Start Your Own Micro-lending Business
A micro-lending business is one that lends small amounts of money, usually to individuals or micro businesses. This venture, if properly run, is very lucrative as the demand for cash is present in almost every community.
People and small businesses go to micro-lenders even if the interest rate is higher than banks. The first and most important reason is the difficulty in obtaining small loans from banks. Secondly, when the need is urgent, banks cannot beat the instant availability of cash offered by micro-lenders. Third is that micro-lenders usually do not require collateral, while banks generally need to have collateral before they release the loan.
If you are going to start your own lending company, here are the steps to take:
Comply with registration requirements. The company must be in the form of a corporation so it must register with the Securities and Exchange Commission (SEC). You will need a minimum of one million pesos paid-up capital. Besides the SEC, you also have to register with the barangay, City Hall, BIR, SSS, HMDF and Philhealth.
Know the current legal requirements. There is a law called the “Lending Company Regulation Act of 2007,” which governs the micro-lending business. Other pertinent laws to comply with is the “Truth in Lending Act” which requires you to disclose in writing the computation of interest, charges and other matters related to the loan. Note that there are other laws that should be complied with.
Study your target market. This is essential to guide you on where to locate your business, your renovation expenses, marketing and other matters. Know where there are the best opportunities and the least competition. Even the way your office looks would have to be in accordance with the income bracket of your target market. Your study of the market would also be very useful to determine the type of loans to offer.
Hire the right employees. You will need only three employees if you are just starting and each of them has a critical role. There must be a loan application processor, collector and bookkeeper. Your loan processor and bookkeeper must have a meticulous personality. A single mistake and you may be unable to recover your loan or, in the case of the bookkeeper, get you into trouble with the regulatory agencies. Your collector must have both patience and firmness at the same time in dealing with your clients. Remember to be careful in selecting your employees because it will be almost impossible to change their personality if you find them unsuitable for the position.
Learn how to screen and collect from clients. This is actually the core competence that you must develop in order to be successful in money-lending. Know what borrowers you must avoid and how to detect them. Learn the C’s of credit assessment, among which are Character, Capacity, Capital and Collateral. In the matter of collection, it is vital to know what you can legally do to avoid complications. Recently, the small claims court was established for loans whose principal is not more than P100,000. This may save you money because no lawyers are allowed in the proceedings.
Micro-lending can be your passport to riches, but like all ventures, you need to know how to operate the business.
To know more about this business, BusinessCoach, Inc., a leading business seminar provider, conducts an excellent seminar on this entitled Starting a Micro Lending Business. Contact (02) 727-5628, (02) 727-8860, (0915) 205-0133 or visit www.businesscoachphil.com for details.
Click here to view details of the seminar: How to Start a Micro-Lending Business »
*Originally published by the Manila Bulletin. C-4, Sunday, August 12, 2012. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.