10 Steps To Creating A Loan Business Online

March 4, 2020 | Sakshi Sharma

There are many reasons to start a lending company. No matter what the reason it’s definitely a great time to start an online loan website. There are millions of people looking for lenders for various reasons. These reasons vary from person to person and company to company. No matter which type you choose there is a large number of people that you can help.

When it comes time for you to move forward with your online loan company there are steps you need to take to build it properly.

Step 1: Determine the type of loans

What type of loan(s) do you want to provide? You can choose to provide personal loans, have a payday loan business, mortgage loans, micro-lending, and more. It’s up to you what you want to provide. The 2 most common business models are commercial and consumer lending because they take up most of the market. Depending on which one of those options you choose what you offer is going to be very different.

If you choose to do personal loans then the money can be for just about anything the lendee wants. Micro-lending is great because it involves a smaller amount of money for individuals or small businesses. Short-term loans are also popular for people who have a commercial lending enterprise.

Many online loan websites tend to focus on consumer payday loans because it only deals with very small amounts of money. On average the amounts tend to be $350. They are also paid back within a month. The interest rates on these can be up to 4 times what the loan amount was for. Between the low risk and high profit, it makes this a popular option for lenders. Business loans do carry an even lower risk but also a lower profit so it just depends on what makes sense for you.

Step 2: Following the Law

Before you start a money lending business, you should do your research and find out all the laws you must follow. Take it a step further and check the laws that are specific to having a loan business online. Look up your specific field. For instance, if you are going to do an online mortgage company then check the specific laws for that.

There may be many things you want to provide your customers but it has to follow the government regulations. Every state has different regulations so look it up based on the state your business is in. Do keep in mind that payday lending tends to have more restrictions in most states and some don’t even allow it at all. You should also know the general restrictions on interest rates and for specific people such as military personnel. Ensure you register with the SEC too.

Step 3: Complete your Business Plan

No matter what kind of business you are starting, online or otherwise, getting prepared ahead of time can be the difference between success and failure. Your business plan should include the following:

A brief summary of what your business is going to offer and why you are better than your competitors.

A full description of the type of lending you will provide with all the details about interest rates, lending, and payback. Here is where you will also describe your brand and how you will market your business.

Market statistics will include information about what is currently going on in the market. It should list out your marketing strategy, what your potential revenue is, how you will grow, and the challenges you could face.

The members of your team should be listed along with a brief description of each. Mention your team’s qualifications and why they are different from others.

Lastly, you will need financial details that include current reports, expectations of profit and losses, the costs, and cash flow for the next 3 years.

Step 4: Gather Marketing Materials

This is where you want to start getting your marketing materials together. It can be a simple email list you get, forming emails, flyers, setting up social media accounts, finding lender events to attend, etc. There are a lot of marketing options that can choose from both free and paid for. During this whole process of getting the business details together and setting up your website set up your marketing can be done simultaneously.

Step 5: Create a Minimum Viable Product (MVP)

An MVP is a stripped-down version of your product. You will have a website of course but you may also want an app to go with it. Either way, it’s a simple version that will give people a better idea as to what you are trying to accomplish. This is optional but if you are looking for investors, being able to show them the basics of what your website and/or app will do is a huge plus.

For this step, you want to find the right website development company to help create this. They can determine what functions have to be included and if you want a mobile app to go with it or not. Take the time to find the right company for this, one that can do it all and understands your needs.

Step 6: Get Investment

You may already have the funds you need, in which case you can skip this step as well but for those wanting investment to help get their business off the ground, this is the time to do it. You’ve done all your prep work and maybe even created an MVP so now is the time to network. The type of investor you want is up to you. You can choose an independent investor who will want equity or interest.

Friends and family are also a good option but keep in mind that you should present to them the same way you would any other investor. It should be taken seriously because their money is just as important. Of course, you could also request smaller amounts from various types of investors whether professional or friends and family. Again, this is your choice as to what will work best for you.

Step 7: Logistics

You want to get all your merchant affairs in order. Without this, you won’t be able to operate at all. Think about the security of your website and what credit card processing merchant you are going to use. Determine what type of payment methods you want to accept based on what works best for loan companies.

Take your time to find the right merchants for you. Don’t just go with the first one you see. Compare pricing and what they offer. This can be a bit overwhelming but if you know exactly what you are looking for then finding the right one can be easier.

Step 8: Finish your Website

If you completed step 4 then you don’t have much further to go. If you didn’t that is ok, but you will need to look for the right web development company that can design, program, maintain, and market your website like SDI. Not all companies are the same so ensure you search and compare what they offer.

Design is everything, it can really make or break you as it determines if users want to continue on it or not. You want to draw your customers in and keep them coming back and that only happens if you have the right design and development team.

You’ll need to purchase a domain name, install an SSL certificate, decide on the content, images, and more. All of these items can be handled by your development partner which means that you don’t really have to do too much. You should mention to your web developer that the website has to be GDPR compliant so they can do what they need to on their end.

This is also the stage you’ll want to create an app if you decide to go that route.

Step 9: Launch and Market

Once you have everything completed it’s time to launch. Now is when your website will go live and your initial marketing materials will be sent out. You may be thinking now what? The dream is that everyone just finds you but in reality, it doesn’t work like that. By now you should have a lot of marketing materials ready to go. All your content for various outlets should definitely be ready.

Targeted marketing is great for online loan businesses to ensure the right people are finding you. One of the most important items you can offer people is free information. Get people to sign up for a newsletter, have a blog and articles. You should be providing advice on anything related to money, lending, and whatever fits the type of lending you are doing.

Step 10: Stay Adaptable

When it comes to any type of lending the market changes. The rules and regulations evolve and adjust as the years go by. What you are doing now may have to change. It would be wise to have your foot in other areas. While your main focus is on one type of lending you should also understand what other areas require so that you can dabble in that and adapt if you need to.

One of the great things about an online business is you don’t have the worries and costs that come with a brick-and-mortar business. That doesn’t mean there are no costs or worries but it can be easier to manage. The most important item of your website is security. It is very serious because you need to protect your customers and yourself. This is the one area you should spend that extra buck for better security.

If you need help with getting started you can contact SDI for your business and technological needs.

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