Why You Should BUY, Rather Than START, a Consumer Loan Business
Fact 1: Since the beginning of human existence, average Joe’s have been bartering, borrowing, stealing, begging, and trading time… for MONEY/STUFF.
Fact 2: We have been, and always will be, a society of Debtors and Creditors. This sucks but it’s a fact. [For a great listen while you’re getting in your daily exercise, get the audio version of David Graeber’s, “Debt: The First 5000 Years.” It’s a fascinating book about the impact of debt on history.]
Storefront, Internet, kiosks, blended… Money Lending can be VERY PROFITABLE.
So… why buy rather than start?
Startups fail. Almost always.
10,000+ “Baby Boomers” are turning 65 EVERY DAY! Many Boomers made their money by lending money. Boomers kids & grandkids do not want to be in “the business of lending money to the masses.” Frankly, the family members of Lenders are OFTEN embarrassed by this business. Right or wrong, this theme is prevalent in our industry.
The Boomer generation owns more businesses than any other generation in HISTORY!
Boomers need to sell. I know this because I receive calls and emails every week from them.
Existing consumer loan stores and internet companies already have the infrastructure in place. They’ve built out their store, maybe they have a website – most of them look like garbage and do not generate loan transactions, they have experienced employees in place, loan management software, relationships with the sub-prime credit reporting agencies and payment processors that enable instant bank verification and same-day funding… In other words, they are LENDING TODAY! You don’t have to waste 90-120 days to put your money to work! HUGE!!
Consumer loan companies already have a database of existing borrowers. This too is HUGE! You really think you can open up a brand new location or launch a website and immediately take market share? You had better have the skills in place already! You will buy leads!
Consumer loan businesses already have historical financials. Examine the cash flow. Break down the numbers. Your 1st look will mimic an IRS tax return. Your goal is to determine the “Seller’s Discretionary Earnings.”
There are not a lot of buyers for these businesses.
YES, you can make a “ton” of MONEY.
Yes, in 33+ states you can charge as much as $30 per $100 loaned. A few states have zero prescribed maximum fees; like Texas.
Tribe lenders and their servicers can lend anywhere they choose. [But why push the envelope?]
Your inventory is moola, cash, $$$$, MONEY! You’re not investing in vegetables, tires, senior care facilities, selling real estate like millions of other agents, making donuts and coffee at the crack of dawn, knocking out burgers, running a 24 hour 7-Eleven, dealing with gym memberships, fixing cell phones or computers, a “Merry Maids” cleaning service… YOU GET THE PICTURE!
Other than the business of lending money, what other industry offers you the potential of earning a 100%+ ROI?
Perceived “moat” or “Barrier to entry.” Looking from the “Outside In,” the business of lending appears to be an overwhelming chasm of licensing, bonds, regulations, bad press… GOOD! Let everyone else start a yogurt shop! Look! Total knuckleheads have applied for and been approved for a state license to loan money. Peter Thiel [PayPal Cofounder] wrote an excellent book called “Zero to One.” He focuses on “economies of scale” and advises, “First, dominate a niche market; second, scale up.” I have a client who focuses on Haitians in Florida and is “killing it!” Another client specializes in lending to Koreans in Los Angeles. Do you know that “baby boomers” make up 37% of the US demand for short-term loans? “You don’t want to be the first mover. It’s better to be the last mover – that is, to make the last great development in a specific market and enjoy years… decades of profits.” Launch, Focus, Dominate your Niche and then expand into related, broader markets. Who doesn’t need MONEY?
You can bring your existing talent, knowledge & strengths to a “tired” loan company, replace its long-time owner, and create extraordinary value.
MANY existing owners are simply tired of being beaten up by the media, regulators, competitors…
The majority of the consumer loan businesses for sale today were launched years ago. A fresh mindset injecting new energy and enthusiasm is OFTEN ALL that is needed to 5X the marketable value of the acquired loan business!
Done right, the cash flow of the business can service the debt carried by the seller. They do want to sell their business after all!
Don’t focus on stupid valuation formulas postulated by generalists; 2X or 4X or whatever EBITDA for example. These are lazy, cop-out valuations! Hint: think “seller’s discretionary income [SDE].” Simply put, SDE is how much total cash flow the seller has been enjoying. [Don’t take the P & L at face value. The business is paying for the Mercedes, the kids phones… A motivated seller may exit at 1X SDE. You grow it 10%/year for 5 years? A 5X+ SDE is achievable! Add your inventory – which is $$$, CASH, MONEY… not rotting bananas, remember! You’ve just built a tremendous asset for yourself. [Shameless Plug. Grab a copy of: “A Guide to Consumer Loan Company Valuations.” [Scroll down to the 9th item.]
By employing today’s technology, you can operate a loan business from ANYWHERE.
Skip the startup B.S!
Why start from scratch?
Buy, grow & innovate. Acquire. Grow revenue. Increase profits. Build an asset.
Grow your business 10% every year for 7 years; it will double in size! Your cash flow increases. The value of your asset increases. You build wealth.
Remember Fact 2: We live in a world of Debtors and Creditors. This sucks but it’s a fact. Money Lenders will always be with us. Be a Money Lender NOT a service provider, a vegetable purveyor, a burger franchisee, a _____fill in the blank!
Are you a BUYER? Are you a SELLER? Have an IDEA, a TOOL or a SERVICE for Lenders? Talk to me… Jer@PaydayLoanIndustryBlog.com
YOU control your Life. YOU control your future. Follow the MONEY! Be the MONEY!!
I’m inundated! Tell me about you, your goal and your resources. I’ll connect you! I know of opportunities TODAY in PA, CA, TX, TN, AZ, VA, IL, Internet… Tell me about you! I can help. PS: Skip the “Google” searching. You will not discover great “deal flow” on BizBuySell.com. This is about relationships! If the deal is on an Internet Biz listing, it’s junk. YOU NEED TO GET UPSTREAM!
Definitions: In this discussion, Consumer Loans mean:
- Payday loans
- Installment loans
- Car title loans
- Cash advances
- Personal loans
- Essentially, loans made to consumers that do not require collateral; other than a car title loan
- We can throw check cashing businesses in this bunch as well.