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Starting a payday loan company?

Discussion in 'General Business Forum' started by 180sxboi, Nov 17, 2008.

  1. 180sxboi

    180sxboi UKBF Regular Free Member

    Posts: 4 Likes: 0
    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.
  2. gtspeed

    gtspeed UKBF Regular Free Member

    Posts: 38 Likes: 2

    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

    • Thanks Thanks x 1
  3. sjt

    sjt UKBF Regular Free Member

    Posts: 229 Likes: 22
    Would you not need to be registered with someone or t'other to run a company like this (FSA etc) ?
    Last edited: Nov 20, 2008
  4. 180sxboi

    180sxboi UKBF Regular Free Member

    Posts: 4 Likes: 0
    not to sure...anyone?
  5. Orthentik

    Orthentik UKBF Regular Free Member

    Posts: 1 Likes: 1
    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
    • Thanks Thanks x 1
  6. i234i

    i234i UKBF Regular Free Member

    Posts: 2,273 Likes: 243
    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.
  7. Martin P

    Martin P UKBF Regular Free Member

    Posts: 343 Likes: 80
    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?
  8. 180sxboi

    180sxboi UKBF Regular Free Member

    Posts: 4 Likes: 0
    Yea I know what your saying, its easy to think these things but putting them into practice is a different story. . .
  9. Astaroth

    Astaroth UKBF Regular Free Member

    Posts: 4,074 Likes: 280
    Yes, will almost certainly need a license (see http://www.oft.gov.uk/advice_and_resources/resource_base/credit-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!
  10. sjt

    sjt UKBF Regular Free Member

    Posts: 229 Likes: 22
    if you want to start out, why not take a look at zopa.com
  11. Subman

    Subman UKBF Regular Free Member

    Posts: 15 Likes: 0
    have a look at the singingpig forum. There are a number of people on there that have set up door step loan company's and there is a lot of discussion on the pro and cons. Some of them have been trading over a year now. Look out for posts by PAL and CRAIG.
  12. NetConneXions

    NetConneXions UKBF Regular Free Member

    Posts: 855 Likes: 142
    Get a job as a loan collector, that will give you some experience in what may entail. ok thats a bit OTT but.....i get the feeling it would be your first business and a loan company i dont believe would be the best option for you especially if its new to you.

    Also like someone else said, 40k isnt alot for a start up loan company.

    JEREMY HAWKE UKBF Regular Free Member

    Posts: 1,795 Likes: 594
    Wow your brave !!!

    Im struggling to get money out of some of the best companies at the moment .The last thing I would want to do is try to do the same with a bunch of chavs !!!
  14. 180sxboi

    180sxboi UKBF Regular Free Member

    Posts: 4 Likes: 0
    Ive been thinking about it over this last while and maybe it isnt such a good idea. As i said in my original post I was maybe being a bit optimistic but isnt that what this type of forum is for, all the advice has been great but i think ill put on hold for the time being, im starting a driving instructor course after christmass so ill see where that takes me for now...
  15. SusanHendricks

    SusanHendricks UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    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 payday loans scale and it starts with less interest .
  16. g5media

    g5media UKBF Contributor Free Member

    Posts: 114 Likes: 24
    SingingPig - isn't that the site dedicated that laughable Rich Dad Poor Dad stuff?
  17. BootCamp

    BootCamp UKBF Contributor Free Member

    Posts: 345 Likes: 19
    I think this is a good idea principle. I had to use one of these about a year ago. It may be a good idea to use one yourself just to see how the process works.

    The company I used set up a one off direct debit for the date you specify for the amount plus thier "interest" and on that date charged my bank. Transaction complete.

    To do this you would need, a website with the back end workings to process the transactions, take and securely store the information from the clients, and I can see that being pretty expensive.
    As has been mentioned you would probably need some affiliation with Consumer Credit of FSA, I am unsure.
    A decent advertising campaign. Forget SEO is a scam. Think where your likely clientele are going to be. I'd have thought the bookies would be a good idea!
    Finally, I reckon the average amount you would be lending out would be £300, to between 15 and 20 people, depending on how much and how widespread your advertising, meaning you'd need at least £6000 in cash flow. With a £1000 for advertising, and well, could throw a dart at the wall for the website. Probably £2-3000. Minimum. So £10k to start up, could be done. I reckon it'd earn you approx £1250 a month, minus any advertising costs and wage you wanted to take.

    Go for it.
  18. BusinessIdeas

    BusinessIdeas UKBF Regular Full Member

    Posts: 2,948 Likes: 245
    I have been running a [urlno="http://www.briteways.com"]cash loan credit company [/urlno] for many years now and it is hugely profitable. It is not payday loans, the loans are collected weekly from the customers home. Cashflow is not a problem because the growth comes from re-lending out all the collections in a particular week, so once you have put your original investment in, you can just re-invest for growth. On a small start-up say; £5000 you would need to have a second income for the first year to live on while the business grows. There are a lot of new regulations for the credit market and you need to be oft licensed. I do offer a full training program see: www.briteways.com for details - Gina :)
  19. BusinessIdeas

    BusinessIdeas UKBF Regular Full Member

    Posts: 2,948 Likes: 245
    Just wondered if the op ever got this off the ground?
  20. pete50

    pete50 UKBF Newcomer Free Member

    Posts: 21 Likes: 0
    always wondered,how do you get the money back from the non-payers?