Tag: RAL’s


Payday Loans, Car Title Loans, Check Cashing … Is It All Too Much?

It’s difficult, to say the least, when you attempt to enter multiple new markets at the same time.

We’re amazed at the number of entrepreneurs we hear from on a daily basis who want to learn how to run a payday loan business, a car title loan business, a check cashing store, a pawn shop, and even RAL’s (rapid tax refunds) all at the same time.

To industry outsiders, these businesses appear to be roughly the same. But to those of us actually in these industries this couldn’t be further from the truth.

Regarding payday loans , auto title loans , check cashing, pawn shops, gold buying and selling , installment lending, RAL’s, etc. you must deal with compliance issues, customer demographic differences, state/province legislation, licensing, employee training, point of sale materials, signage, software and more.

Consider this Press Release:

First Cash announces disposition of automotive operations
First Cash Financial Services, Inc. Monday announced that the operations of its Auto Master buy-here/pay-here automotive business unit have been assumed by Interstate Auto Group, Inc., a multi-state buy-here/pay-here operator doing business under the name CarHop. Terms were not disclosed.

As previously announced in September, First Cash decided to exit the buy-here/pay-here automotive business through the sale or liquidation of its Auto Master business unit. Under the terms of this agreement, CarHop purchased Auto Master’s automobile inventories, assumed leases at all existing dealership locations and hired a significant number of Auto Master’s personnel. In addition, CarHop will manage the collection of Auto Master’s outstanding portfolio of customer notes receivable under a fee-based agreement. CarHop is a privately-held buy-here/pay-here operator based in Minneapolis, Minnesota, which has been in business since 1996 and currently operates 24 auto sales locations in six states.

Rick Wessel, CEO of First Cash, said, “This transaction provides a timely and effective means for First Cash to exit the automotive business. We have liquidated our inventories for what we view to be a fair price and we expect to realize significant future cash flow from the collection of our existing notes receivable portfolio. The collection services aspect of the contract with CarHop provides a mechanism to collect on the existing portfolio of notes receivable and related finance charges through CarHop’s continued operation of the dealerships and collections operations. CarHop is an established industry operator with the ability to maximize the collections on this portfolio over the next 24 to 30 months.”

According to Wessel, “The cash flow and related tax benefits resulting from this transaction will support the continued expansion of First Cash’s pawn operations in Mexico and the U.S. and allow us to further reduce our outstanding debt. Looking ahead, our energy and resources will now be focused exclusively on our core pawn and short-term consumer lending businesses. These operations continue to be highly profitable, generate significant cash flow and provide opportunities for continued growth and profitability.”

Of course, the press release doesn’t reveal some of the internal problems First Cash experienced with their automotive operation. But suffice it to say, the obstacles outweighed the potential for profit in an extremely lucrative business!

The big guys face the same challenges the little guys face. It’s really tough to make money in all these businesses UNLESS you address them one at a time. Even having a team comprised of pros with significant experience in a niche . Even having pros on your team with significant experience is no guarantee of success. You still must train your employees to sell and support the product and educate your customers as well.

So… pick a niche, learn the ropes, understand and appreciate the startegies and tactics, get your systems in place, and only then dip your toe in the water.