How do you start a small finance company?

Answer 1

Three StepsAssuming your definition of a finance company is a company that lends money to consumers, the following may be helpful:

1)Find a short term source of cash for the Company - Company can not lend money to others if the Company has no money itself. Sources of financing are (1) the owners' money, (2) line of credit from a bank (good luck), (3)borrowing money from somewhere else.

2)Find a long term source of cash - The amount of short term money needed depends on how long you hold onto the receivable from the borrower (the consumer). If the Company lends money to someone and then immediately turns around and sells the receivable than the Company does not need much short term money (makes life easier). You can often sell a receivable to a large Finance Company in the same space as your are operating.

3)Find consumers who want to pay interest in order to borrow money. This is the real key, as whoever owns the consumers, makes the money. If you have access to lot of consumers who will pay interest on borrowings, you could bypass #1 and #2 by simply hooking with a larger finance company and being a provider of consumers for a commission. This is a great way to get a track record which will help with #1 at a later date. Many large finance companies (especially mortgage companies) offer these types of arrangements. Research the difference between a mortgage broker and mortgage lender for more information.

You may also want to look into a Cash Checking Franchise business to broaden your options

Good luck.