It has never been more profitable to set up your own loans company. Due to a combination of rising inflation; stricter lending policies on behalf of UK banks; and new media driving the payday loans industry; the loans industry in the UK has grown significantly over the last decade such that payday loans industry was valued at £2 billion in 2014 and bridging is valued at £7 billion.
Regardless of the types of loan you intend to offer, we can provide an insight into how to go about setting up your own loans company and the different teams involved in doing so.
Create a Store Front
There are several lenders in the UK which have a storefront – enabling a customer to walk into the store on the high street, fill in an application form and leave with money on the same day (if approved). Loans2Go have almost 100 stores around the UK, for instance.
If this is the type of service you wish to offer, location is the key aspect to think about. Storefront businesses rely heavily on footfall; if it isn’t frequented by passers-by, no one will even know it exists. Further, the location must be in keeping with your demographic. Affluent people will not need a payday loan, for instance. For the best results, try to find a location that is both busy and is typically frequented by realistically potential customers.
Create a Website
Alternatively, set up your business online (as most lenders do nowadays). This includes having a ‘front-end website’ where customers can see who you are, what you do and also make an application online. A ‘back-end system’ must be present in order to process all the applications that come in and store all the relevant details. This does not mean that you have to build your own software; there are several companies which provide the entire back-end system including an application form, decision engine, and funding process, making the process a whole lot cheaper and easier.
It is fundamental that your website is secure given that you are dealing with sensitive data that belongs to individuals; you may face serious legal risks if this information gets into the wrong hands. The least you can do is put your website on a secure server (so it starts with https), as is our own website.
Establish your Unique Selling Point (USP)
When you set up a lender business, you need to consider what will make your proposition different, and therefore marketable. Will you offer a competitive APR? Will you provide short-term or long-term loans? Will you provide loans to those with good or bad credit? Decipher your USP in order to hone your service and define your brand.
For instance, if you wish to sell guarantor loans, you will need to decide who you are offering your loans to (such as tenants or landlords, or both). When making this decision consider the impact it will have on the size of your market and the potential for growth. Some borrowers do not want guarantors, so requiring guarantors as part of the process may limit the number of people you can potentially reach. However, this could mean that you are able to be more competitive when it comes to pricing as having a guarantor reduces the risk for lenders.
Having a USP will also allow you to help you to create failsafe criteria for your loans, so that you can decide what fulfilments applicants need to meet, such as an age requirement, credit history score, and employment status. Every lender has their own criteria and is able to adjust them according to the results of trial and error.
Deliver on Branding
When branding your business, your name and image must be both relevant and authoritative; you need to be able to capture the attention of your customers but also have them trust what you are offering them.
Many successful loan companies will, for instance, try put borrowers at ease through the use of branding elements which is why having a backdrop of clouds or the ocean is very popular. Some of the best names around include Ocean Finance, Fair Finance, and Sunny Loans. Enlist professional help when it comes to branding; a good website goes a long way.
Build a Good Team
Any successful lender will have a fast and responsive customer support team available by email, phone or Live Chat to take queries from customers and help with basic questions like eligibility and other aspects of the application. Customer agents should have good people skills and be able to provide useful information, be patient, easy to talk to and be reassuring.
Underwriters are also vital to have in the business. Underwriting refers to the steps taken by the lender when deciding whether or not to approve a loan. These are the people who will refer to the criteria that outlines who may be loaned to in order to assess eligibility.
For some lenders, the loan decision will be decided manually by an underwriter, whereas others will use an algorithm that is then overseen by the underwriter.
You will also need what is called a ‘collections team’. A collections team is made up of customer service agents whose duty it is to follow up customers for payments that didn’t go through.
For some customers, their payment might have failed due to a card error or due to a lack of funds. A collection agent will try to recover any debt that might be owed to the business.
Finally, the most important thing about setting up as a lender in the UK is to have proper authorization from the relevant governing bodies. In the UK, most loan products are regulated by the Financial Conduct Authority.
You will be required to apply for a license and display the number clearly on your website and every document you create. There is a list of ‘responsible lending’ and ‘treating customers fairly’ guidelines which must be adhered to by all staff in order to trade legally as a lender in the UK. One must ensure that they follow a strict responsible lending and treating customers fairly policy and that this culture is instilled and implemented by the rest of the staff.
Setting up a loans company does not require huge manpower. You will be surprised that some of the biggest lenders in the UK have less than a dozen people in their offices.
The most important things to remember when setting up a loans company are making sure that you have the regulation and authorization in place so that you can issues loans in the UK, and implementing a successful marketing plan. If you have these in place, and the resources to do so, there is no reason why you can’t become the next leading competitor in the loans business.