Great questions!
does this mean that you're going to have to "write off" (or what ever you call it) a good percentage of the money you put out in your first few weeks, or even months?
Yes, when starting a Brick and Mortar Payday Loan operation, you will generally have more write-offs at the beginning. It's ok. Don't ever start a business expect everything to go smoothly from day one, and don't start a business without enough capital to grow and learn. It will take some time before you start making profits. For example, one VERY common mistake for a new Payday Lender is to focus too heavily on underwriting, as opposed to just getting money on the street. It's common that some lenders NEVER get away from that mistake (hey, they're just trying to protect their money!) and will never see the money they could have made.
Someone was telling me once that only about 5% of loans made (on average) go bad.. That's frighteningly high, but, not when you're charging 400%..
Make sure you know how to accurately calculate APR's. 400% APR on a 1 week loan differs greatly from that of a 2 week loan, and it differs GREATLY from say a 3.6% APR on a 30-year loan. Know them all. It's your money. Play around with these...
http://www.creditprovide.com/calculator/paydayloancalculator.htmlhttp://www.efunda.com/formulae/finance/apr_solver.cfmHow can someone with bad credit who doesn't have the capital for a B&M location get started? Obviously, even operating out of my home I'd have to have a license.
I have seen postings in our classified section in the past where you could "borrow to lend" if you don't have the capital. I have known (but would not outright suggest you to) people who have started by running out of a "home-office" WITHOUT licensing to get started. Of course you would have to be uber-careful about collections, and....prepared for the consequences!
Do people really have hundreds or even millions on the street bringing back 200+% annual returns? REALLY?
Once again, it's not as if someone is taking out any of these loans ANNUALLY, so I would encourage you to do the following....
- Keep learning as much as you can!
- Invest in yourself, by purchasing the "Trihouse Payday Lending" guide. No joke, it's the industry standard. You can get it here
http://www.paydayloanindustry.com/ and feel free to tell him Gabe sent ya!! Jer (the author) is a great guy, so feel free to drop him a line/email as well!
- I also offer consulting services, so if you are serious about getting this up and running, I would suggest investing in a few hours worth of hands-on consultation that way we can speak directly about specifics, you can learn more about your STATE LEGISLATION (one of the most important things we haven't covered yet), licensing and more.
Realistically, the few hundred $$ you spend on getting the Trihouse guide and some one-on-one advice can save you literally thousands your first year alone.
Well, good luck and feel free to drop me an email if you need any more Payday Lending Info!
gabe.rodriguez@synapticdatabase.comI really don't think I want to deal with the consequences of a "basement operation"
I can only imagine what I could be charged with .. multiple felonies, I'm sure.
Especially if I was serious about collection
I think you made a very good point about not starting a business with too little money. I think I've read that 80% of small businesses fail within their first year and a very high percentage of them do fail due to being under funded.
I'd definitely be one who'd be more focused on "getting money out there".. I'd want to get as much as I could out, period.. I've seen the power of one month and installment loans and I love it..
Another good point you've made... state laws and what regulations are in place. I would never want to do something like this in the ridiculous state I live in. Business owners here can't turn around and pee behind the building without being harassed, leaned on and shut down.
Would you think Florida or California would be better for this business?
It's going to take time for me to even be able to think about opening a store because I have to get some other things right in my life, first, but it's one heck of a goal to shoot for. The more I know about this business, the more it makes my heart race.. And it takes something pretty amazing to impress me. I've not had a b&m presence, before, but I've seen and done it all out on the street. I've bought and sold things all of my life. I love business, no matter what it is.
If it's something I can double my money on I'll buy it. If it's something I can get a good return out of I'll get into it. I don't know if you can have them in your state but look into quarter pushers. The ROI is just insane. It's ridiculous. You buy the thing for a grand and it can make up to $300 per week.
I had one and was ready to buy ten more and this state I live in decided to come in and confiscate them from everyone. They made a big production of running a bobcat over them on the news. I truly do live in the middle of h*ll. I did manage to save mine, though, and I had paid only $250 for it (which I got back before I had to take it down)... and then I had to sell it for $400
I never lose money on anything.. I just won't have any to work with for quite some time
I appreciate this opportunity to be on here learning about such a fascinating business!!
