If you are thinking on the lines of starting your own micro-lending business it is important that you have a strategic and immaculate business plan set well in advance. This will help you to prepare a feasibility report of your lending business so that you can know about its prospects and where you will stand exactly after a given period of time. Considering all the requirements for your micro money lending business you must analyze and draft a comprehensive marketing plan.
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Start With The Basics
You must first get your basics right to succeed in your micro lending business. Know that any micro lending or mortgage business is not starkly different from building any standard loan or brokerage business. Microlenders typically deal with broker loans, especially for the small businesses. These loans are given out without any collateral security. The only significant difference of microlenders from brokers is that they have a valid and proper license that provides them with the power and authority to lend money to borrowers seeking home finance.
Attractive And Beneficial Features
If you build your own micro-lending and mortgage business you will have the joy of crafting your own business plans and hours. The thought and fact of keeping your commissions may seem to be very attractive.
- Apart from that, you will have no office drama and its usual politics and can plan your development opportunities that will increase the scope of your business advancement and returns.
- You will be handling your logistics and business operation to ensure better lending and return of funds.
However, simply designing attractive money lending sites is not enough to ensure success as it takes a lot of effort and a thorough understanding of all the ropes, nuances and intricacies of the business before you start your venture. There are several different grey areas of microlending business that you must master first and carry on with it successfully.
Importance Of Feasibility Research
You must be well conversant with the microlending business market, its prospects and terms and the only way to do so are by carrying out a thorough and proper feasibility research on your own.
- Apart from that, you may also take a look at the different useful business plan template so that you learn more from the experts about the elements that the business involves.
- You must know the cost of your business, a number of employees required and much more to build up an effective and immaculate microlending business plan.
All this data and information will be provided by the feasibility report.
A Proper Business Overview
You must have a proper business overview so that you can stay in the market and face the challenges of even the hardest economic conditions. However, you must know that lending business is typically recession proof. This is because people, as well as other business companies, seek loans to pay for several transactions that may include real estate purchase as well. If you know the contours of the business you can easily face the swelling competition that this large business segment faces from the commercial banks. This business has come back from the recession and has been successful in doubling its revenue before the recession.
This is due to the unequivocal demands of the consumer. Most of the previously unqualified borrowers look out for several different micro lending options. Since there is a steady and noticeable improvement in the housing sector over the past few years, micro-lending and mortgage industry has gained popularity. Therefore, the future of microlending business looks bright, much due to the housing market.
The Economic Life Cycle
There are a few facts and information that you must know about microlending business to have a clear and better picture of the economic life cycle of the business.
- Though there is a stiff competition from the commercial banks, the industry value added to the overall economy will grow at a steady annual rate of 1.5% while the GDP is expected to grow at an annual rate of 2.2% over the years.
- These figures indicate the significant contribution of this specific business segment to the economy, especially in the home loans segments.
All these have added a positive pressure on the demand for microlenders that offer an unlimited access to various products with a variety of interest rates.
The Business Plan
Microlending caters to the demand of small businesses, builders, real estate professionals and even individual home buyers. Offering a complete range of microfinance these lenders provides the best rates and terms to the customers. The parameters of microlending enable it to provide a wide range of services and products. Though it depends on your ability and availability of capital, the different types of services and products offered by micro-lending businesses include:
- Offering loans to small business enterprises or SMEs
- Providing commercial, residential and industrial mortgages
- To make available home equity, vehicle and equipment loans
- Providing residential mortgages and mortgage financing online and
- Providing an online mortgage marketplace.
You may also include consulting and advisory services regarding any loan cum mortgage but once again depending on your scope and capacity.
The Distinctive Features
Any microfinance business will have its distinctive features. Some of the distinguishing characteristics include:
- Loans are given to micro-borrowers who are usually low-income customers such as underemployed and petty traders.
- All loan records are studied for credit risk assessment usually with the help of loan officers as most debtors lack official financial statements.
- There are no securities as compared with conventional banks and the entirety of the business depends on the skill and reliability of the assessment of the loan officers.
- Credit authorization and constant monitoring is the key of this extremely distributed lending process.
Controlling the debts is another major function of the loan officers to ensure safe and secure microfinance. Therefore, information on the client’s individual state of affairs is crucial for any micro lending business.