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The Starting Line: 5 Tips for those who want to start a Lending Company

Posted August 20, 2019 by EasyFinance.com to default 0 0

Most of the time, everything you see on the internet is how to help debtors with their money problems. But have you ever wondered how lenders solve their problems? Indeed, lending money to someone you barely know is a significant financial risk that lenders go through almost every day.

When it comes to money, both the debtor and lender each have their own risks to face. One of the most common risks that lenders face, new or experienced, are debtors who don't pay on time or don't pay at all.

With established lenders who know the tricks of the trade, getting their debtors to pay them is done through a complicated, yet systematic web of legal actions appropriately done. For those lenders who are just starting, you don't have to be worried. When done the right way, you can make your business bloom. Here are some tips to get you started:

Establishing a strong legal team

Before even starting out in the lending business, you always have to develop a strong legal team to help you with your company. Getting a team of lawyers and financial experts can help you with the complicated legalities of the law involving lending.

Of course, with every business, you always have to do the proper legal work. Your legal team can help you register your business to the appropriate avenues, comply with state laws, and do your business the clean way. Being established in the first place gives you a lot of incentives, such as attracting clients who are serious and able to pay their dues on time.

Credit checks are important

You've done your part on being a legitimate lending business. Now it's time to look at some credit reports. Credit reports enable you to filter out possible clients who have delinquent pasts when it comes to payment. You can do either a hard or soft credit check. Credit scores also help you the capability of a debtor to pay back their debts to you.

When it comes to credit scores, you should have a proper threshold or a prerequisite. Here's a picture on what credit scores are good and bad:


  • Exceptional: 800-850
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Poor: 300-579


According to Experian, 21% of the United States population has "Exceptional" credit scores. These people often get their loans fast and with excellent rates as well. A score of 740-799 will land you in the "Very Good" range along with 25% of the population. People in this range receive better rates from lenders.

Out of the 21% that belong in the "Good" category, 8% are more likely to become delinquent with their obligations. People that belong in this range have credit scores of 670-739. Those in the "Fair" range comprise of 17% and are considered subprime debtors. 16% of people in the United States who have "Poor" credit scores have a difficult time getting their loans approved. Most of the time, these people often get their applications rejected.

From the statistics mentioned above, you can get a picture of who to lend money to.  Knowing these scores can help you with your business by ideally reducing the risks you take with potential clients.

The Right Type of Persuasiveness

It's not a surprise that there will be late payments done by your clients, sooner or later. When this happens, don't immediately call a debt collection agency. Before anything else, make subtle contact with your debtors. Since we're all humans, we all mistakes. For all we know, your debtor might have honestly forgotten, or they were attending to something else.

You can contact your debtors through the right methods such as: sending a letter, sending an email, or calling them through their numbers. When you make contact, be positive and polite in your approach. You should also time your calls and messages appropriately. For example, if you made a phone call today, it's best not to call tomorrow.

Enlisting Help

The fact that we have to accept when it comes to lending money is that there will be people who won't pay up. When you've already been polite and doing your part as a good lender, consider enlisting the help of Debt Collection Agency. These Agencies can collect debt for you when you have delinquent clients.

Debt collectors often collect an additional 25-45% of the total amount collected from the debtor. Your contracts should also include increasing rates when late payments are made to discourage delinquent behavior. These rates can help you to cover the services of the collection agency.

Waiting Game

As with every business, it takes time for it to grow. Always be patient, don't get frustrated when there's a lot of late payments being made. That's part of the risk, which if played correctly, will ultimately pay off in the end. 


Starting a lending company involves a lot of risks. This fact is true with all other types of businesses. To help you establish yourself, you need to build a knowledgeable legal team, know the importance of credit scores, and be positive and calm.

Be ready to accept the fact that there will be difficulties such as late payments and delinquent debtors. When this happens, you can enlist the help of debt collection agencies and other legal methods to pursue a debtor that's way behind payments. In the end, to be successful, you need to be patient and understanding of the nature of this business.

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