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How to Start Your Direct Lending Business (Lending Investor)
Aside from being an Energy Technology Expert, Marcial T. Ocampo is also a leading consultant in setting up your own start-up business, especially in direct lending — also called lending investor.
The following is a sample business plan for starting your own direct lending business. With today’s global economic crisis, it is important that credit is made available to small businesses with the least inconvenience and costs which normal banks would not otherwise lend for being too small an amount or for being not credit worthy.
On the other hand, traditional investment outlets provide very low returns that individuals with surplus capital placing their hard-earned savings either earn very low interests or risks in stocks and other high-yield instruments.
This article below will hopefully guide you start your own direct lending business.
Please contact the author below for further help in setting up your own direct lending business, including the needed administrative, loan processing and accounting systems.
For a minimal fee, you will be provided with a Sample Business Plan and a Sample Financial Model for a Lending Investor Business.
For a regular fee, you will be provided further with a spreadsheet for a five-year business plan (income statement and balance sheet) that shows the growth of your business to break-even and to profitability.
This model will provide you the minimum new loan releases and minimum capitalization that will provide sustainable operation to overcome the fixed costs of the direct lending business.
BUSINESS PLAN FOR DIRECT LENDING BUSINESS
In the Philippines, there is a great number of individuals and families that could not secure affordable credit because they are either retired already (over 55-60 years old), temporarily disabled (receiving disability pension for about 12 months), or under employed (receiving less than P15,000 gross income per month).
These individuals are therefore exposed to usury and are forced to borrow money at exorbitant interest rates of over 4% per month from pawnshops and individuals wherein they pawn as security jewelry, cellfones, laptops or desktops, motorcycles or vehicles and house & lot titles as collateral. Sometimes, they borrow at 5%-10% a month from individuals lending money for 1-3 months.
It is in this light that this corporation engaged in lending business aims to help them get affordable credit at 2%-3% per month plus fixed charges (3% service fee, 2% collection fee, 1% credit investigation fee, 1% legal/audit fee, 2.5% marketing/referral fee, documentary stamps [PhP 0.30 per PhP 200 PN amount if more than PhP 100,000], notarial fee [PhP 180 per loan] and creditor’s life insurance [PhP 1.55 per PhP 1,000 outstanding balance], all totaling around 8-9% as one-time fixed charges).
This is still much cheaper than their traditional sources of credit. The retired pensioners usually borrow around PhP 2,000-4,000 per month for a term of around 6 to 12 months. For a 12-month term at 2% per month, this translates to a 2.58% per month average interest. On the other hand, salaried individuals borrow from PhP 4,000-8,000 per month for a term of around 3 to 6 months. For a 6-month term at 2.5% per month, this translates to a 3.85% per month average interest.
Experience has shown that once a private employee (SSS member) or a government employee (GSIS member) retires at the optional age of 60 years old or mandatory retirement of 65 years old, the retiree suddenly loses access to affordable credit. This means that prior to retirement, the employee should ideally have saved money and/or invested his savings in some form such as time deposits, treasury bills, stocks, small business enterprises, apartment rental units, etc. in order to have regular replacement income after retirement.