- How much does it cost to open a payday loan, car title loan, or installment B2C loan company?
- How do I become a payday loan, car title loan, or installment B2C loan lender?
- Is starting a payday loan, car title loan, or installment B2C loan business a good idea?
- What are the costs of a payday loan, car title loan, or installment B2C loan startup?
- Do payday loans, car title loans, or installment loan B2C loan companies earn significant profits?
- How profitable are payday loan, car title loan, and installment B2C loan companies?
- Is the payday loan, car title loan, installment B2C loan industry growing?
- Who is the biggest consumer loan company in the USA?
- Do payday loan, car title loan, installment B2C loan businesses make money?
- What are the subprime consumer dangers of using payday loan – cash advance businesses?
- What are the disadvantages for consumers who use a payday loan, car title loan, or installment B2C loan company for solving sudden financial emergencies?
- How do I start a small dollar, B2C consumer lending business?
- How do I start a B2C finance company offering installment loans, payday loans, car title loans…?
- Is using a payday lender a good idea for consumers?
- Are payday loan lenders illegal in the USA?
- How do I start a payday loan, car title loan, or installment B2C loan business?
- Are payday loan, car title loan, installment B2C loan businesses profitable?
- How much does it cost to open a consumer loan company?
- Can I start my own payday loan, car title loan, installment B2C loan company?
- How do I start an online payday loan, car title loan, installment B2C loan business?
- What is the profit margin for payday loan, car title loan, and installment B2C loan businesses?
- How do I start a consumer loan company?
- How much does it cost to create a “lending money to the masses” loan company?
- How does a payday loan, car title loan, or installment B2C loan business work?
- How much do payday loan, car title loan, installment B2C loan lenders make?
- How much money can a consumer get from a payday loan, car title loan, or installment B2C loan business?
- How do I start a B2C consumer-focused money lending business? Not MCA’s [merchant cash advances].
How much does it cost to open a payday loan, car title loan, installment B2C loan company?
The answer depends on whether you’re launching a consumer loan online business or a brick-n-mortar loan business. GENERALLY, startup costs for businesses that loan money to the masses are as follows.
NOTE: For a thorough discussion, ROI expectations, licensing models, recommended vendors, online vs storefront pros and cons consider investing in our “bible,” The Business of Lending to the Masses. It’s 500+ pages delivered immediately to your inbox in PDF format.
- Again GENERALLY:
- For entity formation budget $800. This is for your C-Corp, LLC… Consult your CPA for the most suitable business entity for your situation.
- A bond. Budget $500/year.
- LMS [Loan Management Software] Budget $2000 – $10,000 one-time setup fee plus an additional $200 to $1000 per month subscription fee.
- Insurance budget $200/month
- Payment processing: Of course, this will vary based on your volume. Approximately $1 to $2 per transaction
- IBV {Instant Bank Verification]. You’ll want to evaluate your borrower applicant’s bank account, and income, and view debits/credits for underwriting the loan.
- CAC: [Customer Acquisition Cost]. Budget $200 to $400 for a funded loan. [Again, refer to our “bible, “The Business of Lending to the Masses” for strategies & tactics to reduce this cost.
- Legal fees. Zero$ to $5000. Many states offer DIY solutions. You simply visit the Department of Financial Institutions of your chosen state and download the licensing applications.
Do payday loan, car title loan, installment… B2C loan companies earn extraordinary profits? Yes!
Average APRs are 200% – 800%. [This depends on your licensing model [state/tribe, the financial products you offer, online vs storefront vs blended.] Again, refer to our “bible.” Typically, subprime borrowers fail to pay off their loan principal. Instead, they often choose to pay their fee and “rollover” [react]their loan. It’s a good business practice to insist that at least a portion of their loan principal is paid down every 2 weeks.
How profitable are payday loan companies?
Ah, the REAL question! The answer? IT DEPENDS. It depends on the licensing model you employ [state/tribal/offshore]. It depends on the financial product(s) you offer [payday loans, car title loans, installment loans, line-of-credit loans…]. It depends on how you deploy your capital and how large your portfolio is. It depends on what percentage of “reacts” vs new borrowers make up your loan originations. [Online, brick-n-mortar, blended…]. Let’s examine the storefront model vs the Internet model. And let’s ASSume you plan to eventually scale to 50 locations and service 5 states.
| Store Model | Online Model | Tribe Model |
| 5 state licenses | 5 state licenses | 1 tribal license |
| 50 locations = 50 leases [Avg. $1200/mo] | 1 lease | 1 lease |
| 2.5 headcount per location = 125 employees + district mngt., corporate… | 15 | 10 |
| Multiple loan products for each state | Multiple loan products for each state | 1 – 2 loan products |
| Significant legal/compliance fees | Significant legal/compliance fees | Minimal legal/compliance fees |
Note: This is a VERY simplified breakdown of the pros and cons of the 3 business models. Think of these metrics as ratios rather than a rigid schedule. There are too many variables to account for here. Consider:
- How “seasoned” is your portfolio.
- Your cost of capital.
- Operations management savviness.
- Your tribal revenue share agreement.
- Specific states you operate in and allowable fees.
- Brick-and-mortar lenders experience lower default rates than online lenders.
- Your loan product offerings [payday. car title, installment…].
- Your vendor selection regarding customer acquisition, underwriting, payment processing, loan management software, first-time payment defaults, collection mindset & systems employed.
- And on and on and on.
In general, subprime consumer loan businesses experience a 10% – 30% gross margin monthly. Of course, there are outliers. Again, it all depends…
Is the consumer lending industry growing?
Absolutely! Depending on who funds the study, it’s estimated that as many as 50% of US households cannot access $400 when faced with a sudden emergency. Inflation, higher food costs, gasoline and shelter costs are increasing this percentage! Not only is B2C lending increasing. Add BNPL [buy now pay later], early access to wages, free finance platforms like Dave.com and it’s obvious our industry is heating up!
The consumer loan industry is distinguished by a multitude of small-to-medium state-licensed lenders. Barriers to entry vary by state because some states have more stringent regulations on consumer lending and many have implemented a 36% APR cap and/or a database. This situation drives more competition into the more friendly states. The bank model and the tribal model play a stronger role in these non-friendly states.
Who are the behemoths in the consumer loan industry?
A few are Curo, Enova, Avant, TitleMax, Check into Cash, and Ace Cash Express. The top four companies in the industry account for less than 10.0% of total industry revenue!
Do B2C loan businesses make money? Most certainly! Refer to “How Profitable are Consumer Loan Companies” above.
How do you begin the process of launching a payday loan, car title loan, installment loan… business?
Begin here with our 500+ page eBook, “The Business of Lending to the Masses.” It’s available for immediate download in PDF format. We thoroughly discuss how to start your own payday loan business, car title loan business, and personal, noncollateralized loan business using both the storefront and the digital online models. We continue with strategies for collaborating with sovereign nation Native American Indian tribes, the bank model, and state licensed models. Finally, we discuss real-world examples regarding:
- Can I start my own consumer loan company?
- Demographics
- Customer acquisition
- Underwriting
- Processing consumer loan applications
- Instant bank verifications
- ACH, debit card, E-check… payment mechanisms
- Default rates
- Collection strategies
- Debt sales
- Related consumer products & services
- Location research tools and tactics
- Pro forma Excel spreadsheet
- Business plan template
- Raising capital
- State consumer loan laws
- Federal consumer loans and compliance
- Vendor recommendations for consumer loan providers [Loan Management software for example]
- Legal counsel recommendations
- Determining whether a consumer loan borrower applicant is eligible to borrow
- Day-to-day operations
- KPIs – key performance indicators
- Obtaining merchant services
- Your website – resources, best practices, templates…
- Considerations for building your consumer lending brand
- ROI, profit margin projections & improvement strategies
- Obtaining your appropriate consumer loan license
- Configuring your consumer loan lending guidelines and loan products
- The costs involved with creating a consumer lending entity
- State consumer lending entity corporation filing fees, bonds, and ongoing fees
- Standard loan agreement templates
- How do payday loans work?
- The payday loan consumer’s payment process. Weekly, Biweekly, monthly… Personal checks vs. bank account access
- State-by-state legal fees regarding APRs, reacts, and new loan originations
- How much capital do you need to start a consumer loan finance company
- How to hire talent to run your consumer loan business
- AND much, much, more!
- Literally, everything you need in a box to launch and scale a consumer finance business
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