Starting a payday loan company?

[180sxboi]

Hi guys, im new to the site and basically logged on just to ask this question.

I was thinking of starting up a Payday loan business. Maybe im being naive but i was hoping to do so with a budget of £20k. This is money I have in the bank from an inheritance and I want to try and make it work. I could also start it as a partnership with my brother who would be able to add an extra £20k but I would prefer to do this on my own.

Being broken down basically I was thinking...

Up to £10k on setting up. This would include money set aside for lease payments on an office untill i got up and running, money required to set up office, the costs of any licences, legal fees etc

Then the remainder as the money i would loan out.

Being optimistic if i had the full amount loaned out I would be looking at earning £2500 per month. (ive been researching and on average these companies charge £25 per £100 and the maximum loan time is 1 month, untill their next pay date.) I would imagine I would be able to run it on my own so i wouldnt have any more wages to pay.

I am sure there are a few laughing at my optimism but in my head it appears possible.

Please feel free to coment, good or bad. I look forward to the replies.

[gtspeed]

Hi

Yes it is a good idea but you have to quite ruthless as well as the people you will deal with are at the low end of the pay scale and dont care if they dont pay you back as a CCJ etc wont bother them so a tough edge is your needed to ensure payment - I dont mean the leg breaker type but more a no tolerence to non payment. Are you take a bond of sorts ? My advise check out local companies by lending £100 and see the process might as you say cost £25 in a repayment but could be worth it.

Best of luck

Gary

[sjt]

Would you not need to be registered with someone or t'other to run a company like this (FSA etc) ?

[180sxboi]

not to sure...anyone?

[Orthentik]

I think the first stop is to obtain a consumer credit licence. I am interested in this line of business myself if anyone has any ideas let's brainstorm

[i234i]

i remember a local one was set up. similar to the point above.
the chap loaned out all the money. he was lucky to get 10% back, the people simply didnt care.

[Martin P]

200 customers borrowing £100 and your 20K would be used up

That's without your set up fees
And what about late payers keeping hold of your money?

Could be big cash flow problems. Unless you keep it really small

There are probably more safer options you could invest your money in?

[180sxboi]

Yea I know what your saying, its easy to think these things but putting them into practice is a different story. . .

[Astaroth]

Yes, will almost certainly need a license (see http://www.oft.gov.uk/advice_and_res...redit-licence/ ) and good knowledge of the consumer credit act.

At the moment there is a growing movement of "get out of your debts" type companies looking for errors or omissions in credit agreements so you will need to ensure what you have is fairly water tight otherwise lots of lending followed by lots of people saying the contract is unenforceable.

Given the current climate I am sure that the amount of people turning to these types of companies will be increasing but at the same time the amount of people defaulting will also be going up!

[sjt]

if you want to start out, why not take a look at zopa.com