Forums: Discussions for entrepreneurs and small business.

We're a small Payday Loan Company based in Birmingham, Al, and I am the sole

owner of the Company. We are not yet operational, but hope to be up and running by

Feburary of 2010. We are looking for sources of funding anywhere from 60k at

least to 750k.  I know these are not small numbers, however a company like this, on

any level would require a large investment. Everyone knows the ROI that

these Payday Loan shops make. As a small business I can be more flexible

than the big players in the Industry like Advance America and Cashnetusa.com.

Part of my flexibility and advantage to the Consumer is that I would charge lower

interest rates than the 17.5% that just about EVERYONE charges. We would charge

12.5%, a savings of 25 dollars on a 500 dollar loan. We would also provide loans as

low as 4.16%!! to borrowers who had excellent credit of 850. Our operating expenses

are expected to be rather low, other than the large sums of cash we will need for

lending purposes. I would like to lend 60k a month (750k a year), this would put me at

7,500.00 a month, assuming that all Customers were to pay back their loans in full

each month. This is probably unrealistic as some say that as much as 60% (4,500.00

dollars) will not pay on time, which translates to 3,000.00 (7500-4500) a month in

volume. I plan to do this full-time, so 3,000 would be not cover living expenses, and

business over-head. Not only will rates be cheaper, but if a Customer loses their

job at anytime during their loan, we will freeze their payments for 3

months, and no late fees. I know times are tough for many people, and anyway

that we can show sympathy, and kindness will help us stand out, and makes us feel

better about ourselves as well.

Thank You for your time

Sincerely,

Nathan Winslow - President of Southernlenders.net

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some facts

"In 2005, payday loan analysts estimated that there were approximately 22,000 payday loan outlets conducting $40 billion in loans (Community Financial Services Association of America;" - http://www.franchisedirect.com/accountingfinancialfranchises/paydayloanfranchises/38/19

"According to the Dallas Morning News, in 2008 the U.S.'s largest payday lender, Advance America, "made $4.2 billion in payday loans and charged $676 million in interest and fees." And "Cash America, a pawnshop operator and payday lender based in Fort Worth, recorded net income of $81 million last year – a 132 percent increase in just four years – on total revenue of $1.03 billion."^[39] "

^{- Wikipedia}

Have you researched the legalaties of payday lending online?  The laws differs so greatly state to state I don't even know if you can legally accomplish that business model.  Yes I know others are doing it, but you need to do a ton of research.  You are already in the industry so you may already know these organizations, but search Rtoonline or APRO's website and contact a few buinsess owners that are doing that in multiple states.  In Oklahoma, the government body that is in charge of it is The Department of Consumer Credit and if you make a payday loan in our state online or not without a license - you could go to jail - and I am sure nearly every state has such an entitiy for oversight.

Startup Help

I just had to add one more thing.  Cash America spent a fortune in legal and licensing fees and continues to do so to ensure compliance with the 50 different state laws.  I could easily see you dropping $500,000 in legal just getting to market - having 50 state laws researched - 50 contracts written - website development for 50 different compliant purchase procedures - then onging fees to maintain compliance within the 50 different rapidly changing state and federal laws.  Just going online in this industry does not give you a national reach.  Why wouldnt you just avoid all of those headaches and focus on opening brick and mortar storefronts in markets you understand before undertaking such a risky eneveour?  If your set on it I also know Trooper Earl at Premier Rents has a franchise system for payday loans and he may have already done all of that legwork.  If you throw caution to the wind and go in business without it, I promise you someone within the industry will report you because they dont want companies operating outside the law to bring image issues to the industry as a whole.

Startup Help

Actually I'm completely new to this industry coming from no experience..sigh. lol, but yes I can understand spending 500k for the licenses and contracts, however the contract would remain pretty much the same, but yes, some states vary greatly in pdl laws.

I can see in 10+ years from now spending that kind of money, but its not going to happen all at once. Even if I had the means, I wouldn't feel comfortable. I need to grow a customer base, here in alabama before I even think about expanding.

Because of the name of my business "SOUTHERN" lenders, we will probably focus on providing financial services to the Southern States, and maybe later create a fictitious name and expand to other states when the time is right.

This company is going to start off real small, thats for sure, but givin the fact that the government is cracking down on payday loans, I think it will give smaller companies like us a leg up, as the larger players will have a hard time adjusting to the new 36% APR law compared to the 450% or more, as it stands now.

on a 100 dollar loan, we will only make 2.60 in interest, compared to the 17.50 which will soon change.

- nate

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