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Some books and infomercials make it sound like you can get started in the payday loan business with little money and a simple office and just rake in the cash.  That was about 10 years ago.  Now with the increased scrutiny and burdensome regulations, the payday loan business a lot harder.  In addition there is a lot more competition, both online and in many locations, with sophisticated marketing and business development.   There will be a lot of time, effort and money to go into starting this business.  While the rewards can be great, don’t fool yourself that the payday loan business is easy to start and be successful.

A payday loan business by itself isn’t as profitable as it has been in the past and relying on only one stream of revenue will be mediocre at best.  People need more than just loans in their daily life, so why not find additional services to give them a reason to come back for all of their financial needs?  As long as you are building positive relationships with the payday loans, once these people get on their feet, they will be likely to come back for more advanced services such as ATM machines, Coin Stars, money orders, buying gold, tax returns, etc.

The biggest areas of failure for the payday loan business is having insufficient capital to provide loans, loose loan approvals and not following/staying on top of the regulations and laws which can result in serious fines and possible closure.

The return on investment is very high (in most states as of this writing) but is not without significant risk.  To stay in business you have to be tough on who you lend too and be very quick to find out why a payment was missed or late.  The longer you wait or more exceptions you give and your money will not be coming back.  Be sure to take time in the beginning to write a business plan to plan your future before you start a payday loan business.

For more articles on starting a payday loan business, visit StartupInformant.com

The majority of us are unaware of the multitude of ways an entrepreneur can make money with payday loans. Often we are so focused on our own passion, skill and knowledge base that we fail to comprehend other methods of monetizing our expertise and understanding of this dynamic industry. This brief discussion will cover a few of the ways we can develop multiple revenue streams all utilizing the payday loan product. If you and your team are uncomfortable or unwilling to fund payday loans be advised there are a multitude of ways to make a “ton of money” in the payday advance industry. (Note, this list is in no particular order.)

* Funding Payday Loans. Of course this is the obvious method most of us employ to maximize our returns. We form a corporation, get a license where appropriate, we open our store, utilize advertising and signage to draw customers and fund the payday loans ourselves. This “brick-n-mortar” model still works very well. And fortunes are still being made with this approach.

* Utilizing the Internet. Consumers in the USA, Canada, Australia, New Zealand, the Caribbean, England, Ireland, and more demand access to our payday loan product. However, not all consumers have the ability to simply walk into their neighborhood cash advance store and receive one. We are all aware of states having unfavorable payday loan legislation. Millions of payday advance consumers are forced to use call centers and web sites of companies outside the protection their state may offer or the “best-practices” promoted by http://www.CFSA.net andhttp://www.FISCA.org . And, let us not forget the value in combining a “brick-n-mortar” payday loan operation with web sites. The “big guys” in our industry have figured this out and purchased existing payday loan Internet companies. We perceive the major value in their taking this approach was the fact these payday loan Internet companies had pursued and secured multiple state licenses. In any event, it only makes sense to use a web site in conjunction with your “brick-n-mortar(s). Fund the loan applications submitted via your web site by residents of your state/province and simply sell those from locales you prefer not to do business in. (See Affiliates)

* Payday Loan Leads. There are millions of dollars being made collecting and brokering payday loan leads and applications. (See Affiliates)

* Consulting. There is a tremendous demand by entrepreneurs to get involved in the payday loan industry. Their thirst for knowledge regarding software, licensing and legislation, store location, web site development, ACH processing, stored-value and prepaid card deployment, compliance, and on and on has no end.

* Affiliates. There has never been more money being made in the payday advance industry by entrepreneurial companies and individuals that never fund a single cash advance! Ten’s of thousands of dollars are made monthly by simple creating a web site to gather payday loan leads and applications and selling them to payday loan companies willing to actually fund the loans. Today, these leads and applications sell from $3.00 ea to as much as $55 each depending on volume, filtering, quality, source, and any due-diligence performed prior to the sale. Just one example is that of a payday loan lead generation entity selling 50,000 payday advance applications per month at an average of $9.00 each. And the buyer claims to be funding 40% of these leads! We estimate less than 10% of the payday loan web sites on the Internet today actually fund payday advances! It is extremely easy for an entrepreneur to simply build a web site(s), become an affiliate at http://www.cj.com to immediately begin selling payday loan leads to advertisers. Additionally, one can set up a Google Adsense account and earn approximately 30% to 50% of the income Google receives for each click (currently $7.02 per click for position #1). Last month 294,000 searches were performed at Google for the term “payday loan.” Of course, this count does not include all the other permutations for “payday loan” such as “payday advance”, “cash advance” “payday loan cash advance”, “no teletrack payday loan”, and many, many more. Nor does this include searches performed at other search engines such as Yahoo, AOL, Earthlink, MSN, etc. Our research yielded more than 1,000,000 searches last month for the term “payday loan”!

* Vendors. There is no limit to the various products and services one can offer to payday loan operators and consumers of cash advances. Creativity is the key to developing continuing revenue in our industry. Payday loan operators need creative solutions for meeting compliance issues, creating complementary products, advertising and marketing, collections, solidifying relationships with payday loan consumers, customer identification, customer employment validation, bank account and ACH verifications, security, insurance, store layout, web site and software integration including http://www.Teletrack.com and http://www.CheckDataSystems.com.

* Investors. Astute individuals and organizations with a desire to put money to work at favorable interest rates do exist. We receive inquiries from them daily. Those deals involving no equity typically earn returns of 2% to 5% interest paid monthly. The key for both the payday loan operator in need of funds to meet demand and potential investors is to research and understand the payday loan product thoroughly, develop specific criteria for the investment or use of the funds, and a complete assessment of the ability of both parties to work together. Finally, all agreements must be put in writing.

* Education. Opportunities for helping payday loan operators to increase revenues and meet compliance and legislative issues abound. Again, topics covering marketing, advertising, collections, compliance, accounting, insurance, fraud, investing, debt servicing, complementary products and services, customer relations, legislation ( http://www.PaydayLoanLegislation.com ) are just a few of the subjects payday advance operators are in need of.

* Franchising. Entrepreneurs are clamoring for information regarding how to get started in the payday advance industry. Independents desire a strong brand and well-organized operations offering terrific and timely support. Turnkey payday advance models will yield the greatest monetary success.

* Trade Organizations & Magazines. It is shocking to realize how many existing and prospective payday advance operators, vendors and suppliers are unaware we have trade organizations and magazines. Visit and support http://www.Fisca.org and http://www.CFSA.net. And, do not forget our trade magazine, Cheklist(sic) Magazine at 212-807-0148begin_of_the_skype_highlighting              212-807-0148      end_of_the_skype_highlighting. Cheklist Magazine maintains a list of state payday loan and check cashing associations.

The bottom line is this: entrepreneurs, training organizations, vendors, suppliers, educators, consultants, and more all have an opportunity to earn substantial income and recurring revenue streams by participating in the payday loan industry. Success will come with proper research, a good plan put into action, follow up and adjustments in combination with integrity and honesty.

The loan approval process is very important in the payday loan business as making too many bad loans will ensure your money will never return.  It is critical that you have these policies written out before you open the doors and never make exceptions, even though the person sitting across from you is really nice. Nice does not pay the bills and you are in business to make money and the likelihood that you would get anything back in a lawsuit is small.

Credit reports can be a good first indicator but many borrowers will have little to bad to no credit history and should not be used as the only indicator, however many payday lenders don’t run them.   Other  indicators of likely repayment include work history, pay stubs, tax returns, checking accounts, debit cards, debt-to income, home ownership or length of time at one home/bank for signs of stability.  Also fixed income clients are good because their income while small, it is stable.

For more articles on starting a payday loan business, visit StartupInformant.com

The easiest way to get started into the payday loan business is to buy a franchise, especially if you have no industry experience.  This is because the franchise has built a business model that works.  With a franchise you can call other payday loan franchisees to see how the company is to work with, have a strong marketing program out of the gate and developed procedures that help you be more successful at running your payday loan business.    Some of the payday loan franchisees that have built a decent reputation are FastBucks, Ace Cash Express and Cash Plus.

The downside to a franchised business however is the additional upfront costs and ongoing royalties over starting one on your own.  Expect a one-time franchise fee of up to $75,000 and royalties of up to 10% gross sales.  This is in addition to build out costs and upfront capital requirements.

The choice of starting a payday loan business from scratch or getting into a franchise is not an easy one, but the advantage of a proven business model and marketing support is worth a lot in this business, especially if you do not have a lot of experience in this.

There are a lot of features for software in the payday loan business that is on the market and it is difficult to evaluate the cost vs. benefits, especially without industry experience.  The software is a huge investment $80,000 and climbing but will have a huge impact on the operations, profitability and ease of running your payday loan business.

While the features and benefits of all of the payday software companies look similar there is a reason for the ones that are super cheap.  Also remember that it isn’t as easy as start with an inexpensive software package and upgrade later.  Many packages don’t work well in importing from another program.  Don’t focus on your needs today but instead, where you want your business to be in the future.

Here are a few of the software vendors that have had good results in the payday loan industry. Note that none of these are recommended but to be used as a reference.  Please do your in-depth research before purchasing your payday loan business software.

eCheckTrac

Empower – Synaptic

IntroXL

Payday Loan Manager

Payday Plus

Quik Draw

TranDotCom

For more articles on starting a payday loan business, visit StartupInformant.com

Location is a key component for success in the payday loan business.   For starters you should not be located along a stretch of road directly next to several other competitors unless you can start out with a more professional image at a simliar price. While placing your location in an area with different demographic, a good one will have a target household incomes between $35,000 and $45,000, preferably under a three-mile radius.  Check out www.freedemographics.com to search. (This is a free site but requires a login.) High traffic is very beneficial as well as drive by traffic is great for advertising. Sometimes people fall into the trap between two locations with one in a high traffic location which is expensive and a low traffic location that is cheap.  The high traffic location will always outperform and the free advertising with a big sign on your building will make up for the extra expense.  Most states have a website for the department of transportation that provides these numbers.

Obtaining state licensing for a payday loan business will be one of the toughest hurdles in getting started and is a pretty long process.  Many of states will require some kind of business plan and some states require bonding. The difficulty level also increases with the number of services you plan to offer (payday loans, title loans, check cashing, etc.)  Depending on the state, it may be beneficial to start with one service and add more as you go along.  State officials will typically evaluate the level of experience you have within the industry when determining their licensing decision and use the complexity of state laws to discourage new entrants.  As you build experience, additional licensing or opening new stores is much easier than the first.

For more articles on starting a payday loan business, visit StartupInformant.com

The costs to start a payday loan business can vary as there are multiple options from brick and mortar vs. internet site, franchise vs. start from scratch, size of market and the software.

If you are starting a payday loan business yourself from scratch as a brick and mortar expect $40,000 and up for a turn-key operation with a leased location. About $10,000 would be for the store and initial marketing and $30,000 to loan out.  Yes it can be done for less but this is a realistic number.  There are stories (urban legends maybe) of someone starting out with $1,000 or less but that really isn’t realistic even with the best of collections.  In this business you need money to make money so there had better be some money to loan out, no if’s and’s or but’s.

A franchise operation will add $20,000 to $80,000 in terms of startup expense, build out and reserve capital requirements.

Reserve capital is important in this industry as it will take you several months to figure out how to underwrite and find the right customers to lend to. The first few months are scary as you now have the realization that you are lending to total strangers with poor credit and if you lend to the wrong person it’s not coming back.   After some time though you will have a better understanding of the industry and who to make loans through.  You should work on projections with different levels of default to see what your numbers need to be to stay afloat.

The money will usually come back and you will begin to accept that fact that there are going to be some loses that will be offset by high interest from your other customers.  If you are able to start with a solid set of process and are aggressive with marketing and funding loans (and make loans to people who will repay), profits should start coming in within the first 3 – 6 months.

For more articles on starting a payday loan business, visit StartupInformant.com