Starting a cash loan business requires one to adhere to regulations set out by the National Credit Act. This form of finance is gaining more credibility in the mainstream finance industry. Many commercial banks are offering micro credit, which effectively gives more consumers options to gain access to extra cash from a trusted, reputable lender.
The economic environment is quite harsh nowadays, so more people require funds from alternative sources of finance.
Even though many banks offer cash loans, there is also a growing market for micro lending institutions. Not everyone has the funding and ability to start their own bank; so many people are resorting to starting micro lending institutions. This is an assured way of multiplying money.
So what does it take to start a cash loan business?
Cash loan businesses operate in a similar way to banks. Banks however have a ceiling on the amount of interest which can be charged to consumers (stipulated by the Usury Act).
All micro lenders must register with the MFRC (Micro Finance Regulatory Council) before commencing operations.
There are some basic steps you should take before starting a cash loan business. These include:
- Setting up an area of operation
- Becoming familiar with the legal aspects of the business
- Publicising your business
- Having systems in place to thoroughly determine the eligibility of a borrower
- Ensuring that you have a surplus of funds for defaults. Decide how many delayed repayments by borrowers you can withstand to survive in business.
- Spelling contract terms clearly
How to register:
A registration fee of R2000 is required plus a R250 branch fee per location. Application forms can be downloaded from the NCR website.
The Registration Division of the National Credit Regulator is responsible for the registration of Credit Providers. Approval after submitting an online registration takes about eight weeks.