Private money lending services are mostly offered by organisations and individuals who do not conform to credit conditions that mainstream lenders such as banks impose on borrowers. This means that there is significantly less regulation and “red tape”. Despite the fact that more risks are associated with private money lending, it is a fulfilling career to help entrepreneurs that need quick cash. Here is the process you need to go through to become a licensed money lender.
Before you are allowed to operate as a legal money lender, you must find a name for your company and obtain a physical address. You must also provide details such as phone and fax numbers irrespective of the structure of your money lending business. Before settling on a particular name, contact the local business registration office to reserve your ideal company name.
Financial matters are highly intricate. Therefore, it is advisable to plan early since a business plan is a roadmap that will keep your company on track. You should also ensure that any appropriate business software that is necessary is purchased beforehand. This will help you formulate parameters such as the maximum and minimum loan amounts, and interest rates. Come up with financial projections including break-even points, legal costs, projected income, and other expenses.
Once a business plan has been drawn, you should go ahead and develop an underwriting and risk management program, which is meant to protect your investment against unforeseen circumstances. This is particularly important if you plan to bring other investors on board. In this case, you have the responsibility of managing the risks associated with private money lending appropriately. A risk management program then not only protects the business but also shields you from litigation if the business fails or you suffer immense losses.
Any legal money lender that is new in business needs an experienced and competent management team, which will help it navigate the early stages of operation. The team must have experience in private money lending since this adds to the credibility of your new business. Besides this, it makes it easier for you to raise investment capital. After the management team has been hired, you can go ahead and recruit the rest of your workforce.
For your private money lending business to be successful, you must plan ahead. This may entail laying down strategies to counter situations such as refusal by borrowers to services their loans. In line with this, you should be ready to go through foreclosure processes when borrowers default on their payments.
To understand the private money lending business, you should befriend lenders who have been in business for a long time. This will prepare you for the nuances of private money lending. Also, it gives you the opportunity to identify and capitalise about the possibilities. You should certainly understand the various loans that a licensed money lender can offer.