How to Become a Payday Lender
- 1). Apply for a state license. Individual states are the primary regulators of payday lending. Laws vary among states in terms of maximum loan amount and finance charges among other things, according to the National Conference of State Legislatures, and some states do not have payday-lending practice by law. When choosing to have an Internet presence, be aware of regulations in other states where an Internet payday lender is effectively operating if lending offers are made to customers in those states.
- 2). Open a transaction account with your bank. The most efficient way in payday lending is crediting and debiting a customer's checking account when releasing and collecting funds. This is done through electronic funds transfer and an appropriate transaction account with the payday lender's bank allows the lender to give instructions to its bank, which then initiates fund transfers through the automatic clearinghouse on behalf of the account holder.
- 3). Develop a business plan. Internal operation and external marketing are the two basic elements in any business pursuit. For a payday lender, a business plan addresses the issues of funding, fee structures, collection practice, marketing efforts, etc. For example, on the funding issue, since the maximum amount of a payday loan is around $500 by law, depending on the intended scale of the business, the payday lender can fund its starting capital accordingly.
