When we’re talking about side hustles or businesses that you can run from your own home, a cash advance business is often overlooked in favour of other methods. You can find a plethora of articles about selling your creations, content writing or other methods of remote working, but not many on cash advance businesses. Here we break down exactly what a cash advance business is and how you can start one.
What Is A Cash Advance Business?
Cash advance businesses are basically loans that you give to borrowers. The more common term that is now used is a microloan company. Don’t worry, you’re not a loan shark, you will be lending out legitimate money that is backed by insurances, underwriting and other legal requirements and permits that you will need to set up. The basic premise is exactly what it says on the tin though, you will be advancing cash loans to borrowers. You can also loan money off the back of sales, especially if the business you are dealing with has a steady flow of credit card sales. The way this works is that you lend against the sales that are going to be made, so you advance the cash and then take a deduction from the credit card sales once they have been completed.
Research, Research and Research
So, you’ve decided that you want to start a cash advance business. On the surface it sounds like it something that is easily done. Just give people money and get it back at a higher return, right? Sadly, this isn’t the case and there is a lot of pre work that is needed before you jump head into this. Different states have different laws and legislation around lending people and businesses money. If you are thinking of diving into this arena, then it would be worth either A) getting some solid legal advice about what you can and can’t do or B) buy into a franchise of already set up cash advance companies. Either way, you’ll have all your basis covered. The legislations that are different from state to state can be a range of things, such as maximum interest rate you are allowed to charge, as well as the process of dealing with borrowers that don’t pay.
Business Plan
So you’ve done your research and established what laws and directives can impact on how you operate. Now you need to do the important part, you need to write down exactly what it is you want to do in a business plan format. If you have never written a business plan before, now is not the time to flex your skills. Invest in someone that knows how to write this, as most people are going to need to secure capital for their cash advance business in some way or another. Once you have a solid business plan, you are able to take it to lenders if you need capital or reserves to be able to start this business.
Agreements
Once you have had the advice that you need to start, got your business plan on lock, you now need agreements in place that will determine interest rates, payment terms and how you deal with deliquant loans. All of these factors make you a legitimate business and will help you gain the customers that you need. Have a look at your competitors rates and see how much they are charging for the service that you also want to provide. Once you get a ball park figure of interest rates and policies, you can begin setting your own. You are in the advantageous position where you can set your own rate and undercut the already established competition if you want to. You can always lift your rates later on one you have got a few customers under your belt.
Marketing
You will need to market your cash advance business. You aren’t going to have customers walking through your door wanting to work with you, you need to make sure that you are visible and approachable. Start with branding and make sure that you stand out from other lenders. A good brand will also build trust in your service. Make sure it is consistent across platforms and really show cases who you and what your business stands for. You want to get your marketing and web presence sorted long before you start approaching potential clients as the first thing they will do, is look into you. If you start approaching people before you have your online persona sorted, chances are they will look elsewhere as you won’t be a reputable company to deal with, so branding is everything in this context.
Call Clients
Once you have got all these building blocks in place, now you can start contacting clients and offering your services! Be warned, the market is saturated, and it may take some time to land a deal, but don’t be deterred.
Wrap Up
When it comes to starting a cash advance business, you want to make sure that you have all of the foundations in place before you hit the ground running. Setting up this type of business is a little more complex than others, but the payoff is well worth it if you get it right. Don’t shy away from legal advice and make sure you have developed a cohesive business plan and marketing strategy to make sure you get it right straight away.
