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How to Start a Check Cashing Business

Check Cashing Business

A check-cashing business is a type of financial service provider that offers customers the ability to cash various types of checks, such as payroll checks, government-issued checks, personal checks, and more.

These businesses cater to individuals who may not have traditional bank accounts or who prefer to receive immediate cash for their checks without the wait associated with depositing them into a bank account. It’s worth noting that while check cashing businesses offer convenience, they tend to charge higher fees compared to traditional banks.

This is because they assume more risk by providing immediate cash without the same level of scrutiny that banks might apply. Additionally, these businesses often serve individuals who are unable to open or maintain bank accounts due to various reasons, such as low income, a lack of proper identification, or a history of financial problems.

Steps on How to Start a Check Cashing Business

  1. Conduct Market Research

Conducting thorough market research is essential before starting a check-cashing business. First, you will need to clearly outline what you want to achieve through your market research.

Identify the specific information you need to gather, such as potential client demographics, competition analysis, and market trends. Next, you would need to identify other check-cashing businesses and service providers in your target market.

Research their offerings, pricing models, customer reviews, strengths, and weaknesses. This will help you identify gaps in the market and differentiate your business.

Gather firsthand information by conducting surveys, interviews, or focus groups with check cashing practitioners and office managers. Ask about their pain points, challenges with check cashing, and their willingness to outsource these services.

Lastly, compile the insights from your market research into a comprehensive business plan. Outline your business goals, target market, competitive analysis, marketing strategy, financial projections, and operational plan.

a. Who is the Target Market for the Check Cashing Business?
  • Unbanked and Underbanked Individuals
  • Low-Income Individuals
  • Immigrants or non-citizens who face barriers to opening bank accounts
  • People who work temporary or seasonal jobs
  • Some individuals, such as freelancers, gig economy workers, and those who receive irregular income
  • Some individuals, such as homeless individuals or those without valid government-issued identification who may have difficulty opening bank accounts.
  • Individuals who receive government assistance, such as welfare or unemployment benefits
  • People with poor credit histories or previous banking issues.
b. Is the Check Cashing Business a Profitable Business?

A check cashing business can be profitable, but its profitability depends on various factors, including location, competition, fee structure, customer volume, and operational efficiency.

c. Are There Existing Niches in the Industry?

No, there are no existing niches when it comes to check cashing business.

d. Who are the Major Competitors?
  • ACE Cash Express
  • Check Into Cash
  • Speedy Cash
  • Advance America
  • PLS Financial Services
  • MoneyGram
  • Western Union
  • United Check Cashing
  • The Check Cashing Store
  • Amscot Financial
  • Check ‘n Go
  • Community Financial Service Center (CFSC)
  • Payroll
  • PL$ Check Cashers
  • Ohio Check Exchange
  • Florida Currency Exchange
  • Texas Check Cashers
  • Illinois Currency Exchange
  • New York Paymaster.
e. Are There County or State Regulations or Zoning Laws for Check Cashing Businesses?

Yes, there are regulations, licensing requirements, and zoning laws that govern check-cashing businesses in the United States.

However, these regulations can vary significantly from state to state. Many states require check-cashing businesses to obtain licenses or registrations to operate legally. These licenses often involve background checks, financial reviews, and compliance with specific requirements.

Some states impose limits on the fees that check-cashing businesses can charge for their services. This is intended to protect consumers from excessive fees.

Anti-Money Laundering (AML) and Know Your Customer (KYC) Regulations require financial institutions, including check-cashing businesses, to implement measures to prevent money laundering and verify the identities of their customers.

Various federal and state consumer protection laws apply to financial transactions, including check cashing. These laws ensure transparency, fair practices, and the rights of consumers. Some states have usury laws that cap the interest rates or fees that can be charged for financial services, including check cashing.

Regulations might dictate how check cashing businesses can advertise their services, ensuring that their advertisements are clear and not misleading. Local municipalities might have their own regulations regarding signage, hours of operation, and other aspects of running a business.

f. Is There a Franchise for Check Cashing Business?

Yes, there are franchise opportunities for check cashing business and some of them are:

  • Ace Cash Express
  • Check Into Cash
  • United Check Cashing
  • PLS Financial Services
  • Advance Financial
  • Cash Plus
  • Payroll
  • Express Check Advance
  • Fast Cash Pawn
  • Cash America (Now part of FirstCash, Inc.).
g. What Do You Need to Start a Check Cashing Business?
  • Business Plan
  • Office Facility
  • Legal Structure
  • Licensing and Permits
  • Business Bank Account
  • Equipment and Technology
  • Staffing
  • Insurance
  • Marketing Plan
  • Compliance Procedures.
  1. Choose a Memorable Business Name

When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable. Some of the catchy business name ideas suitable for a check cashing business are;

Creative Check Cashing Business Name ideas
  • Michael Stevenson© Check Cashing Company, Inc.
  • Owen Adams® Check Cashing Company, LLC
  • Collins Weaver© Check Cashing Company, Inc.
  • Cash Solutions® Check Cashing Company, Inc.
  • Tricia Cash™ Check Cashing Company, Inc.
  • Gillians Andersons ™ Check Cashing Company, LLC.
  • Aston Percheron© Check Cashing Company, LLC
  • Sol Perkinson® Check Cashing Company, Inc.
  • Cash Trust© Check Cashing Company, Inc.
  • Cornell Johnson© Check Cashing Company, Inc.
  • Cash Glow® Check Cashing Company, LLC
  • John Jamel® Check Cashing Company, LLC
  • Jake McNown’s™ Check Cashing Company, LLC
  • Bob McInnes© Check Cashing Company, Inc.
  • Joel Gersham® Check Cashing Company, Inc.
  • Peter Parker™ Check Cashing Company, Inc.
  • Julai Williams™ Check Cashing Company, Inc.
  • Cash Now© Check Cashing Company, Inc.
  • Debbie Wright® Check Cashing Company, LLC
  • Serah Taylor™ Check Cashing Company, Inc.
  1. Register Your Business

a. What Type of Business Structure is Best for Check Cashing Business?

Even though there are several options such as sole proprietorship, partnership, limited liability company (LLC), and corporation when it comes to the business structure for a check cashing business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because a provider wants to protect themselves from lawsuits.

Please note that an LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below.

b. Steps to Form an LLC
  • Choose a Name for Your LLC.
  • File Articles of Organization.
  • Choose a registered agent.
  • Decide on member vs. manager management.
  • Create an LLC operating agreement.
  • Comply with other tax and regulatory requirements.
  • File annual reports.
c. What Type of License is Needed to Open a Check Cashing Business?
  • Business License
  • Money Services Business (MSB) License
  • Check Casher License
  • Sales Tax Permit
  • Employer Identification Number (EIN)
  • AML (Anti-Money Laundering) Registration
  • Local Zoning and Land Use Permits
  • Signage Permit
  • Fire Department Permit (if applicable)
  • Health Department Permit (if applicable).
d. What Type of Certification is Needed to Start a Check Cashing Business?
  • Certified Anti-Money Laundering Specialist (CAMS)
  • Certified Financial Services Auditor (CFSA)
  • Certified Fraud Examiner (CFE)
  • Certified Public Accountant (CPA)
  • Certified Risk Professional (CRP)
  • Certified Regulatory Compliance Manager (CRCM).
e. What Documents are Needed to Open a Check Cashing Business?
  • Business Plan
  • Articles of Incorporation or Organization
  • Business License
  • Money Services Business (MSB) Registration
  • Check Cashing License
  • Employer Identification Number (EIN)
  • Sales Tax Permit
  • Lease Agreement or Property Deed
  • Anti-Money Laundering (AML) Compliance Program
  • Employee Identification and Employment Agreements
  • Insurance Policies (e.g., liability, property)
  • Customer Agreements and Disclosures.
f. Do You Need a Trademark, Copyright, or Patent?

For a check-cashing business, the need for a trademark, copyright, or patent would depend on the specific circumstances and services you’re providing.

A trademark is used to protect brand names, logos, and symbols that identify and distinguish goods or services. In the context of a check cashing business, you might consider trademark protection if you have a unique business name, logo, or slogan that you want to safeguard from being used by others in a confusing manner.

Patents are typically not relevant for check cashing businesses unless you’re developing a novel and useful process, method, or technology that has a unique and specific application in the field of check cashing.

  1. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Check Cashing Business?

The startup cost for a check cashing business is not uniform. But basically, a check cashing business will cost from $5,000 – $100,000 or more to start and that can easily go higher depending on your overall business goals and objectives.

b. What are the Cost Involved in Starting a Check Cashing Business?
  • 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 totaling – $1,200.
  • Marketing promotion expenses (2,000 flyers at $0.04 per copy) for the total amount of $80.
  • The cost of hiring a business consultant (writing of business plans inclusive) – $2,500.
  • Insurance (general liability, workers’ compensation, and property casualty) coverage at a total premium – $2,400.
  • The cost of accounting software, CRM software, and Payroll Software – $1,500
  • The cost of leasing an office facility (long-term lease agreement) – $45,600.
  • The cost for facility remodeling and installations – $5,000.
  • Other start-up expenses including stationery – $500
  • Phone and utility deposits will cost – ($2,500)
  • Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $30,000
  • The cost for store equipment (cash register, security, ventilation, signage) – $3,150
  • The cost of launching an official website – $600
  • The cost for our grand opening party – $3,000
  • Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Check Cashing Business?
  • The size of the check-cashing business
  • The choice of location
  • The required licenses and permits
  • The cost of hiring and paying a business consultant and attorney
  • The cost of branding, promotion, and marketing of the check cashing business
  • The cost of furnishing and equipping the check cashing business
  • The cost of the insurance policy covers
  • The cost of registering the business
  • The cost of recruiting and training your staff
  • The cost of the purchase and customizing of uniforms
  • The cost for the grand opening of the check cashing business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

It is not compulsory to build a new facility for your check cashing business. As a matter of fact, you can operate your check cashing business from a shared office, or even from a kiosk.

e. What are the Ongoing Expenses of a Check Cashing Business?
  • The cost of renting or leasing the physical space where your check cashing business operates.
  • Salaries and wages for your staff, including tellers, customer service representatives, and managers.
  • Fees for renewing licenses and permits
  • Premiums for insurance coverage
  • Expenses for maintaining and updating computer systems, software applications, and technology infrastructure.
  • Costs associated with marketing campaigns, promotions, and advertising efforts
  • Fees for maintaining compliance with industry regulations, anti-money laundering (AML) requirements, and data privacy laws.
  • Costs for professional accounting, bookkeeping services, and potentially software to manage financial records.
f. What is the Average Salary of your Staff?
  • Chief Operating Officer (Owner): $48,000 Per Year
  • Admin and HR Manager: $38,000 Per Year
  • Accountant: $38,000 Per Year
  • Check Cashing Officers: $37,000 Per Year
  • Marketing and Sales Executive: $32,000 Per Year
  • Customer Service Officer (Receptionist): $30,500 Per Year
g. How Do You Get Funding to Start a Check Cashing Business?
  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for a loan from your bank/banks
  • Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
  • Source for soft loans from your family members and friends.
  1. Write a Business Plan

a. Executive Summary

Debbie Wright® Check Cashing Company, Inc. is a financial services business located in Dallas, Texas, specializing in providing convenient and reliable check cashing solutions to the local community. Our mission is to offer accessible financial services while maintaining the highest standards of customer service, security, and compliance.

Debbie Wright® Check Cashing Company, Inc. differentiates itself by offering personalized, friendly, and secure financial services. Our experienced staff is dedicated to fostering positive relationships with customers, ensuring their transactions are handled with the utmost professionalism and care.

Debbie Wright® Check Cashing Company, Inc. is founded by Debbie Wright, a seasoned professional with extensive experience in the financial services industry.

b. Products and Service

Debbie Wright® Check Cashing Company, Inc. is committed to addressing the financial needs of individuals who may not have traditional banking relationships or prefer immediate access to their funds. We provide a range of services, including check cashing, money transfers, and bill payment.

c. Mission Statement

At Debbie Wright® Check Cashing Company, Inc., our mission is to empower individuals and communities by providing accessible and reliable financial services. We are committed to delivering personalized solutions that enhance our customers’ financial well-being while upholding the highest standards of integrity, transparency, and customer service.

Vision Statement:

Our vision at Debbie Wright® Check Cashing Company, Inc. is to be the premier provider of comprehensive financial solutions that cater to the diverse needs of our community. We envision a future where individuals have access to secure and convenient financial services, fostering financial inclusion and growth.

d. Goals and Objectives

The goals and objectives of a check cashing business are for individuals who may not have traditional bank accounts or who prefer to receive immediate cash for their checks without the wait associated with depositing them into a bank account.

e. Organizational Structure
  • Chief Operating Officer (Owner)
  • Admin and HR Manager
  • Accountant
  • Check Cashing Officers
  • Marketing and Sales Executive
  • Customer Service Officer (Receptionist)

Marketing Plan

a. SWOT Analysis
  • Founder Debbie Wright brings extensive industry experience and knowledge to the company’s operations and strategic decision-making.
  • The company’s commitment to providing personalized and friendly service sets it apart, fostering strong customer relationships and loyalty.
  • Situated in a high-traffic area of Dallas, the company benefits from excellent visibility and accessibility to potential customers.
  • Utilizing advanced technology for secure transactions and streamlined processes enhances efficiency and customer experience.
  • Actively engaging with the local community through partnerships and outreach activities helps build brand awareness and trust.
  • Starting and maintaining a check cashing business requires a significant initial investment in licensing, equipment, and staff.
  • The financial services industry is heavily regulated, and maintaining compliance with changing regulations can be complex and time-consuming.
  • The company operates in a competitive landscape, facing competition from established financial service providers and potential newcomers.
  • Relying heavily on technology for operations could lead to disruptions in case of technical issues or cyber threats.
  • The underserved population in Dallas presents a substantial opportunity to capture a significant share of the local financial services market.
  • Introducing additional financial services such as money transfers, prepaid cards, or bill payments could attract a broader customer base.
  • As the company gains trust and recognition in the local community, there’s potential to expand to other locations within and beyond Dallas.
  • Offering online and mobile services can tap into the growing demand for convenient digital financial solutions.
  • Evolving financial regulations could impact business operations and require adjustments to compliance procedures.
  • Economic downturns or financial crises could lead to reduced customer transactions and revenue.
  • The financial industry is prone to security breaches, fraud, and cyber threats, which could damage the company’s reputation and customer trust.
  • Increased competition from existing financial service providers and new entrants could put pressure on market share and profitability.
b. How Do Check Cashing Businesses Make Money?

The primary source of income for check-cashing businesses is the fee they charge customers for cashing checks. The fee is usually a percentage of the check’s total value or a fixed amount based on the check’s value. For example, a business might charge a fee of 2-3% of the check amount. The fee compensates the business for the immediate cash provided to the customer and covers operational costs.

In addition to check cashing, some businesses offer other financial services such as money orders, bill payments, money transfers, and prepaid debit cards. These services may also come with associated fees that contribute to the business’s revenue.

c. Payment Options
  • PayPal
  • Apple Pay and Google Wallet
  • Gift cards and store credit
  • Cash on service delivery.
d. Sales & Advertising Strategies
  • Use traditional methods like flyers, posters, and newspaper ads to reach local communities and inform them about your check cashing services.
  • Leverage digital platforms such as social media, search engines, and email marketing to target specific demographics.
  • Establish partnerships with local businesses that share a similar customer base. For example, collaborate with payday loan providers, convenience stores, or retail shops to cross-promote services and reach a wider audience.
  • Participate in local events, fairs, and community gatherings to raise awareness about your business.
  • Encourage your existing customers to refer friends and family members by offering incentives, discounts, or bonuses for successful referrals.
  • Run limited-time promotions or discounts on check cashing fees to attract new customers and incentivize repeat business.

Financial Projection

a. How Much Should You Charge for Your Product/Service?

Subscription-Based Fees: Monthly or annual fees for basic billing services might range from $500 to $2,000 or more, depending on the level of service and the size of the check-cashing practice.

Percentage-Based Fees: Some check cashing businesses charge a percentage of the check amount, often ranging from 1% to 3% or more. For example, if you’re cashing a $1,000 check and the fee is 2%, you would pay $20 as the fee.

Fixed-Fee Structure: Others might use a fixed-fee structure, where the fee is a predetermined amount regardless of the check’s value. Fixed fees can range from $2 to $10 or more, depending on the company and location.

Tiered Fees: Some businesses use a tiered fee structure based on the check’s value. For example, they might charge a lower fee for checks up to $500 and a higher fee for checks over $500.

Check Type: The type of check being cashed can also affect the fee. Payroll checks, government checks, personal checks, and business checks might have different fee structures.

b. How Much Profit Does Check Cashing Business Owners Make a Year?

The profit that check-cashing business owners can make in a year can vary widely depending on several factors, including the location of the business, the volume of transactions, the fee structure, operational costs, competition, and the overall economic environment.

It’s important to note that there is no fixed or guaranteed amount of profit, as it can differ significantly from one business to another. On average, check cashing businesses typically aim for profit margins ranging from 3% to 10% of their total revenue.

c. What Factors Determine the Amount of Profit to Be Made?
  • The capacity of the check-cashing business
  • The types of related service offerings
  • The location of the check cashing business
  • The management style of the check-cashing business
  • The business approach of the check cashing business
  • The advertising and marketing strategies adopted by the check cashing business
  • The number of years the check cashing business is in business
d. What is the Profit Margin of a Check Cashing Business?

The profit margin of a check cashing business is not fixed. It could range from 3 percent to 10 percent.

e. What is the Sales Forecast?
  • First Fiscal Year: $200,000
  • Second Fiscal Year: $320,000
  • Third Fiscal Year: $380,000.
  1. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for a Check Cashing Business?
  • The demography of the location
  • The purchasing power of businesses and residents of the location
  • Accessibility of the location
  • The number of check-cashing businesses in the location
  • The local laws and regulations in the community/state
  • Traffic, parking, and security et al
b. What State and City is Best to Open a Check Cashing Business?
  • Asheville, North Carolina
  • Palm Beach, Florida
  • San Francisco, California
  • Washington DC
  • Boston, Massachusetts
  • Las Vegas, Nevada
  • Los Angeles, California
  • New York City, New York
  • Washington, D.C.
  • Scottsdale, Arizona
  • Chicago, Illinois
  • Dallas-Fort Worth, Texas.
c. What Equipment is Needed to Operate a Check Cashing Business?
  • Computers
  • High-Speed Internet Connection
  • Relevant Software
  • Office Furniture
  • Printer and Scanner
  • Phone System
  • Headsets
  • File Cabinets
  • Office Supplies
  • Backup and Data Storage Solutions.
  1. Hire Employees

One good thing about a check cashing business is that it is a business that can be started and operated by an individual. But if you plan to start a standard check cashing business with the capacity to offer additional services in and around your city, then you must make plans to hire competent employees.

  1. Launch the Business Proper

In recent times, no check cashing business will open its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can choose to go for a grand opening party for all and sundry.

The bottom line is that with a proper launching of the check cashing business, you will be able to officially inform people in your city that your check cashing business is open for business.

a. What Makes a Check Cashing Business Successful?
  • Choose a good location and reliable processes to launch the business
  • Partner with leading financial institutions
  • Hire only competent, hardworking, and trustworthy staff
  • Throw an open house grand party before officially opening the check-cashing business
  • Be deliberate with your marketing sales approach
  • Encourage the use of word of mouth to promote your check-cashing business
  • Leverage all available online and offline platforms to promote your check-cashing business
b. What Happens During a Typical Day at a Check Cashing Business?

Operations start by preparing the premises and ensuring equipment functionality. Staff set up secure procedures for transactions as customers present various checks, like payroll or personal. Trained employees verify checks, confirm IDs, and process transactions, deducting fees from the cash amount.

Customer service remains paramount, aiding clients’ financial needs and ensuring AML compliance. The day concludes with reconciling transactions, recording data, and preparing for the next day.

c. What Skills and Experience Do You Need to Build a Check Cashing Business?
  • Financial Services Knowledge
  • Business Management
  • Regulatory Compliance
  • Customer Service
  • Financial Literacy
  • Risk Management
  • Sales and Marketing
  • Team Leadership
  • Technology Proficiency
  • Industry Networking.