The loans business can be very profitable and there is a strong demand for customers and businesses who are looking for finance in the UK. This has emerged as high street banks have become stricter with their lending criteria and with the Internet at our fingertips, there is a low barrier to entry to starting your own company.
No matter what kind of loan your company intends to offer, there are a number of standard rules which will help you to successfully set up your loans company.
What kind of loan do you want to offer?
Will you be lending to individuals or businesses? Do you want to be high cost or low cost loans? Is there strong growth in the market such as bridging loans or peer to peer loans or is the industry declining (like payday loans) and you see an opportunity to capitalise?
When setting up a loans company, you must think about what it is that you will offer that will make you different from your competitors. Will you offer loans which are long-term, short-term or both? Will you offer a competitive APR? Are you willing to provide loans to applicants with good or bad credit? You must set out a plan to establish your unique selling point in order to make your company marketable and stand out from the crowd.
Do you want a store front?
Having a store front enables customers to walk into a store from the high street to fill in and application and leave with the money that same day, should their application be approved.
If you wish to offer this service, you must think of the location for maximum customer reach. Since storefront business heavily rely on footfall, if is not in a location which is passed by frequently, then no one will know it even exists.
Moreover, the location you choose must be in keeping with your demographic. People living in an affluent area may not be interested in high cost loans or cash converters. Try to set up shop in an area which is both busy and visited frequently by realistic potential customers.
Create a website.
You can set up your business online, as most lenders choose to in today’s digitally motivated world. It is of extreme importance that your website is secure given that you are going to be dealing with customers’ sensitive data. If you do not have a secure site, you can look at facing serious legal risks if the information provided by customers ever got into the wrong hands, especially given recent GDPR regulation. Put your website on a secure server, so it starts with Https://.
Whether offering instalment loans online or commercial property loans, the application can be a full form to complete or just a data capture which allows a team member to pick it up and call back.
If your industry is regulated and you have a license, you can start trading online immediately. If your application license is in process, you are recommended to put up a holding page and state that you have an application pending.
Build a good team.
Behind every great company is a dedicated team. In the loans industry, a strong and responsive customer support team needs to be available by email, phone, live chat or in store.
Overall, setting up a loans company does not require huge amounts of manpower. You may be surprised to discover that some of the UK’s biggest companies only have around a dozen people working in their offices.
Make sure you have a well-trained underwriter. An underwriter’s role is vital to growing your business. Underwriting is the steps taken by the lender when deciding whether or not to approve a loan by referring to criteria set out by your company.
A collections team is also essential. This is a team made up for customer service agents who are responsible for following up customers for payments if they did not go through.
In fact, you can find that you have staff members that can do both – not only can they do underwriting or marketing but they can chip in with compliance, training and collection calls too.
Most loans in the UK are regulated with the only real exceptions being business loans or non-status loans, however this may change. Since the UK finance industry is regulated by the Financial Conduct Authority, it is essential that you are covered or you may face fines and imprisonment. An FCA application can take between 12 to 18 months or slightly less if you are a broker (comparison or introducer) and there is a cost for setting up so be sure to include this in your costings.