You might already be aware of the fact that many successful entrepreneurs make money by offering a small amount of loan to those individuals who are not able to get loans from the banks. This can be for those employees whose salaries are not enough for meeting the monthly expenditure or for those people who are in need of quick loans for fixing some immediate personal or professional needs. These loans are given to those projects that do not want to go through the stringent loan processes of the bank. It is both risky as well as demanding to start the business of micro money lending.
However, if you do not have a proper knowledge about micro money lending before you decide to venture into this business, chances are that you are going to incur huge losses. The first and most important thing that is required is a proper experience about the financial structures. You might also have to study banking, finance, or accountancy if you are interested in this particular business.
You can consider the guide that has been coined together below, in order to understand how you can start and move ahead with your micro money lending business.
There is no doubt about the fact that Financial Services is undoubtedly one of the broadest possible industries. Aspiring entrepreneurs, who have a startup capital along with knowledge about how financial businesses work, can easily start this unique and amazing business. Micro money lending is also known as microloans or microcredit. They are loans that are small and are given by individuals rather than financial institutions or banks. A single person can give this loan or a group of persons can also contribute a certain portion of the entire amount.
A micro moneylender can give a loan of $50,000 or even less to the startups or the small businesses as well as individuals. It is also equally important to know that these kinds of loans are provided to those people who belong to the third world countries and the places where the traditional financing systems like bank loans are not available. These loans are helpful for them especially if they are willing to start a small business. Entrepreneurs visit the reputed website to stay secured legally.
Almost 74 million people were known to hold microloans, which amounted to a sum of $38 billion, in the year 2009. An important factor that allows the entrepreneurs to start a micro money lending business is that this business brings in a lot of profit.
Psychographics and demographics
The demographics, as well as the psychographic composition of the people who require the microloans, is something that you need to know. These loans are normally taken by startups and people who require loans but due to certain reasons, they are not going to access it from the banks or any other standard lending institution. So when you are considering the people who are going to take loans, you have to include startups, the aspiring entrepreneurs, and people whose salaries are really less.
You need to understand that there is no particular niche area within this particular business. A micro moneylender is capable of giving out a loan of 50000 dollars or even less to the small scale individuals or businesses. Few of the companies are also known to operate with the help of the internet, which allows people to access the microloans without residing in the particular location where the business is physically located.
The competition present in this industry
The competition that exists in this industry is not dependent on the physical location of a particular business as a number of ventures are also known to operate online. However, a number of money lending businesses are scattered over the world as well as the internet space. If you are starting your own business, you are definitely going to face a stiff competition especially when you are choosing to operate online. Moreover, there are also a number of well-established firms that are known to determine the various trends within the industry. You have to get ready to compete with these firms for clients.
Possible challenges and threats that you can face
If you have decided to start your own firm of micro money lending services, a major challenge that you can face is the well established firms as well as other stable and standard lending institutions, like the banks, mortgage banks, and much more, who offer all the services that you intend to offer to your clients. The only manner in which this challenge can be avoided is by creating your very own market.
Other unwanted threats include government policies that are unfavorable, the arrival of competitions where you are operating or an economic turndown globally. You also need to understand that there is nothing you can do about these threats but it is definitely important that you remain optimistic and positive that things are going to be perfect for you.
When you have started your business of micro money lending, the legal entities that you are going to consider are responsible for determining the growth of your business. Few of these service firms design the service and the business for the regional communities, the national market, or the international market with the help of the online platforms. You can either choose general partnership or the limited liability companies.
The general partnership is ideal if your business structure is small and if you have just started with a moderate capital. Most of the people prefer a limited liability company especially if they have the intention of growing the business as well as having both individual and corporate clients from all over the globe. When you set up an LLC, you can be assured that your personal liabilities are going to be protected.
Before starting the business, it is extremely important that you have a proper knowledge about all these or you can be at a risk of huge losses, which is something that you definitely do not want.
This article has been written by John Bell for Times of Startups. John has been writing articles on Social Media, skilled business consultant and Financial Adviser for the last few years. In this post, he has written about the benefits of Social Media Marketing, Business, Finance as well as the features related to the same.