cash Advance Service – Sample Business Plan Template
1. Register Your Business
It is very important that you chose a Business Name for your cash advance business and then register the business. There are loads of benefits you stand to gain when you register your business with the corporate affairs commission of your country.
The truth is that when your company is registered, you can sue any loan defaulter as a company. Besides, it is only when you register your company that you are issued a Tax Payer’s ID and you will have the access to operate legally in your country. So ensure that you sort out the registration of your company before opening your door for business.
2. Get a Business Operating License-: You need to obtain a business permit or license or permit to run any form of business in any States in the U.S. The Town County is in charge of issuing out business license for business. You need to visit the Town County in our area to apply for a business license.
If you are going to employ workers for your business, then you also need to apply for an Employers Identification Number (EIN); not forgetting to also apply for a Tax Identification Number (TIN) from the IRS department in your State. With these, you can run your business without can legal issue from the State.
You should be able to come up with a good business plan before starting out with your cash advance business. You should be able to answer certain key business questions before committing your cash and time to any business. Your cash advance business plan will guide you on how to run your business, how to source for fund and how to make profits and expand your business.
One thing about cash advance business is that you would need liquid cash per – time to be able to meet the demand of your client, and your business plan is one of the tools you can use to convince investors to invest in your business and also to convince the bank to issue you loan.
The fact that you are into the business of giving out loans to people makes your capital base your most important tool. Good enough if you have a good credit rating with your bank, you can easily access loan when you need it.
You can as well generate capital from investors, and also from your family and friends. On the average, you would need a liquid capital base between $20,000 and $200,000 to be able to run a cash advance business that can meet the need of your clients.
It is always advisable not to run a cash advance business from your house. If you have made up your mind to start your own cash advance business, then you should consult your real estate agent to help you get a decent office space in a good location. Well, if you want to cut down your start – up cost and also if you want to keep your running cost to the barest minimum, then you can look for someone to share office space with.
The office should contain basic things you need to run the business like a Safe, a cash register, a computer with an internet connection; that is if you are going to offer your services online. The bottom line is that, you should not run this kind of business from your home; doing this will expose you and your family members to some of the hazard that is common with this kind of business.
6. Draft Your Contract
It is no doubt that cash advance business is a high risk venture because of the possibility of people absconding with your money, or the risk of being robbed at gun point. So one of the basic things you need to put in place is a contract (document) that will clearly state interest rates, terms and conditions of your business.
The truth is that, your contract document is one of the things you can take to court if the need arises for you to sue your client. So, what you need to do is to contact your lawyer to help you draft good contract document for your cash advance business. Before issuing out loans to your clients, double check the contract document to be sure that it is properly filled and signed.
7. Get Business Insurance Cover-: I have mentioned earlier that there are some risks involved in running a cash advance business like the risk of bad debt. A good way to minimize the risk is to get a business insurance that will cover for bad debts. This type of insurance package may be on the high side but you need save you a lot of money in the future.
8. Open Your Door and Let People Know What You Do
The last step to follow is to open up your door for business. You should look for ways to attract people who are looking for quick loans. Lastly, you would require some form of training and certification in finance and also it pays you to acquire relevant experience before launching your own cash advance business.
The training and experience you gather will help you with interest calculations et al. As a matter of fact, it is advisable to work in the bank as a loan officer before starting this kind of business. It will afford you the experience of properly screening loan applicants.
9. Advertise Your Business-: If you were successful in securing a Store in the busy part of the town, people will naturally locate your store to get some loan advance from you. Other ways that you can advertise your business include: sharing fliers and posters round town to notify people of the new Cash advance service.
Your rates and terms should be printed out boldly on the flier, so that anybody coming to your Store to get a loan advance should have read through your rates, terms and conditions and is okay with them; this will help to keep away time wasters.
10. Carry Out Background Check-: Though this business doesn’t afford you enough time to carry out a thorough background and financial check on your Customers before you advance them the needed cash, that does not mean you cannot ask for an evidence from them to ensure that they will meet up with the financial obligation.
You can ask for a Payday check from the Customer to verify that the Customer is working with said company he claims to work with. Also, you can ask for a post dated check from your Customer which can be cashed out after they have received their pay check.
There you have it; the 10 steps needed to be able to start your own cash advance business from the scratch and build it to profitability within record time.
At this stage, I have covered the basic function of a Cash advance business, factors to consider when a person wants to start a Cash advance business and also steps to starting a Cash advance business.
Remember that there is much money to be made from this business, but you have to tighten you terms and conditions for advancing loans to reduce the risk that comes with the business and also get a business insurance policy for bad or irrecoverable debts.
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