Starting a Finance Company: A Guide
Types of Finance Companies
The idea of starting a privately controlled finance company is not new. There are many industries in which this approach helps to acquire new customers and keep them over the long term. Taking the time to learn about how this strategy is used in different industries will help you determine if this is a path that your employer can take. You may even find that some of the competition is already quietly offering this service and building stronger relationships with their clients.
Setting Up a Finance Company
Establishing a new finance company, even as a subsidiary of an existing business, requires careful preparation. The process will involve identifying local statutes that the company must meet, organizing the company structure, and establishing a means of providing the underlying capital for operation. You must also manage the task of hiring the right people to assume each position within the organization. These and other issues must be resolved prior to opening the doors and extending the very first loan to any borrower.
Keeping the Business Profitable
Finance companies are for profit entities. This means that the organization must be structured to earn a profit very early on. Reaching and maintaining profitability will involve balancing the amount of revenue earned from interest with the balances owed on open accounts. Periodic review of the schedule of charges and the aging of open loans is important. You will also need to periodically review the application and acceptance processes to ensure that the company is only approving loans that come with a reasonable level of risk.