What do you need in order to start a payday loan shop?

If starting a payday loan shop is something that you are interested in then here are some tips on how to go about it. There are many stories and urban legends of those who won millionaire status from opening a payday loan shop with as little as 500 pounds. If this is true then the shop must have opened in his Mother’s basement, where it was unlikely that any funds for rent were available. With 500 pounds, our millionaire must also have started handing out very meager loans. Even if he had slapped an eye watering APR on the teeny loans, and back then you could pick and choose your APR as you pleased, it would still take a long time to turn over the kind of profit that would take him into a shop on the high street. Anyway, who wants to start up business in their Mother’s basement? There is something a little fishy about it (or should I say ‘sharky’).

Our conclusion is that you need a lot more than 500 pounds and a healthy amount of business savvy.

Start a payday loan shop properly

As a payday lender, the basic rule is that you need money to make money. This means you are going to want to have enough money to lend out so that you get a decent return and can start to grow your business. People don’t want to come and borrow 5 pounds, they want to borrow 155 pounds. So basically a good amount to have on hand to start a payday loan shop is around 30000 pounds. You will need to use a quarter to rent and design the interior of the shop. Then you will have to spend some money marketing your shop and the rest will be for lending out. You cannot start a payday loan shop if you do not have a generous capital base with which you can begin to lend out to clients.

A franchise is another option to consider. It will add dramatically to your start up costs but at the same time your marketing and demographics are already taken care of. Under a popular franchise banner, you are guaranteed customers.

Start a payday loan shop: it seems so risky, what if my debtors don’t pay back?

First of all, it is always a good idea in the payday industry to squirrel away some funds in reserve. This is because it takes a bit of time to underwrite size up your customers. It is a matter of finding out which customers are reliable to lend to. It will take a little time and a few knocks but you should come right quick enough. Keep on top of your numbers so that you now how to project and keep your levels of default in place. Don’t be too dejected when people don’t pay back. This is part of payday! The good news is that if you d your homework and stay on top of your game, profits should be coming through the door within 3 to 6 months.