Everyone needs an extra dime, whether they earn a little or more. Money is a scarce resource that is never enough. Knowing what not to do in the lending business will save you a lot.
Starting any business has become easy; unlike traditional days where one had to go through a lot of offices. Nowadays one can even start a business without having to visit any office.
Technology has come to save us a lot of hassle. It has also cut down on cost and provided flexibility.
Everyone who starts a business has an aim that it will grow. However, before the business starts booming one needs to have the necessary tools.
A plan is the most important tool, it entails budget and how each stage will be implemented. One also needs to have passion and purpose for the business.
Let’s dive into the topic of what not to do in the lending business; let’s start with knowing the basics.
So what is lending?
This is a two-way transaction. It involves the creditor (who gives the loans) and the borrower (who receives the loan).
The transaction however is governed by terms and conditions. A borrower must agree to the creditor’s terms before receiving the loan.
Some terms can include the commitment of assets, collateral, guarantors, and many more depends on the creditor’s terms.
As a two-way transaction, the borrower ought to return the loan with something extra; interest. Interest depends on the rates the borrowers have set.
In case of default, the creditor has the authority to acquire the assets or collateral and use it to pay for the loan.
So before borrowing any loan one oughts to be careful and read through all the terms before getting the loan.
Is the lending business profitable?
Yes, it’s the best business to start. Imagine just earning from just giving money; you give you receive with something extra.
Lenders earn from interests, fines, and collateral. This means that they recover the amount they lend easily.
Now here is an example:
Consider borrowing $10,000 from a lender with an interest rate of 18%
How to start a lending business?
The lending business is just like any other business. However, one needs to be careful in this business.
Here is how to:
- Find a business name– this is the name that people will know your business through, the name to sell your business.
- Create a business plan- this is the detailed step-by-step action guide that will help you run the business.
- Find funding- it’s the money to use to build the business. One can use investors instead to help you start.
Here is a resourceful article to help you on starting a lending business.
Here is what not to do in the lending business.
1. Starting without an aim
The aim is what drives you. Without an aim, the business is prone to failure which is a big blow for the business.
The aim is not just to make money from lending; one also needs great customer services, constant growth as well as employee attraction and retention.
Ensure you have an aim; in short offer a solution to a current problem which the competition hasn’t been able to solve.
2. Relying on the normal knowledge
Research is key; reading books and watching keynote speakers give tips on how to grow the business is very crucial.
Businesses are evolving; the normal knowledge is not enough. One needs to keep up with the trends.
Every business needs to change; meaning evolving and be able to accommodate the current market trends.
3. Not registering your business
This is the worst mistake one can make. Registration of the business allows it to be recognized by law.
Registering means that one can transact freely; the business also needs recognition which also helps in the payment of taxes.
Taxes are important and every business registered ought to pay taxes. It from taxes that even the market improves.
Registration keeps the business safe and also protects you as the owner when faced with legal terms; so register and avoid all these troubles.
4. Launching or expanding too soon
Before starting or expanding one needs to look at the market, how the business has been performing. One doesn’t just decide on a big decision without facts.
Research is crucial, one needs to be well informed before making huge decisions. Besides, both startup and expansion require a lump sum to implement.
Without the right information, you might end up spending and incur losses and debts which will you.
5. Not keeping track of the books
Bookkeeping is crucial. It helps one account for the spending and planning ahead by allocating different resources to different slots.
However, at times this becomes tiresome and one needs help. Here is the best news for you! You don’t need to get tired anymore.
How? There is software that will help you manage books and generate reports on all transactions made.
Software? Yes, Jisort; a web-based platform for Microfinance Institutions, SACCOs, Banks, Cooperatives, Credit Unions, Lending Organizations, and other financial institutions.
Jisort is used to manage clients’ information as well as keep track of their transactions and generate reports and business statements.
Jisort has been up and running for over 6 years. It has thousands of clients both local and international. It has been able to integrate with:
- Credit Reference Bureaus (CRBs)
- Among others
Why use Jisort?
- It is affordable– with just $20 one can manage all their clients under one place. Besides one also gets transaction reports and business statements.
- User-friendly- the system is an all-in-one platform in that it’s easy to use and managing all clients is fast and easy.
- Time saver- well it’s online searching for a client’s history is easy unlike the traditional filing system
Of course, there are many other reasons to consider Jisort. Here is a good read as to why Jisort is the best.
6. Lacking online presence
A website is vital to help you post updates about the lending business, the terms, and conditions and many more.
Nowadays you don’t need money to start a website. At OLITT creating a website is free and fast, go live in less than 10 minutes.
Features of OLITT:
- SSL Certificates- provides a free certificate for all landing pages and websites created on OLITT to keep your site safe.
- SEO Tools- perform search engine optimization for your website with the OLITT tools provided.
- Domains- OLITT provides a free domain, discounted domain extensions and it also gives you a chance to connect a custom domain for FREE!
- DNS Management -it provides a secure DNS Management Platform for free, to help manage your domain name records. It also supports DNSSEC plus many more.
- Affordable- it has a free option and a lifetime option of $59; meaning that no more payments once subscribed.
- No design or coding skills needed- anyone can create a website with OLITT; no designing or coding needed to have a website.
- Easy-to-use- it is responsive, besides it has a drag and drop feature to help one create any website.
- Secure- OLITT offers security for all your websites. Whether on paid or free subscription one gets a free SSL certificate.
Get your free website now for free. Get to reach out to as many people as you need share your business and watch it grow.
Well, now you know what not to do in the lending business. Make sure to consider the above 6 resolutions to better your business.
Having a lending business is another way to earn. However, one ought to put in place a good plan and financial management software to help run the business.
It’s not too late or too early to start earning an extra dime.