How to Start a Lending Company

by Julia Lynne Mei; Updated September 26, 2017
...

A lending corporation lends money from its own capital funds or from its investors to the public, earning money from the interest paid by individuals and entities. Companies approve loans for auto or home purchases, business endeavors. education costs and credit servicing. Starting a lending company takes business savvy, research, time and effort. It can be very lucrative.

Step 1

Unless you already have considerable experience in the field, research it extensively. Write a business plan stating your financial goals and strategies. Develop a plan to raise capital to start lending, market your services, manage the business and expand it.

Step 2

Register your business name with your local and state government. Business names are mandatory on government forms and applications. Check to make sure the business name isn't already taken by referring to the website of your state's business registry or department of state.

Step 3

Acquire an Employment Identification Number (EIN) from the Internal Revenue Service (IRS). You may apply for the EIN number online, mail it in or call an IRS agent. You are also required to get a tax ID and permit from your state revenue agency.

Step 4

Find out what the requirements are from your local Secretary of State for filing a lending business permit or license, and fill out the necessary applications. The U.S. Securities and Exchange Commission requires that lending company be registered as stock corporation.

Step 5

Raise capital for your company. There are a number of opportunities to look into: private investors, banks or lending institutions, venture capital funds, small business loans, personal savings or money from friends and family. Talk to a bank about opening a business fund account.

Step 6

Consult with a business attorney to inquire about legal requirements and procedures for the company. He will guide you in the necessary steps to attain approval for your lending company and will handle the application processes as well as legal issues.

Step 7

Network as much as you can socially or on the Internet. Go online and to business and networking events to market and promote your services. Socialize with potential clients and make a lot of phone calls to build your list of prospects.

Step 8

Find an office. Use the help of a real estate agent to look for office space to rent in high-traffic neighborhoods, especially areas with other lending businesses. Build the rent into your business expenses.

Tips

  • When starting a lending business, start small. Use integrity and your best social skills to build trust and your clientele.

Warnings

  • When drafting a contract for a client, ask an attorney to review your contract to make sure there aren't any loopholes clients may find to avoid repayment of the loan.

About the Author

Julia Lynne Mei started publishing, writing and editing for online in 2009. Her work appears on eHow and on All is Luv, an online support community for women. She holds a Bachelor of Science in education, specializing in teaching English language arts, from Boston University.

Photo Credits

  • Excited Woman Holding Stack of Money image by Andy Dean from Fotolia.com