How to Start a Payday Loan Business?

Narendra Kumar

31 Dec, 2020

Money may not be all that it’s cracked up to be but, at the same time who doesn’t want a few extra money in their pocket? No person in the world has enough money in the pocket!! Everybody once in their life has faced the situation of cash broke. Payday Loan business is like a credit card that offers the facility to people to turn with handful money when there are in cash broke situation. Many people take the advantages of these payday loans as they are offered by non-bank companies and are easy to avail. These loans allow the borrower enough funds to get the road cross to pay next day upon which the loan and interest become due.

Paydays loans are highly marketed to people who have difficulty in making ends meet each month and once you start taking out the payday’s loans it becomes much easy to lie upon them. This market is flourishing with the ample number of customers around.

A payday loan business lends the money to the customers on short notice to clear their paychecks. Each paycheck is used as the collateral on each loan. These types of loans are usually the short term and the rather risky. And this is the reason that the payday loans are quite profitable for lenders. The procedure is not that complex as it seems it is very easy to start a payday loan business if you shake hands with the right company.

Two Backpacks You need for Starting the Payday Loan Business

• NBFC Registration
• Business Plan

The first thing you need to do is a strong Business Plan including a list of the assets and data on the prospective payday loan clients. It includes a detailed marketing plan that attracts the customer with telephone book advertising, vibrating signage, direct mail and networking with others financial institution. Carved these plans carefully and contact an accountant or use a business plan to the template to guide you.

The second thing you need to do is to form a corporation. It is also wise to incorporate an NBFC so that it can protect your personal assets and keep them separate from those owned by the business.

Now, what you need to form an NBFC (Non-Banking Financial Company) in India. A firm that specializes in NBFC Registration can be neighborly. You may have to loosen your pocket as a filing fee depending upon the type of corporation you form. It is prudent to incorporate an NBFC first for your payday loan business.

How to Setup Payday Loan Business in India?

For setting up any type of Loan Company in India, one needs to apply for NBFC License with RBI. For NBFC registration our team of professionals will file a prescribed application online on the website of the RBI (Reserve bank of India) and set of documents will be submitted with the regional office of the RBI (Reserve Bank of India)^[1]. RBI will verify an application and thereafter Certificate of Registration will be issued. This process usually takes around 90 days.

Before applying for an NBFC license, a company will be incorporated with the Registrar of Companies. For NBFC license, the following are the basic requirements:

• A company must be registered either as Private Limited Company or Public Limited Company
• There is a required minimum net owned of Rs. 2 Crore.

Important Stairs to Step on for Starting Payday Loan Company

• Select a method of Lending
  

Find a posh location in the busy retail area if you thinking to take office on rent. Storefronts are the best choice and if you want to go online then a small office with two or three-room as well as sufficient. Don’t be a miser, contact a real estate agent experienced in finding the property for retail businesses.

• Secure a Line of Credit
  

Ring up with a commercial lender and discuss with your representative the business plans, license, and financials. If you qualified it, your lender will issue you a line of credit to serve as your operating capital from which to make loans. Bring out the best interest rate possible. Keep that in mind that your credit score and assets will determine the amount of credit and rate for which you qualify.

• Set Pricing on your loan
  

Keep an eye on your competitor, ask what interest rates and finance fees they charge. Be competitive. It may happen; some of your interest rates will be determined by the rate you are paying the bank. Don’t offer risky loans.