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Money Lending Business

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How to Start a Money Lending Business

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on June 15, 2022 Updated on March 13, 2024

Investment range

$8,550 - $18,100

Revenue potential

$72,000 - $300,000 p.a.

Time to build

3 – 6 months

Profit potential

$58,000 - $120,000 p.a.

Industry trend

“Neither a borrower nor a lender be,” Shakespeare warned. Yet many have ignored his advice and today non-bank loans represent a $7 billion US industry. You could make good money with your own money lending business, as you’ll charge a higher interest rate and fees than those charged by banks because of the additional risk involved.

But before you start searching for investors, you’ll need to understand the process of launching a business. Luckily, this step-by-step guide has all the information you need to put you on the road to entrepreneurial success as a lender. 

Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.

Form your business immediately using ZenBusiness LLC formation service or hire one of the Best LLC Services .

Step 1: Decide if the Business Is Right for You

Pros and cons.

Before we get into the details, it’s important to clarify the type of business under discussion. Money lending businesses provide capital to individuals, generally those who cannot qualify for traditional bank loans. Money lending businesses can be structured in a number of ways:

• Private Lending – With a private lending company, you’d be lending your own personal funds to individuals, either unsecured or secured by collateral.
• Hard Money Lending – You would form relationships with money brokers and investors who would put up capital for you to use to make loans. The brokers or investors will take the interest earned and you would charge borrowers a loan fee.
• P2P Lending – Peer-to-peer lending is usually online and is basically a money lending app that connects individual lenders and borrowers. The P2P lending company usually takes a fee for the loan service. 

This article will focus mainly on a hard money lending business, which requires much less capital to start. Even so, starting a money lending business has pros and cons to consider before deciding if it’s right for you. 

• Good Money – Make 3-5% of each loan up front
• Flexibility – Run your business from home
• Large Market – Customers can be anywhere
• Build Relationships – Takes time to find investors, clients
• Attorney Fees – Need a prospectus for investors, plus loan documents

Money lending industry trends

Industry size and growth.

• Industry size and past growth – The US installment loan industry was worth $6.7 billion in 2021 after declining 1.3% annually over the previous five years.(( https://www.ibisworld.com/united-states/market-research-reports/installment-lenders-industry/ ))
• Growth forecast – The US installment loan industry is projected to continue to modestly decline over the next five years. 
• Number of businesses – In 2021, 19,551 installment loan businesses were operating in the US. 
• Number of people employed – In 2021, the US installment loan industry employed 106,935 people. 

Trends and challenges

Trends in the money lending industry include:

• Hard money loans are growing in size and more often used for home purchases. This means higher fees for hard money lenders.
• More and more cross-border hard money loans are being made due to investors wanting to expand their reach globally.

Challenges in the money lending industry include:

• Money lenders have come under much scrutiny for alleged predatory lending practices and the high rates and fees they charge.
• Regulations are continuously tightening on money lenders, creating obstacles to doing business.

Demand hotspots

• Most popular states – The most popular states for lenders are South Dakota, Minnesota, and Michigan.(( https://www.zippia.com/lender-jobs/best-states/ ))
• Least popular states – The least popular states for lenders are Indiana, Tennessee, and Virginia.

What kind of people work in money lending?

• Gender – 50.8% of lenders are female, while 49.2% are male . (( https://www.zippia.com/lender-jobs/demographics/ ))
• Average level of education – The average lender has a bachelor’s degree.
• Average age – The average lender in the US is 44.9 years old.

How much does it cost to start a money lending business?

If you decide to start a hard money lending business, your startup costs will range from $8,000 to $18,000. The largest cost will be attorney fees. You will need a prospectus to give to potential investors detailing how you will do business and how they will get a return on their investments. Such documents are complicated and costly. You’ll also need a website and a marketing budget.

How much can you earn from a money lending business?

Hard money lenders typically take a 3% to 5% fee of the total loan amount. Since a large portion of the loans you make will be for homes, these calculations will assume an average loan amount of $150,000, which would give you an average fee of $6,000 per loan. 

The interest paid on the loans will go to the investors. Your profit margin should be high, at around 80%. In your first year or two, you could do 12 loans a year, bringing in $72,000 in annual revenue. This would mean $57,600 in profit, assuming that 80% margin. 

As you build a reputation, you could increase that number to 50 loans a year. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of $300,000, you’d make a handsome profit of $120,000.

What barriers to entry are there?

The only barrier to entry for a money lending business is building relationships with investors, which often takes a lot of networking and leg work.

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Step 2: hone your idea.

Now that you know what’s involved in starting a money lending business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research money lending businesses in your area to examine their products and services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a micro lending company or a money lender that will provide a business line of credit. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as term loans for those with bad credit, or hard money startup loans.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

You’ll need to determine what types of loans to offer, and how you will evaluate credit scores to determine whether to make the loans. You’ll need to lay out specific lending criteria in your investor prospectus. 

As far as the types of loans, you can offer mortgage loans, business loans, personal unsecured loans, car loans, or lines of credit. 

How much should you charge for money lending?

Hard money lenders typically take a 3% to 5% fee of the total loan amount. The interest paid on the loans will go to the investors. The interest rates you charge will depend on the interest rate limits in your state. Working alone, your profit margin should be high, at around 80%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will generally be anyone with bad credit who needs a loan. You should market on TikTok, Instagram, Facebook, and even LinkedIn, which is also a good way to connect with potential investors. 

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist , Crexi , and Instant Offices .

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Money Lending Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “money lending” or “hard money loans”, boosts SEO
• Name should allow for expansion, for ex: “Instant Money Solutions” over “Home Sweet Loan”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator . Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Find a Domain

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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Money Lending Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: A brief summary of the business plan, highlighting its key points and objectives.
• Business Overview: An overview of the money lending business, including its mission, vision, and legal structure.
• Product and Services: Details about the types of loans or financial services offered, including terms, interest rates, and eligibility criteria.
• Market Analysis: An examination of the target market, including size, demographics, and trends, to identify potential customers.
• Competitive Analysis: Evaluation of competitors in the lending industry, assessing their strengths and weaknesses.
• Sales and Marketing: Strategies for attracting and retaining customers, including advertising and promotional efforts.
• Management Team: Introduction to the individuals leading the business, highlighting their qualifications and roles.
• Operations Plan: Information on day-to-day operations, such as loan application processing, risk management, and customer support.
• Financial Plan: Projections for revenue, expenses, and profitability, as well as funding requirements and financial forecasts.
• Appendix: Supporting documents, such as legal agreements, market research data, or additional information to enhance the plan’s credibility.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to money lenders.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your money lending business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC , which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization , and answer any questions you might have.

Form Your LLC

Choose Your State

We recommend ZenBusiness as the Best LLC Service for 2024

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number , or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist , and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan .
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a money lending business. You might also try crowdfunding if you have an innovative concept. 

Step 8: Apply for Money Lending Business Licenses and Permits

Starting a money lending business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need to meet the requirements to be a licensed money lender in your state. You’ll also need to follow federal and state regulations on lending practices. 

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration ( OSHA ), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package . They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account .

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your money lending business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as  HES , Black Knight , or Moneylender , to manage your loan processes, accounts, credit checks, and fees. 

• Popular web-based accounting programs for smaller businesses include Quickbooks , Freshbooks , and Xero . 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace . This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization ( SEO ) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Starting a money lending business can be lucrative, but success hinges on effective marketing strategies. Here are practical tips beyond creating a website and networking:

• Targeted Local Advertising: Utilize local newspapers, community bulletin boards, and radio stations to advertise your services, ensuring your message reaches the right audience within your community.
• Strategic Partnerships: Forge partnerships with local businesses like real estate agencies or car dealerships, creating a referral system where they recommend your lending services to their clients.
• Educational Seminars: Host free financial literacy seminars in your community to position yourself as an expert and attract potential borrowers seeking valuable insights into managing their finances.
• Social Media Engagement: Leverage social media platforms to engage with your audience, share financial tips, and create a community around your brand, fostering trust and credibility.
• Customer Testimonials: Showcase satisfied clients through testimonials in your marketing materials, emphasizing success stories and building credibility among potential borrowers.
• Loyalty Programs: Implement a loyalty program offering incentives or discounted rates for repeat borrowers, encouraging customer retention and word-of-mouth referrals.
• Direct Mail Campaigns: Design targeted direct mail campaigns to reach specific demographics, using compelling offers or promotions to capture the attention of potential borrowers.
• Online Reviews and Ratings: Encourage satisfied customers to leave positive reviews on online platforms, enhancing your online reputation and influencing potential borrowers in their decision-making process.
• Community Involvement: Actively participate in local events and sponsor community initiatives to increase your brand visibility and foster a positive image within the community.
• Referral Programs: Develop a referral program where existing customers are rewarded for referring new borrowers, creating a network of advocates who vouch for your services.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your money lending business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your money lending business could be:

• Bad credit? We can put you back in the black 
• Mortgage loan denied? We’ll finance your new home 
• Affordable loans to build your business

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a money lending business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in money lending for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in money lending businesses. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a money lending business include:

• Loan Processors – handle loan paperwork
• Loan Originators – take loan applications, get loan informational documents
• General Manager – scheduling, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed , Glassdoor , or ZipRecruiter . Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Money Lending Business – Start Making Money!

Money lenders provide a valuable service to people unable to obtain loans, which is why it’s big business. If you can build solid relationships with investors and are committed to helping people, you could build a lucrative lending operation, even starting from your own home! 

Now that you know what’s involved from a business perspective, it’s time to launch your successful money lending business. 

• Money Lending Business FAQs

You can make a 3% to 5% fee on each loan amount, so it can be very profitable. The key is to build relationships with investors who will fund your loans.

Hard money lenders typically take a 3% to 5% fee of the total loan amount. The interest paid on the loans will go to the investors. The interest rates you charge will depend on the interest rate limits in your state.

To differentiate your money lending business, focus on providing competitive interest rates, flexible repayment terms, exceptional customer service, quick loan processing, transparency in fees and charges, and personalized financial solutions tailored to individual borrower needs.

Yes, you can start a money lending business on the side, but it requires careful consideration of legal and regulatory requirements, managing risk effectively, and ensuring proper time management and resources to handle both your main job and the lending business.

Assess the creditworthiness of potential borrowers by conducting thorough credit checks, verifying their income and employment stability, reviewing their credit history and repayment patterns, and considering any collateral or guarantors provided. Additionally, evaluate their debt-to-income ratio and analyze their financial statements to gauge their ability to repay the loan.

Expand your money lending business by developing strategic partnerships with local businesses or professionals, leveraging digital marketing strategies to reach a wider audience, offering referral incentives to existing clients, exploring new geographical regions or markets, providing online loan application and processing options, and continuously enhancing your reputation through positive customer reviews and testimonials.

This was a good guide for me , Thank you

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• Decide if the Business Is Right for You
• Hone Your Idea
• Brainstorm a Money Lending Business Name
• Create a Money Lending Business Plan
• Register Your Business
• Register for Taxes
• Fund your Business
• Apply for Money Lending Business Licenses and Permits
• Open a Business Bank Account
• Get Business Insurance
• Prepare to Launch
• Build Your Team
• Run a Money Lending Business - Start Making Money!

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How to Start a Money Lending Business

Last Updated: April 15, 2024 Fact Checked

This article was co-authored by Clinton M. Sandvick, JD, PhD . Clinton M. Sandvick worked as a civil litigator in California for over 7 years. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013. There are 11 references cited in this article, which can be found at the bottom of the page. This article has been fact-checked, ensuring the accuracy of any cited facts and confirming the authority of its sources. This article has been viewed 328,318 times.

If you want to start a money lending business, you will need to decide what kinds of loans you want to make—payday, mortgage, or installment loans. You may choose to start a lending business using only your own money or money from a group of investors. Starting a money lending business will require that you develop a business plan and gain the necessary government licenses.

Preparing to Start the Business

• You should search your state’s business filing office to find out if a name has already been taken.

• Executive summary. You will need to briefly describe the nature of your business and why you think it will be successful. The executive summary should contain your mission statement as well as company information. As a startup, you should focus on explaining how your experience and background will contribute to the business’s success.
• Company description. Explain the nature of the business, your intended market, and the market needs your lending business will satisfy. For example, you might want to meet the small loan needs of your community, which are underserved.
• Also identify your competitors and describe their strength or weakness in the market.
• Product line. Describe the loans you want to make. You should explain the advantages of your loans over those of competitor’s.
• Marketing and sales. Discuss your overall sales strategy, including your plans for growth. For example, you may hope to grow geographically, offering your loans to a larger community. Or you might hope to grow by offering additional types of loans to your current market.
• Financial projections. Based on your market analysis, you should forecast your projected finances for five-years out.

• Some money lenders have dipped into their retirement accounts, such as their IRAs and 401(k) accounts, to fund their loans. Experts encourage money lenders who do this to understand the risks that they are taking. For example, loans might not be repaid, in which case you could lose a large percentage of the loan amount. [3] X Research source
• If you seek funding from investors, then you will need to work closely with a lawyer to draft a prospectus to share with investors. State and federal laws tightly regulate how you advertise securities to potential investors. Your lawyer will need to be experienced in securities regulation.

• Generally, you will assess risk by gathering information about the loan applicant’s financial history. For example, you would want to look at their income, FICO score, and other debt load. [4] X Research source

• To find an experienced business lawyer, you can visit your state’s bar association website, which should run a referral program.
• You can research any attorney by visiting his or her website. Look for experience with business formation, as well as banking or lending experience. If you are starting a lending business for real estate, then look for an attorney who has real estate experience as well.

• You can purchase your domain name from various registrars. Search the internet for “where to purchase domain name” and look at the different companies that provide this service.

Registering Your Business

• To incorporate, you will have to file articles of incorporation with your state. Your attorney should be able to get them, or you can get them yourself from your Secretary of State.

• In addition to state licenses, you may need municipal or local licenses. You must contact your state business licenses office and search for applicable licenses or permits. The Small Business Administration has links to each state’s office at https://www.sba.gov/content/what-state-licenses-and-permits-does-your-business-need .

• Not every state requires that you register a “doing business as” name. You can check registration requirements with your Secretary of State office as well as with your county clerk’s office.

• You should check with your attorney whether or not you need to register the securities and which agency you need to register with.

• You can apply for an EIN online. This is the preferred method. [6] X Trustworthy Source Internal Revenue Service U.S. government agency in charge of managing the Federal Tax Code Go to source To start the application, visit the EIN Assistant at https://sa.www4.irs.gov/modiein/individual/index.jsp .
• You can also apply by mail or fax by printing off Form SS-4 available at http://www.irs.gov/pub/irs-pdf/fss4.pdf . To find out where to mail or fax your form, you should visit the IRS website at https://www.irs.gov/filing/where-to-file-your-taxes-for-form-ss-4 .

• Under federal law, specifically the Fair Debt Collection Practices Act, you are prohibited from harassing or abusing the customer that owes you money. [7] X Trustworthy Source Federal Trade Commission Independent U.S. government agency focused on consumer protection Go to source Also, you cannot use false, deceptive, or misleading means to collect any debt. [8] X Trustworthy Source Federal Trade Commission Independent U.S. government agency focused on consumer protection Go to source If you fail to obey federal law, you and your business could face stiff civil penalties. [9] X Trustworthy Source Federal Trade Commission Independent U.S. government agency focused on consumer protection Go to source
• Each state will also have laws prohibiting certain debt collection activities. For example, in Iowa, you are prohibited from making illegal threats or from coercing or attempting to coerce a customer into paying a debt. [10] X Research source

• To find a compliance professional, you can ask your lawyer for recommendations. Alternately, if you met anyone at a national conference or panel, you could contact them for a recommendation.

Launching Your Business

• Rent is often one of the largest expenses for a new business. Accordingly, you should budget and not spend more than you can afford.
• Try to negotiate a one- to two-year lease with an option to renew. Because you don’t know if your business will be successful or not, you shouldn’t sign an initial lease for longer than that.
• Find out what other expenses you might incur in addition to the rent. For example, you could have to pay for maintenance and repair, upkeep, and utilities.
• Negotiate some add-on clauses, such as a right to sublease or an exclusivity clause (which prevents a landlord from leasing to a direct competitor at the same location).

• Business tax identification number (or Social Security Number if sole proprietor)
• Business license
• Business name filing document
• Articles of incorporation with corporate officers listed (for a corporation)

• If you are lending money for real estate, you will need not only the promissory note but also the mortgage note. Lenders working in the real estate field also typically use other documents, such as Letters of Intent (LOI) and preliminary title reports. [13] X Research source You should ask your attorney or compliance professional about what other contracts are necessary.
• For more information on loan agreements, see Write a Loan Agreement.

• If you want to make a few loans to acquaintances or people in your neighborhood, you could rely on word of mouth. However, if you want to reach a larger market or grow more quickly, then you should consider advertising in newspapers or online.
• You should also consider advertising in the form of imprinting your company name on pens, paper, calendars, and other giveaway items.

Expert Q&A

• Some experts recommend that you lend locally, preferably within 100 miles of your physical location. [14] X Research source Thanks Helpful 0 Not Helpful 0
• Running a collateral-free loan is an added advantage to run a successful lending business. Thanks Helpful 25 Not Helpful 6
• You should not underestimate the amount of work it will take to start a money lending business. If you find it difficult to write a business plan, you might want to rethink your objectives. Thanks Helpful 14 Not Helpful 5

You Might Also Like

• ↑ https://www.profitableventure.com/starting-a-micro-money-lending-business/
• ↑ https://www.sba.gov/writing-business-plan
• ↑ https://www.investopedia.com/terms/l/loan.asp
• ↑ http://www.creditinfocenter.com/mortgage/guidelines.shtml
• ↑ https://www.sba.gov/business-guide/launch-your-business/register-your-business
• ↑ https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
• ↑ https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text
• ↑ http://www.nolo.com/legal-encyclopedia/iowa-fair-debt-collection-laws.html
• ↑ https://www.pacificprivatemoney.com/6-tips-for-a-successful-private-lending-practice/
• ↑ https://www.sba.gov/business-guide/manage-your-business/buy-assets-equipment
• ↑ http://www.fortunebuilders.com/becoming-private-money-lender-part-2-breaking-private-money-loan/

About This Article

To start a money lending business, you’ll need to draft a business plan and obtain the necessary licenses by completing the paperwork required by your state. Your business plan will need to include the types of loans you want to make, such as payday or mortgage, and strategies for how to grow your business. That way, you can attract potential investors, which is typically less risky than using your own savings. You should, however, work with an attorney experienced in securities to ensure you acquire your investments legally. Your lawyer can also help you apply for the needed licenses and register your business as a corporation, sole proprietorship, or whichever type of company you choose to be. For more advice from our Legal co-author, like how to advertise your new business, keep reading! Did this summary help you? Yes No

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How to Start a Money Lending Business (Step-by-Step Guide for 2024)

Would you like to learn how to start a successful money lending business? It is no longer new that alternative finance is fast becoming a norm all over the world as small businesses and individuals seek a faster way to get funds. In a report by Grandviewresearch, alternative finance was valued at USD 10.82 billion and is expected to attain a growth of 20.2% compound annual growth rate (CAGR) from 2023 to 2030.

This is an industry with huge growth and profit potential. If you are searching for a guide on how to start a money lending business step by step, search no more. In this guide, we will give you all the information you need to start your money lending business. You will also learn how to succeed in this business.

What is a Money Lending Business All About?

Table of Contents

This is the first place to start. You shouldn’t start a business that you don’t know what its primary nature is because attempting to do so will be a free ride to disaster. 

This is a form of business where a money lending company provides loans to businesses and individuals that can’t qualify for the traditional bank loans with an interest which can be simple or compound interest.

Now that you know what your intended business is about, let’s move to the next step.

Types of Money Lending Businesses and How They Work

Money lending business is broken into three types and it is important to know them before choosing the one you are going into. Below are the three types of money-lending businesses:

1. Private Lending

If you operate a private lending company you will be lending out your personal funds. This means that when there is a loss or damage, the weight will be on you alone, and equally when there is a profit they come to you.

2. Hard Money Lending

This is the opposite of a private lending company. Unlike in private lending where you run the business with your personal funds, here you work closely with investors and money brokers. 

Investors and money brokers are the ones that will provide the capital for the business. In this type of money lending company, the brokers or investors bear the loss and also they take the interest on the loans. You only make money by charging the borrowers a loan fee.

Hard money lending must be backed with a real estate property.

Peer-to-Peer Lending

As the name suggests, this is a type of lending that happens between peers. As a P2P company owner, your job is to connect lenders to borrowers while you charge a fee for each transaction.

It’s the responsibility of the peer-to-peer platform to verify the creditworthiness of the borrower before making their loan application open to the investors (lenders). From time to time, lenders browse through the platform in search of who to lend money to for a profit in return.

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Guideline on How to Start a Money Lending Business

Know your target market.

No business can survive with patronage and that is why understanding your target market is very crucial. Knowing your target market before starting your money lending business will help you understand what you are up against in terms of risk, competition, potential profit, etc.

Take your time to research the alternative finance industry to understand the business landscape, the customers, and their pains and expectations.

Choose a Business Name and Check Availability

After you have researched your target market, it is time to brainstorm a name for your business. Your business name is its identity, therefore you need to carefully choose one. 

When choosing a name for your business make sure it is short, easy to remember and pronounce, and also unique. A short, easy-to-remember and pronounce makes it easier for your brand to stick in the minds of your customers. Always check and make sure that no other business is using the name. 

An easy way to check the availability of the name is by searching it on the internet. You might as well check the internet for AI tools for business name suggestions. The one you settle with must be one that will suit your choice of domain name .

Register a Domain Name and Setup Your Website

This is not debatable or optional. Every business that has a long-term goal in this time of the internet needs an internet presence and should take it seriously. You need a place where your customers can access your services anywhere they are.

Go on Namecheap , search for your business name, and register it.  After registration, host it on HostGator and set up your website. You can hire the service of a website developer to set everything up for you.

Register Your Company

If you are in the United States of America, visit your state’s Secretary of State office or Department of Revenue to register your business. If you are in a different region visit the equivalent in the country where you are in. 

Develop Your Money Lending Business Plan

A business without a plan is one without goals and strategy. A business plan will keep you in check. It also helps your customers to understand the business. Develop a detailed plan for your money lending platform. 

Below are the key elements of a good business plan:

• Business Overview: This is where you present the company’s vision, mission, and plans.
• Industry Analysis: Showcase your understanding of your business industry. The trends, challenges, etc.
• Competitive Analysis: Analyze your business competition.
• Customer Analysis: Analyze your potential customers. 
• Marketing Plan: Explain your marketing strategies, costs, products, and services.
• Management Team: Introduce the management team and their roles.
• Operations Plan: You will explain how you intend to run your daily operations of the company.
• Financial Plan: Here you explain everything about financing the business.
• Executive Summary: This section briefly summarizes what your business is all about in simple words so readers can easily understand.

Secure and Equip Your Physical Office for the Business

Just as an internet presence is important for businesses, having a physical office is also important. Having a physical office adds a level of credibility to your business. 

Always make sure that your office can be easily located. Do not site your business in an environment where a large number of your competitors are. This is important because you are new and not yet known.

Secure a space for your physical office where your customers can easily walk in. Furnish it with all the office supplies to make it more organized. Follow these quick tips to improve your office space on a budget .

Buy the needed equipment like chairs, computers, etc., and install the necessary software used in the money lending business. A typical example of the money lending software your business needs before you start is the loan origination system (LOS). This is a loan processing and servicing system.

Loan origination system technology helps financial institutions generate loan documentation in a way that complies with regulatory and internal requirements.

Get the Funds for Your Lending Business Ready

If you are establishing a private lending company you should have your capital ready at this point and if you are going into hard money lending, you should have your brokers and investors.

Apply for Necessary Licenses and Permits

There are a number of licenses and permits you will need to meet their requirements before starting a money lending business at both the state and federal levels. These licenses and permits vary depending on the country and state of your business.

Open a Business Bank Account and Get a Business Credit Card

After registering your business with the appropriate bodies, it is now time to create a business bank account. 

Do your findings of the available banks and make a choice. You should make sure that the bank’s service is friendly to businesses. 

After you have chosen a bank, visit the bank and provide documents like proof of incorporation, either driver’s license or passport, and proof of address. If there are additional documents they will inform you. 

• 5 Benefits of Opening a Digital Bank Account and Possible Challenges
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Get Business Insurance for Your Money Lending Business

In life nothing is 100% guaranteed therefore don’t leave your business vulnerable. Getting insurance means that your business is covered if any damages occur. Some of the insurance options include:

• General liability insurance :  This insurance is an all-in-one insurance that covers everything that can be covered in your business.
• Auto insurance :  This type of insurance covers damages on your automobiles.
• Commercial property insurance :  This policy takes care of damages on your commercial properties by fire or vandalization.
• Equipment Breakdown Insurance: Takes care of repairing or replacing equipment due to mechanical issues.
• Professional liability insurance : This policy covers your business in the situation of a client’s claims of a loss.

It’s Time to Start Your Money Lending Business

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How to Start a Microlending Company

Microlending is the practice of lending smaller sums of money, typically to those who are unable to obtain funding through an established federal institution. Microlenders typically don’t request any type of collateral before loaning out the money. For-profit institutions may charge a high rate of interest to mitigate financial risks should the borrower default on their loans.

Microlending has had a lot of traction overseas in developing nations, and most are non-profit ventures. Money is lent to people who need it to start a small business in their area. Would-be entrepreneurs can get the cash they need to fill a vital need in the community, and lenders can contribute in their own way to helping individuals find their niche and lead more productive lives.

Learn how to start your own Microlending Company and whether it is the right fit for you.

Ready to form your LLC? Check out the Top LLC Formation Services .

Start a microlending company by following these 10 steps:

• Plan your Microlending Company
• Form your Microlending Company into a Legal Entity
• Register your Microlending Company for Taxes
• Open a Business Bank Account & Credit Card
• Set up Accounting for your Microlending Company
• Get the Necessary Permits & Licenses for your Microlending Company
• Get Microlending Company Insurance
• Define your Microlending Company Brand
• Create your Microlending Company Website
• Set up your Business Phone System

We have put together this simple guide to starting your microlending company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas .

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

What will you name your business?

• What are the startup and ongoing costs?
• Who is your target market?

How much can you charge customers?

Luckily we have done a lot of this research for you.

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Microlending Company Name Generator

If you operate a sole proprietorship , you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name , we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability .

It's very important to secure your domain name before someone else does.

Want some help naming your microlending company?

Business name generator, what are the costs involved in opening a microlending company.

Microlenders typically don’t have a lot of overhead, though you’ll likely need to hire a loan processor, a collector, and a bookkeeper. If you plan to take on all of these roles on your own at the beginning, you'll need to be extra careful. Even one mistake on your part can land you in legal hot water.

What are the ongoing expenses for a microlending company?

Overhead for a microlender is low, as you generally don’t need an office to conduct business:

• Employee salaries
• Advertising costs
• General office supplies
• Website costs

Who is the target market?

If you're hoping to make a social contribution as much as an economic one, an ideal person to lend a small sum of money to may be a woman in a third-world country, for example. She may be smart and capable of running a small family farm, but she lacks the resources to get started. A small sum of money may buy her enough for a few animals, which she can then raise to provide for her family. She may use the milk from goats or eggs from chickens to both nourish her family and sell to others in her community.

If you're hoping to make money on your loan, you may want to consider lending to young go-getters who lack the credit history they need to get a conventional loan. There are a number of reasons why people may need a small amount of money, so do your research first before you decide which areas need your assistance the most.

How does a microlending company make money?

Microlenders make money by charging people interest on their loans. You may lend out $500 at a 20% interest rate, meaning the debtor will owe $600 by the time all is said and done.

Interest rates vary widely from place to place. Some may charge 10% while others charge up to 80%. The average is about 35%, but you’ll want to do research on the interest rates in any given area. Some well-known non-profit microlending websites don't even offer the option of interest, while others may go as low as 3%. In these cases, it's more like charity than a business venture though. Those who charge extremely high interest rates are usually for-profit businesses.

How much profit can a microlending company make?

With persistence and patience, a microlender can make a considerable amount of money when in the right area. Some studies state that up to 97% of low-income borrowers pay back their loan under the agreed-upon terms. If you make $100 on average on each loan, you’ll need to make 600 loans in a year to make $60,000.

How can you make your business more profitable?

You may wish to expand to other parts of the world to make your business more profitable. Or you could consider opening up a payday loan store in your neighborhood if you feel you have a good handle on microlending and want to serve others who may need financial assistance.

Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship , partnership , limited liability company (LLC) , and corporation .

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your microlending company is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services . You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

You can acquire your EIN through the IRS website . If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil .

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history , which can be useful to raise money later on.

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a microlending business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits .

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses .

Certificate of Occupancy

Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws, and government regulations have been met.

• If you plan to lease a microlending office location :
• It is generally the landlord’s responsibility to obtain a CO.
• Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a microlending business.
• After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
• If you plan to purchase or build a microlending office location :
• You will be responsible for obtaining a valid CO from a local government authority.
• Review all building codes and zoning requirements for your business’ location to ensure your microlending business will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance . This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance . If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

FInd out what types of insurance your Microlending Company needs and how much it will cost you by reading our guide Business Insurance for Microlending Company.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners , we'll give you helpful tips and advice for creating the best unique logo for your business.

Recommended : Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker .

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator . Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market a microlending company

The best way to promote and market your business is to understand the need you’re filling in any given area. For example, if you’re only targeting small family farmers, then you need to determine how they learn about financial opportunities in their area. This may include physical advertising, such as flyers, or online advertising on specific websites. Depending on your goals, it may even include going door to door.

You should also have your own website that describes what you do, and how you do it. Consider having your information in several languages for the best results, and hiring an interpreter for better communication.

How to keep customers coming back

The best way to generate customers is to be as fair a lender as possible. This doesn’t mean letting people get away with constantly missing payments, but it does mean trying to work with your clients whenever possible. Always do what you say you're going to do, and ensure excellent customer service and professional behavior at all times.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business .

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

• All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
• Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
• Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended : Get started today using our recommended website builder or check out our review of the Best Website Builders .

Other popular website builders are: WordPress , WIX , Weebly , Squarespace , and Shopify .

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Recommended Business Phone Service: Phone.com

Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.

Is this Business Right For You?

This business is excellent for those who understand the power of responsible lending. This isn't charity, but it is giving someone else a helping hand when they need it the most. The successful microlender will need an excellent balance between helping others and remaining financially solvent.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at a microlending company?

Microlenders must do a number of things to prepare to lend money:

• Research target client/demographic
• Screen clients
• Create reasonable billing plans for pay back
• Comply with all state/federal laws for financial lending
• Study lending practices in different areas.

What are some skills and experiences that will help you build a successful microlending company?

Having some type of formal education in how finances work around the world will help, as will an in-depth knowledge of current law for both the country you operate out of and the country of those you’ll be lending to.

What is the growth potential for a microlending company?

Microlending has done well in Latin American countries and third-world nations because there are a limited amount of ways to obtain conventional funding. If you wish to open a for-profit business, you may want to concentrate on these areas as opposed to lending within the US.

TRUiC's YouTube Channel

For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.

Take the Next Step

Find a business mentor.

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a microlending company?

The best thing you can do is learn how to screen your clients, and to create detailed contracts about each loan. You will get a lot of applications from hard-working, responsible people who will do everything possible to use the funds wisely and pay you back. However, you will get a certain amount of people who are out to take your money, or who are asking for the money to achieve an unattainable goal. Consider video chat or in-person meetings as a way of getting to know your clients. Ask them about their business plan, and look to see how much effort went into their model.

You also need to keep meticulous records to ensure you’re never in danger of violating the laws. Start with sketching out a business plan that details how each transaction will work, and how everything will be recorded. Owners also need to have enough capital to start the business. Even with a limited amount of clients at the beginning, all of your loans will add up quickly.

How and when to build a team

Those familiar with the microlending business say to hire people right away because the risks of making a mistake can be high. However, if you’re starting small with just a few clients or you don’t have very much capital, you may be able to get everything started without external help.

Useful Links

Industry opportunities.

• A Brief History of Microlending

Real World Examples

• American Microloan
• Microfinance

Have a Question? Leave a Comment!

How to start a small lending business

Table of Contents

What you’ll need for a small lending business

Funding , a business plan, know the industry , people skills , marketing skills , how to set up your small lending business, register your business, register for taxes, get authorisation from the fca, find insurance , how to organise your small lending business , business management , outline your services, business current account, keep track of your clients , how to market your lending business for success, business branding , business website , social media marketing , advertising , organise your lending finances with countingup.

If you’re interested in starting a small lending business, it can be a great way to earn money and become your own boss. Lending businesses allow you to help other people and small businesses with money needs while making money yourself. 

A small lending business would allow you to loan out smaller sums of money to those in need of funding. About 43% of small businesses apply for loans to support their business. Some of these small businesses struggle to secure funding and, as a result, suffer from poor cash flow. 

This shows that there is a market for small lending businesses. You could offer to fund individuals and small businesses that struggle to get approved at larger institutions. If you’re wondering how to start a small lending business, there are a few things you’ll need to know to get started. 

This guide will cover how to start a small lending business, including: 

• What you’ll need for a small lending business 
• How to organise your lending business
• How to market your lending business to find clients 

Knowing how to start a small lending business means knowing what you’ll need to run that business smoothly. 

The most important part of a lending business is the funding. You’ll need money to lend out to your clients, which you will eventually earn interest on. So, to start this business, you will need access to cash. This could come from your savings or from investors that finance your lending business. 

When sourcing financing for your business, consider how you can remain profitable. If you seek investors as a cash source, you will likely need to pay them back with interest. This can reduce your business profits. If you use your savings, you will need to examine how much you want to lend out and how quickly you can start earning money from these services. 

Once you secure a funding source, you can create a business plan to organise your objectives and long-term and short-term goals. By writing a plan for your business, you can understand your mission and work towards it. 

This plan could outline your lending intentions and target market . Who do you want to lend to? Will you focus on small businesses that are struggling to get funding? Will you approach your business with a social cause, such as lending to communities that are struggling? 

Plan how much money you’d like to lend out and determine your interest rate. This can help you understand how much money you can make from your business. 

You’ll also want to examine your startup costs . Though lending businesses don’t usually have many startup costs other than the funding itself, you may want to invest in a good computer, bookkeeping software, loan processing, and marketing. 

To succeed in your lending business, you’ll need to know about the lending industry. This will help you appear professional to clients and reduce risk. You will also want strong financial skills so that you can stay on top of your lending business.

Consider continuing your education in lending and financing by taking a course or attending seminars or conferences. This can teach you important information and trends within the industry. A strong grasp of the lending industry will help you avoid major business losses and lend to clients responsibly. 

An important part of how to start a small lending business is showing people what you can offer them. Consider how you can make yourself trustworthy as a lender. If you can clearly explain your services and how you help borrowers with financial opportunities, you can more easily convince people to use your services. 

Also, consider what you can offer that larger lenders cannot. As a small lending business, your interest rate may be higher than larger firms. But, you may offer better customer service and build stronger personal relationships. 

You’ll need marketing skills to grow your audience and to find clients. With a clear understanding of your target market, you can reach the right audience through digital and physical marketing tactics. Consider where you can find the right people and use your people skills to build relationships and convince potential clients of your services. 

Knowing what you’ll need to get started is just one part of how to start a small lending business. Once you have everything you need, you can set up that business to start earning money. There are a few steps you’ll need to follow. 

You can start by registering your lending business as either a sole trader or limited company . As a sole trader, you’ll be personally liable for your business, while a limited company is a separate legal entity from you. This means you are not personally liable for the business. 

You may also want to register a company name . A unique and memorable name can help build your brand identity and appear professional to clients.  

Next, you’ll need to register to pay your taxes with the HMRC . As a self-employed person, you’ll need to manage your own taxes . If you choose to register as a limited company, you’ll also need to pay corporation tax. Plus, if your lending business may bring in over £85,000 annually, you’ll need to register for VAT .

To run a lending business in the UK, you will need authorisation from the Financial Conduct Authority or FCA. This FCA is a financial regulatory body that operates separately from the UK government. As a lender, you’ll need to follow conduct principles outlined by the FCA. 

You’ll likely also want to read the FCA Perimeter Guidance Manual , so you know what the FCA expects of your business. You can apply for a limited or full permission for your company. In this application, you’ll have to show how you’ll conduct your lending business and deal with different challenges within operations. Apply for permissions through the FCA here .

You may want to seek insurance for your lending business. Consider how you can ensure that the money you lend gets returned to you in a timely manner. You can consider lender protection insurance to ensure that you still receive your money if something happens to the person or business you lend it to.  

You can also look into business insurance to help protect you from risk as a lender. 

Once you know how to start a small lending business, you’ll want to efficiently organise your business for success. A strong business organisation will help you keep track of your clients and finances to grow your business. It can also help ensure your business is profitable.

You can organise your lending operations through business management platforms like Google Workspace or Microsoft 365 . These platforms let you keep your contacts, calendars, and documents in one place so that you keep track of everything easily. 

As a lending service, you’ll also need to outline your lending process. Think about how you’ll collect, process, and organise your loans through bookkeeping . 

It will be important to outline your services and terms so you can appear professional and organised. First, determine your loan amounts and interest rates. Then, outline a payment schedule and conditions for each loan. Clearly stating these terms can help clients understand what you offer and what is expected of them when they take out a loan. 

With a lending company, financial management may be more important than in other small businesses. Though you aren’t required to open a business current account unless you register as a limited company, it can help you separate your business finances from your personal ones. 

It will also help you to build credit and streamline your finances. 

The Countingup business account and app lets you easily organise your business account. It automatically categorises business expenses and track your cash flow. It can also automatically update spreadsheets to simplify your lending finances. 

As a lender, you will want to keep your client base and lending amounts organised. This will help you know when a payment is due from a client and when payments are running late. To earn money from lending, you’ll need to ensure that your clients make their payments on time and as agreed. You can learn more about chasing up late payments here . 

Knowing how to start a small lending business means you’ll need to know how to find clients for that business. Marketing your business will be important to its success. 

You can start marketing your business by building a brand identity that reaches your target audience . Your brand is a design and tone that represents your business and makes it memorable. If you remain consistent with your brand, you can build awareness and reach a larger audience. 

You can use design platforms like Canva to create marketing materials for your business, such as logos to business cards . 

A business website will be important to the marketing of your small business. Having a website can make your business more accessible to interested people. If you make the website easy to navigate and consistent with your business brand, potential customers can use it to learn more about your business. 

Make sure your lending business website has your company name, contact information, and services outlined clearly. You can find a website designer to build your website for you, or you can use a platform like Wix , Squarespace , or WordPress to build your own. 

A great way to reach your audience is through social media marketing. If you create profiles and post regularly to platforms like Facebook , LinkedIn, and Twitter, you can build your outreach and find potential clients. 

LinkedIn might be a great platform to focus on for marketing if you want to lend to small businesses. You could also consider posting finance and lending tips to a YouTube channel to appear knowledgeable to potential clients. 

Make sure each of your social media pages is consistent with one another. You can add your business logo and website URL each page to make your business accessible to potential clients. Give yourself a schedule and list content ideas to maintain regular engagement with the platforms. 

Apart from growing your audience through digital marketing, you can create an advertising budget for your lending business. Advertising in local newspapers and magazines will help you reach small businesses nearby that may need funding. 

You can also look for online opportunities for advertising that will reach the people you want to lend to. 

Email newsletters are another great way to spread your business services and regularly update potential clients. These newsletters are easy to subscribe to from your website. Overall, using your marketing skills to grow and engage with your audience will help you find your first lending clients. 

Once you get your small lending business up and running, managing your finances will be crucial to your success.. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here .

• Counting Up on Facebook
• Counting Up on Twitter
• Counting Up on LinkedIn

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How to Start a Loan Business

Starting a loan business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful loan business.

Importantly, a critical step in starting a loan business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here .

Download our Ultimate Business Plan Template here

14 Steps To Start a Loan Business :

• Choose the Name for Your Loan Business
• Develop Your Loan Business Plan
• Choose the Legal Structure for Your Loan Business
• Secure Startup Funding for Your Loan Business (If Needed)
• Secure a Location for Your Business
• Register Your Loan Business with the IRS
• Open a Business Bank Account
• Get a Business Credit Card
• Get the Required Business Licenses and Permits
• Get Business Insurance for Your Loan Business
• Buy or Lease the Right Loan Business Equipment
• Develop Your Loan Business Marketing Materials
• Purchase and Setup the Software Needed to Run Your Loan Business
• Open for Business

1. Choose the Name for Your Loan Business

The first step to starting a loan business is to choose your business’ name.  

This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your loan business:

• Make sure the name is available . Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
• Keep it simple . The best names are usually ones that are easy to remember, pronounce and spell.
• Think about marketing . Come up with a name that reflects the desired brand and/or focus of your loan business.

2. Develop Your Loan Business Plan

One of the most important steps in starting a loan business is to develop your loan business plan . The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise money for your business.

Your business plan should include the following sections:

• Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your loan company.
• Company Overview – this section tells the reader about the history of your loan business and what type of loan business you operate. For example, are you a secured loan, unsecured loan, home equity loan, or personal loan business?
• Industry Analysis – here you will document key information about the loan industry. Conduct market research and document how big the industry is and what trends are affecting it.
• Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
• Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
• Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
• Product : Determine and document what products/services you will offer 
• Prices : Document the prices of your products/services
• Place : Where will your business be located and how will that location help you increase sales?
• Promotions : What promotional methods will you use to attract customers to your loan business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
• Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
• Management Team – this section details the background of your company’s management team.
• Financial Plan – finally, the financial plan answers questions including the following:
• What startup costs will you incur?
• How will your loan business make money?
• What are your projected sales and expenses for the next five years?
• Do you need to raise funding to launch your business?

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3. choose the legal structure for your loan business.

Next you need to choose a legal structure for your money lending business and register it and your business name with the Secretary of State in each state where you operate your business.

Below are the five most common legal structures:

1) Sole proprietorship

A sole proprietorship is a business entity in which the business owner and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a loan business together. The partners share in the profits and losses of the business. 

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a loan business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a loan business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your loan business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.

4. Secure Startup Funding for Your Loan Business (If Needed)

In developing your loan business plan , you might have determined that you need to raise funding to launch your business. 

If so, the main sources of funding for a loan business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a loan business that they believe has high potential for growth.

5. Secure a Location for Your Business

There are a few key things you’ll want to consider when choosing a location for your private lending business. You’ll want to think about the demographics of the area, as well as the availability of potential customers. You’ll also want to make sure that the location is zoned for a business like yours.

Another important factor to consider is competition. You’ll want to find an area where there aren’t already too many loan companies competing for customers. 

In addition, you’ll want to make sure there is easy access to roads and highways in the area of the location. Finally, the property itself should have enough room for you to set up your office and meet with clients.

6. Register Your Loan Business with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.

7. Open a Business Bank Account

It is important to establish a bank account in your loan business’ name. This process is fairly simple and involves the following steps:

• Identify and contact the bank you want to use
• Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
• Complete the bank’s application form and provide all relevant information
• Meet with a banker to discuss your business needs and establish a relationship with them

8. Get a Business Credit Card

You should get a business credit card for your own loan business to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing business loans and getting credit lines for your business in the future.

9. Get the Required Business Licenses and Permits

The licensing requirements to start a loan business vary by state. You may need a business license, a loan broker license, and a credit services organization license. Make sure to check with the state where you plan to start your business for specific details and requirements. 

10. Get Business Insurance for Your Loan Business

There are a multiple types of insurance that you will need to have in order to operate a loan company.

Some business insurance policies you should consider for your loan business include:

• General liability insurance : This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
• Auto insurance : If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
• Workers’ compensation insurance : If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
• Commercial property insurance : This covers damage to your property caused by fire, theft, or vandalism.
• Business interruption insurance : This covers lost income and expenses if your business is forced to close due to a covered event.
• Professional liability insurance : This protects your business against claims of professional negligence.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs. 

11. Buy or Lease the Right Loan Business Equipment

To run a loan business, you need some basic equipment including a computer with internet access, a phone, and a fax machine. You will also need a printer to print out loan contracts.

12. Develop Your Loan Business Marketing Materials

Marketing materials will be required to attract and retain customers to your loan business.

The key marketing materials you will need are as follows:

• Logo : Spend some time developing a good logo for your loan business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
• Website : Likewise, a professional loan business website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
• Social Media Accounts : establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your loan business.

13. Purchase and Setup the Software Needed to Run Your Loan Business

The software you’ll need to run a loan business include a loan origination system (LOS), a loan processing system, and a loan servicing system. 

The loan origination system is the front end of your company, where borrowers fill out forms, provide documentation, and undergo review for credit. The loan processing system records the information associated with the loans you make—things like origination fees, interest rates, credit limits, and payments received. There’s also a back-end system that manages your borrowers—collecting payments and insurance premiums as well as servicing loans each month.

14. Open for Business

You are now ready to open your loan business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.

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How to Start a Loan Company FAQs

Is it hard to start a loan business.

It is not hard to start a loan business if you familiarize yourself with the industry. In today’s competitive business environment, running a loan service company can be daunting and expensive. The key is building relationships with the right people so that your brand name increases in popularity. When this happens, you will find it easier to connect with potential customers and grow your business as well as prospects for investors who are looking for companies for investment capital.

How can I start a loan company with no experience?

There are a few ways to start a lending business with no experience. One way is to partner with an existing company that offers loans. Another way is to start your own company and provide loans to people who need them.

To start your own company, you'll need to do some research on the best way to offer loans. You'll also need to create a business plan and get funding for your business. Once your business is up and running, you'll need to find customers and make sure they're happy with your services.

If you're not sure how to start a loan business, there are a lot of resources available online and in libraries. You can also talk to someone who's already in the loan business to get advice.

What type of loan business is most profitable?

There is no definitive answer to this question, as the profitability of a loan business will vary depending on the type of loan products offered, the target market, and the level of customer service provided. However, short-term and payday loans are some of the most profitable loan products. They tend to have low default rates, and borrowers can complete their repayments within a short period. Therefore, money lenders get their money back faster.

How much does it cost to start a loan business?

The cost of starting a loan business varies depending on the services you offer as well as the physical location of your business. The startup costs for loan businesses typically include the cost of establishing your company, hiring employees, and developing a marketing strategy.

What are the ongoing expenses for a loan business?

The ongoing expenses related to businesses offering loans can vary based on the size of the business and whether it is a traditional brick-and-mortar organization or an online lender. Typically, ongoing expenses will be higher for brick-and-mortar establishments due to the need to pay for rent, utilities, and maintenance of the office space. Administrative fees are common, along with the cost of maintaining loan books and employee salaries.

How does a loan business make money?

A loan business makes money by lending money and charging interest on the loans it issues. It also may charge other fees, such as origination or late payment fees. Another way for a loan business to make money is by trading loans—buying and selling them with other business owner s or financial institutions.

Is owning a loan business profitable?

Yes, owning a loan business can be profitable. One reason is that there is a large potential market for loans. In addition, the interest rates vary widely and can be quite high, which can result in sizable profits. Furthermore, the business can be automated to a certain extent, which can further reduce costs and improve profits.

Why do loan businesses fail?

There are a number of reasons why other lenders may fail. One reason is that the company may be unable to generate enough revenue to cover its costs and repay its loans. Additionally, the company may have insufficient funds to cover potential loan defaults. Poor management and fraud are also common reasons for loan business failures.

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• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
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Money Lending Business Strategy Example + Ideas

• Author Content Team
• Published February 21, 2024

Starting a money lending business can be a profitable endeavor if done right. With proper planning and strategy, you can build a sustainable lending business that provides value to customers while generating steady revenue.

Here is an overview of key things to consider when developing a money lending strategy :

• Understand legal/regulatory requirements in your area
• Determine what types of loans to offer (personal, business, etc)
• Decide on loan terms/structure (durations, interest rates, fees)
• Build lending criteria and risk models
• Source funding capital to provide loans
• Market services and acquire customers
• Leverage software to automate and scale operations

Crafting an effective strategy lays the foundation for a thriving lending operation.

Developing Lending Criteria and Risk Models

One of the most critical components of a money lending strategy is developing clear lending criteria and risk models to guide decision-making. Lending criteria refers to the standards and factors lenders use to determine borrower eligibility, loan sizes, rates, and terms. Risk models help assess the likelihood loans will default.

Here are key steps to establish strong lending criteria and risk models:

Research borrowing demand and risk profiles

• Conduct market research to understand needs of target borrower segments
• Gather data on default rates for similar loans
• Identify common attributes of high-risk applicants

Create loan application scoring system

• Determine key metrics to assess during applications
• Assign weighted scores to these metrics
• Metrics may include income, credit score, collateral, payment history, etc
• Set minimum score thresholds for loan approval

Establish tiered approval bands

• Segment applicants by risk level into approval bands
• Each band has standardized loan terms and rates
• Low risk: Up to $10,000, 8% APR, 36-month term
• Moderate risk: Up to $5,000, 12% APR, 24-month term
• High risk: Up to $2,000, 15% APR, 12-month term

Integrate risk model projections

• Risk models estimate chance of delinquency/default
• Plug model outputs into lending criteria rules
• Ensures consistent risk-based decision making

Revisiting and refining criteria and models improves outcomes over time.

Determining Capital Requirements and Securing Funding

Access to capital is the fuel that powers any lending business. Determining how much money you need, and securing funding sources to meet capital requirements, is an essential strategic move.

Here is a strategic approach to capital planning for a money lending operation:

Estimate minimum capital needed

• Project average loan size and loan loss rate
• Multiply average loan size by number of borrowers planned per month
• Add proposed maximum outstanding principal
• Factor in assumed bad debt rate
• Result approximates minimum capital required

For example:

• Average loan size: $5,000
• Monthly borrowers: 20
• Max. outstanding principal: $500,000
• Assumed loss rate: 5%
• *Minimum capital = (20 * $5,000) + $500,000 + $25,000 = $525,000*

Evaluate funding options

You can fund loans from a few sources, each with pros and cons:

Secure commitments

Based on funding needs and options:

• Get commitments from those providing capital
• Formalize agreements with clear repayment terms
• Ensure reliable access to capital before making loans

The more certainty around capital, the easier it is to plan operations.

Acquiring Customers and Marketing Services

To generate loan volume and revenue, a robust strategy for customer acquisition and marketing is vital for any lending operation.

Several proven channels can attract prospective borrowers:

Digital marketing

• Useful for reaching web-savvy applicants
• SEO to drive organic traffic from search engines
• Pay-per-click ads placed through Google, Facebook, etc.
• Targeted display ads on finance-related websites
• Retargeting ads to website visitors
• Provides trackable results

Print/broadcast promotions

• Leverages traditional media
• Newspaper, magazine, radio, TV ads
• Billboards located in high-traffic areas
• Direct mail campaigns to targeted consumer lists
• Harder to quantify effectiveness

Strategic partnerships

• Develop referral relationships with entities serving prospective borrowers
• Real estate agencies
• Small business associations
• Accounting/tax advisory firms
• Could structure revenue share agreements on loans referred

Networking/word-of-mouth

• Communicate offering at conventions, seminars, other events
• Motivate happy customers to organically refer others
• Low/no cost with trust benefits

An optimal strategy likely utilizes a mix of these options, with budgets allocated across channels based on observed conversion rates. Testing and optimization allows for resources to be shifted toward highest-performing channels over time.

Leveraging Software and Technology

Technology integration is key for scaling a money lending business while controlling costs. The right software makes operations more productive and efficient.

Here are some solutions worth incorporating into tech strategy:

Loan management software

Mission-critical systems that handle key workflows:

• Borrower portal – Receive and manage applications
• Document collection/e-signing – Securely collect signed agreements
• Underwriting automation – Score applications, render credit decisions
• Loan servicing – Payment tracking, late notices, collections
• Reporting/business intelligence – Portfolio analytics, risk insights

Top systems provide: workflow configurability, rules-based decisioning, document generation, data integration, portability.

Accounting software

Tracks financials, supports tax/regulatory compliance:

• Manage accounts receivable, payable
• Process electronic payments
• Reconcile transactions
• Structure financial reporting

QuickBooks, Xero, NetSuite are popular platforms.

Risk analysis software

Specialized programs bolster risk management:

• Predict loan performance /credit risks
• Track portfolio health metrics
• Model scenarios to stress test operations
• Guide risk-based decisions on capital allocation

Integrating outputs into underwriting systems closes loop.

CRM platform

Centralizes borrower data and interactions:

• Unified client database
• Email/SMS capabilities
• Task assignment, activity logging
• Reporting on engagement metrics

Salesforce, HubSpot, Zoho typical options.

Prioritizing solutions that easily integrate while meeting specialized needs allows for a scalable, optimized tech stack tailored to lending operations.

Providing Ongoing Value as a Sustainable Business

Launching a money lending operation is one thing – building it into a sustainable business over the long haul requires continually delivering value. Here are some strategic priorities that serve borrowers while fueling lasting success:

Maintain stringent risk management

While lending higher volumes generates more revenue, uncontrolled risk exposure threatens long-term viability. Strategy involves:

• Enforcing rigorous underwriting standards
• Securing diversified capital sources
• Testing portfolio performance under stress
• Modifying risk limits based on data

Balancing growth with prudent standards provides reliability.

Explore expanded product offerings

Start with a niche, then expand responsibly into other lending areas once established. Potential options:

Broadening into adjacent spaces serves more financial needs.

Provide a consultative borrowing experience

Rather than quick, transactional funding, aim to build relationships with borrowers – understanding their circumstances to structure mutually beneficial loan packages. Tactics involve:

• Needs assessments during underwriting
• Ongoing guidance around responsible borrowing
• Proactive refinancing when advantageous

This level of consultative service earns trust and loyalty.

The most sustainable model adapts over time – taking cues from borrowers while innovating around new opportunities that further strategic goals. Commitment to continual improvement cements longevity.

What are the 5 C’s of lending?

The 5 C’s of lending are a framework used by lenders to determine the creditworthiness of potential borrowers. Here’s a breakdown of each:

1. Character

• Lenders assess your credit history and reputation for repaying debts on time. Your credit score reflects this.

2. Capacity

• Lenders want to know if you have the ability to repay the loan. They’ll examine your income, debt-to-income ratio (DTI), and overall financial situation.
• This refers to the amount of money you’re putting down (down payment) as well as any other assets. Lenders like to see that the borrower has some “skin in the game” and is invested in the transaction.

4. Collateral

• Assets that can be pledged to secure the loan. In the event of default, the lender can seize the collateral to recoup losses.

5. Conditions

• The purpose of the loan and how the money will be used. Lenders also consider prevailing economic conditions that could affect your ability to repay or the value of any collateral.

Why are the 5 C’s important?

The 5 C’s offer lenders a systematic way to evaluate the risk of lending money. By carefully examining these factors, lenders can make more informed decisions, leading to:

• Reduced risk of defaults: The 5 C’s help minimize the chance of lending money to borrowers who won’t be able to pay it back.
• Fair interest rates: Borrowers with a strong profile across the 5 C’s can often secure lower interest rates.
• Responsible lending: Considering the 5 C’s promotes responsible and ethical lending practices.

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Key takeaways.

• Conduct extensive research when developing lending criteria and risk models to guide decisions
• Estimate capital requirements based on projected loan volume and losses, secure commitments
• Employ diverse marketing tactics for customer acquisition, measure effectiveness
• Leverage specialized software to scale operations efficiently
• Expand products judiciously while providing consultative borrowing guidance
• Manage risk exposure stringently to ensure long-term sustainability

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Microfinance Mastery: Crafting a Winning Business Plan in India

Microfinance Bank Business Model Explained

How Create A Strategic Blueprint for Microfinance Success

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Sample Micro Money Lending Firm Business Plan

Micro money lending business plan sample.

Starting a money lending business does not have to be an impossible idea. You will discover that my claims are not fraudulent if you can take your time to read through this post.

Most commercial banks make money in two major ways.

They give out grants and small business loans at particular interest rates, for instance, AB – MFB Microfinance Start-up loans. They also lend money to investors using funds that you deposit with them through cash, check deposit, or electronic money transfer.

I won’t be referring to commercial banks’ subsidiary functions like giving out credit letters and Forex transactions.

GUIDE: HOW TO START A LOAN COMPANY

CASH LOAN BUSINESS PLAN – LENDING BUSINESS IDEAS

The truth is most of these functions are too technical for your own money lending business. The good news is many lending business ideas would be able to receive cash and give out advance money and will duly be registered. Here is how to open a small money lending business.

What Do I Need To Start A Money Lending Business

– Education – Passion – Close Monitoring – Capital Base (Less Than 100k)

How To Set Up a Money Lending Business

It is difficult to start your own money lending business that caters to the whole country considering your current resources. This is the reason you should think about localization. You will later need an official base where new and existing clients can come to get their issues sorted out.  The place must be conspicuous, accessible, and presentable.

Good affordable furniture and a PC with the necessary money lending business software installed are important too.

How To Register A Money Lending Business

You will need to get your business register and secure the appropriate license. The requirement for lending out funds are country-specific but are generally lesser than those for establishing commercial and micro-finance banks.

Who Should I Target?

Since you don’t have what it takes to lend to big companies and corporations like P&G, MTN, BAT, SHELL, and others; you should target those investors and individuals at the bottom of the economic pyramid. Small salary earners, petty investors, market women, and artisans are a good market to generate a client base for your money lending business.

What Is The Best Money Lending Business Strategy?

Although there is no shortage of customers for the money lending business, you cannot take on everybody. This is due to what is called credit appraisal. To take care of the fund receipt and repayment process, each client should be made to deposit at least 20% of the loan sought. To protect your money, enable daily and weekly loan repayment and these people have a high tendency to become less aware of their obligations after receiving the loan.

Studying trends of operations and advertising in micro-finance banks and using it to develop marketing strategies for money lending business is recommended. You don’t have to hire a lot of people for a start. As your money-lending business expands its capital base, you would need to employ more people to do the footwork. If you want to start with say 90k, loan out 20k to each client. That is like 4 clients already. Don’t make the mistake of giving out all your funds at once. No business ever does that.

Call it whatever you like. Giving out loans as money lending business ideas, I call it smart banking 🙂

MONEY LENDING BUSINESS PLAN EXAMPLE

Here is a sample business plan for starting a micro-lending company.

If you are reading this, then I will agree that you are interested in starting a money lending business. So many have gone into this business and have greatly improved their status and their lifestyle, and in a very large way, they have helped those making use of their services.

Money is an essential part of living, sad though, humans will not always have the exact amount needed, and at such moments, they might need to borrow to sort the urgent situation they are in out, as a moneylender, that’s where your work comes in.

The way humans look at the idea differs, some see it as a good option, while others see it as something bad. Either way, only those who have once tried it can agree that the money lending business is a very good one.

The reward of starting a money lending business is unimaginable, your interest will keep growing, and you will always have people who need your services, some will pay back before the expected day; still, you will get your complete interest.

In this article, we are going to provide you with a guide that will help you in your endeavor to write your award-winning money lending business proposal sample which will help you get reasonable and willing investors to back your business up.

Here are the essential subheadings that must be included in your business plan to make it an award-winning and complete business plan.

• The Introduction Or The Overview Of The Industry

The Executive Summary

• Risk And Strength Analysis

The Market Analysis

The Competition

• The Sales And Marketing Strategy
• Financial Analysis And Forecast
• Sustainability And Expansion Strategy

Let us now discuss in detail how you can develop each of these points to get a unique business plan

Overview Of The Industry

The introductory part of the business plan is the part where you will be writing about the entire shape of the local and international money lending business, in this part, you need to provide a brief history of the money lending industry.

In this section of your money lending business plan, you will need to provide brief information about the company and the people setting it up. In this section too, you will need to provide the vision of the company as this helps your investors to see if there are plans for the future or not. Most prefer using terms like ‘’ to become a leading brand in the world’’

Your business mission will also be discussed in this section as this very important if you will get reasonable investors for your business. Your business structure is also fundamental, and as such it will be discussed in this part. Your structure will go a long way in defining your future so you must develop this very well.

The key roles to be filled will include Chief Executive Officer (CEO), Accountant, Sales, and Marketing Agent, Receptionist, etc.

Risk and Strength Analysis

In this section of your business plan, you will need to write about your understanding and analysis of your Strength, Weakness, Opportunities, and Threats This is popularly referred to as the SWOT ANALYSIS.

Your strength might involve the latest technology that will help you run a secure money lending business; your threats might be the effect of economic instability or late payment on the part of the borrowers.

This part is one of the essential parts of your business plan. The market analysis segment will prepare you for what you will meet in the money lending market. Your understanding of the business will be brought to the test to see if you have the basic needed understanding. There are trends that the market follows, some forces that define the activities of the market, the role of the economy, and the government in the business.

In this part, you will define your target market, those who will be using your services. Your services will be need by virtually everyone especially students, business owners, industries amongst others.

In this section, you will need to show that you understand the level of competition in the market, and your plans to succeed in the light of these competitions. Your competitive advantage will also be discussed. Your competition might include banks offering loans.

The Sales and Marketing Strategy

In this section, your strategy for advertising and publicizing your business to people both far and wide will be scripted, those mediums like social media, use of news media, and another advertising medium will be discussed.

Your interest rate or how much people will be charged for using your services will also be discussed.

Financial Analysis and Forecast The finance part of your business is very important. For that reason, you need to take this part seriously. Your source of income and the expected income will also be discussed. Other important points include your expenses and the total cost to be incurred, your projected profit for a set period (usually within 5 years)

Sustainability and Expansion Strategy

Your plans to and expand your money lending business will be discussed in this part.

At this point in your money lending business plan, you will be expected to summarise the entire content of the business plan and also include your concluding remarks.

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How to Start a Hard Money Lending Business

Hard money lending is a topic that’s on a lot of lips these days and rightfully so.

In today’s economic climate, people need quick ways to access cash and don’t always have the time or credit to seek loans through a traditional bank. More and more, people are accessing funds through private lenders. That means a growing demand for the people who connect the investors with the consumers. Enter the hard money lending business . Hard money lenders secure funding from companies and individuals who want to invest. Then, they match those up with borrowers who are looking to fund their projects. If you’re interested in learning how to start a hard money lending business,  you’re in the right place.  This article will cover the basics of hard money lending, the pros and cons of becoming a hard money lender, and steps you can take to start your own hard money lending business.

 By the end, you should have a good idea of whether or not hard money lending is right for you. We’ll also take a look at some of the most common questions people have when they’re interested in hard money lending.

What is Hard Money?

Depending on what part of the financial sector you’re in, hard money is defined in different ways. So as not to be confusing, we’ll use the definition that fits with hard money lending. That is, hard money is money that is secured by a physical asset’s value. That asset could be real estate property, heavy equipment, vehicles, and inventory. A loan is made based on the assessed value of that asset and the borrower usually receives a percentage of that value in a lump sum. The asset then becomes collateral for the loan. So, if the borrower is unable to satisfy the loan terms, the lender can take possession of the building, vehicle, or equipment that was valued to recoup their costs.

Hard money loans are attractive to borrowers because they’re often easier to get. Because the funds are secured by physical property, borrowers don’t have to worry as much about having a negative credit history. Hard money loans are often a fast solution to immediate cash needs. Private lenders don’t have to operate under the same restrictions as traditional banks do. So, they don’t usually require as much documentation and paperwork, shortening the application approval process. Hard money loans are also a great stop-gap for borrowers who are awaiting other, longer-term loans to come through.

Borrowers who seek hard money loans so they can fix and flip real estate property are a boon for hard money lenders. Since residential real estate properties are flying off the market faster than they have in the past – down to 36 days on the market from 44 the previous year – buyers can’t afford to sit around waiting. Competition for new homes on the market is fierce. So, it’s beneficial for them to be able to access fast cash when they need it to get a hold of that property before someone else does. Hard money loans give them what they need when they need it. Since they’re not staying with the property long term, they can repay the loan in the shorter term typical of a hard money loan.

As an investor, hard money loans are a good financial proposition. Realizing a return on investments is not dependent upon the creditworthiness of the borrower. In some cases, it’s preferable to have the borrower default on the loan and collect the property because the investor may realize higher returns. That’s not to say that investors encourage or desire failure on the loan, but this security makes hard money investing less risky and therefore more attractive. Because hard money loans typically carry a shorter term than traditional loans, investors see their returns faster.

Where hard money lenders come into the picture is connecting people who need money with the people who have it. It’s not easy for a borrower to find someone with the capital to lend them. They can’t just walk into a corporation or a wealthy individual’s home with their hand out. It takes time to build relationships with lenders who want to invest their money. The average buyer not only lacks the skills or access to these investors but usually has no reason to develop these relationships for a one-time transaction.

Hard money investors often either don’t have or don’t want to expend the resources to vet every possible borrower. They would need to not only invest their funds, but also invest in marketing, assessments, valuations, application processing, and financial verifications. It’s like starting a whole new business just to take care of the lending piece. A lot of these investors are interested in making money but don’t care to spend resources dedicated to lending. Their primary interests lie in the business they earned their money from in the first place.

This is where the need for an intermediary arises. This is where you, as a hard money lender, would step into the picture. You help investors more easily find borrowers and borrowers more likely to find investors. On the investing side, you handle identifying potential opportunities, filing paperwork, investigating assets, and vetting borrowers. On the borrowing side, you provide access to funds that would otherwise be inaccessible. You provide a central contact place for multiple funding sources and offer advice on how to best manage the loan.

That’s the big picture of hard money lending and what a hard money lending company does. There’s a lot more to explore. If becoming a hard money lender still intrigues you, read on to get more in-depth on the advantages and disadvantages of hard money lending.

Hard Money Pros and Cons

One very attractive feature of becoming a hard money lender is that you can make a living investing someone else’s money. That’s not to say that it doesn’t take any investment of your own capital to start a lending business, but most of your income will come from using investors to generate business. This means you can get into real estate and financial sectors without needing to have accumulated a tremendous amount of wealth yourself.

Since you are essentially a broker between the investors and the borrowers, you get paid upfront. You’re not usually the one investing in the loan. So, you have less risk than the lender does. If a deal goes bad, it’s your reputation on the line, but not necessarily your finances. You’re not responsible for paying the loan back to the lender.

Another advantage of getting into this business is that hard money lenders aren’t subject to the same set of rules and restrictions that banks are. Generally, that means you don’t have as much red tape to cut through and can negotiate more flexible loan terms. Hard money loans are usually processed and approved in a month or so. Shorter processing times can mean doing more business faster and making more connections.

You don’t have to be involved with real estate to be a hard money lender either. Hard money loans can be based on other assets like machinery, inventory, vehicles, and even shares in a company. This gives you a chance to diversify your business so that if the housing market takes a downturn, you aren’t reliant on it to bring in funding.

Hard money loan brokers generally operate on the local level. Having relationships with investors and knowing the local housing markets are both very important to the success of the business. With a startup staff, it can be difficult to build these relationships nationwide or to accurately read the ups and downs of the market. While this can be a very positive thing, it also means there’s more riding on local reputation.

Let’s be realistic. It’s not easy to be a startup company. Even though you don’t have to have an advanced degree or a banking background to start a hard money lending business, you do have to have a strong knowledge of financing and operations. Many of the qualities you need to be a hard money lender are the same as what you need to succeed in other startup businesses: hard work, networking, dedication, and planning.

A few startup numbers: According to the U.S. Bureau of Labor Statistics , about 20% of new businesses fail in their first year. After five years, that survival rate goes up to 50%. That means that only half of the businesses that started five years ago are still operating this year. At ten years, the percentage has fallen to 30% or roughly a third of all startups. Those numbers encompass all of the country’s startups, regardless of the type of business. The biggest growing business right now is healthcare. Transportation and construction, however, aren’t looking so good. What’s the most common reason startups fail? Failing to meet customer needs. That’s not startling, considering you already know you need customers to succeed.

Don’t expect to open your doors and immediately be flooded with borrowers. Both investors and borrowers care about their money. They want to trust the company they’re doing business with. So much of this business is done by word of mouth and referrals that you need to maintain important connections. Once you have an established reputation, things should get easier, but it can be hard starting as an unknown.

Hard money lending is regulated at the state level. To operate legally, you’ll have to know what your state’s rules are and abide by them. Should you decide to relocate, you’ll have to understand and satisfy a new set of rules. If your business is located near a state line, you’ll probably want to do business in both states. In that case, you’ll have to satisfy two sets of rules at the same time.

Are you a good fit for this industry?

Take a PROFITABILITY ASSESSMENT to find out.

When meeting a potential new referral partner you start by

Are you more likely to see

For long term business success you should focus on

Is it usually better to start a conversation by

In conversations do you focus more on

When thinking of my current income and free time:

My current employment is

When you face failure or a set back are you more likely to

Are you more driven to

Are your colleagues more likely to describe you as

Starting A Hard Money Loan Business

If you’re not discouraged by the statistics and are the kind of person who enjoys a challenge, getting into the hard money loan business could be a good choice for you. For someone good at networking, already has a strong connection with real estate, and understands what borrowers and investors are looking for, hard money loans can make you some money. The good news is that people always need money and people always want to make more of it.

Here are a few steps to help you get started in the hard money lending business.

Step 1: Establish yourself officially as a business. That means going through the process of incorporating or becoming an LLC. You’ll have to register your business and apply for a tax identification number from the IRS. You might also need one from the state or states you plan to work in.

Step 2: Obtain the right licenses and permits. The fastest way to get your business shut down is to fail to get the right permissions. Make sure you’re transparent about them once you do have them. This will lend your business some credibility and legitimacy.

Step 3: Establish a business account and keep your personal finances separate. It’s easy to get in hot water when you don’t make a clear separation between what you own and what the business owns. Having a dedicated bank account for your business makes that a thousand times easier.

Step 4: Get insurance to protect the business. In some cases, insuring your company is a requirement of maintaining your license. You also want to have protections in place to cushion you from the unexpected. If you’re operating out of a brick and mortar office, you need to have the building insured as well.

Step 5: Contact an attorney. Even if you’re an investment genius, you might not be a litigation expert. There’s a reason that attorneys have to go through rigorous education and exams. The law is a full-time pursuit that takes special training to fully understand. Hiring someone to make sure you have your legal ducks in a row is highly advisable.

After that, some good thing to keep in mind are:

Word of mouth is the best way to build a business. This means you need to treat people fairly and burn as few bridges as possible. If you haven’t already established a network with lenders and other brokers, there are business groups you can join that not only boost your numbers but give you a chance to meet others in the industry for advice and referrals.

Find a niche to operate in or, rather, a focus. Diversification is indeed important, but you can’t market to everyone all the time. If you specialize in securing funding for minority-owned small businesses or real estate loans for non-profits, focus on becoming the best in that niche. This way you can hone in on the needs of that specific group and how you can meet them better than anyone else.

Make referrals to other brokers. It might seem like this is giving business away, but it’s quite the contrary. As mentioned above, you can’t fill every niche yourself. Other brokers might be better at something than you are. Sending customers that fit their business over to them encourages them to return the favor and you’re still helping your customer. Both are solid reputation builders.

Be as transparent as possible. Integrity is essential in the hard money business. Don’t pretend to have experience or resources that you don’t or make claims you can’t back up. You want a reputation as trustworthy and dependable, not as a scam.

Loan Broker Industry Orientation

Hard money faqs.

There are some common concerns for those looking to get into the hard money lending business. After all, you want to be armed with as much info as you can get to succeed, right? Below are some frequently asked questions concerning starting your own hard money lending business.

Q. Do I need my own money? The answer is yes and no. You could start with a hard money loan yourself or find an investor to give you the funds upfront. For the licensing, permits, and insurance, you may have to initially invest your own capital.

Q. Do I need a degree? Unless your state requires it, you don’t necessarily need an advanced degree, but it helps. You can also start as an intern to learn about the business that way. Strictly speaking, you can have the knowledge you need without the degree. It does affect the perception of your qualifications, however. If you can show that you know your stuff, that’s sometimes all you need.

Q. How do hard money lenders make money? According to the job search site, Simply Hired , the average loan broker’s salary is $83,686 per year. The highest salary measured in their survey was $195,496. So, how do they do it? Lenders make money on commissions paid by the investors, fees paid by the borrowers, or both.

Q. How is a hard money lender different from a bank? Banks have to operate under very strict conditions to be compliant with federal laws. That makes the application process more restrictive and the loan terms less flexible. Bank loans generally have lower interest rates, but longer repayment periods. Their lending criteria are based on the borrower’s creditworthiness and the loans are long term.

Q. What gives one hard money lender an edge over another hard money lender? There is certainly competition in the hard money lending game. The more successful lenders will have better customer service, be able to lend money faster, and have lower interest rates than their counterparts.

Q. What is the average interest rate for a hard money loan? There is no national standard interest rate for hard money loans. They vary by region and lender, but they’re typically between 7% and 15% of the principal.

Q. What are points on a loan? Points are a way for borrowers to pay lenders for a lower interest rate. Borrowers can pay a certain amount of interest upfront for a point. Each point they buy lowers the interest rate by a percentage.

The hard money lending business isn’t always easy, but it can come with great rewards. Following the guidelines in this article should give you a good start on understanding the business and starting your own. Remember that trust and transparency are important for your professional reputation and that most deals are done from that reputation. So, keeping up compliance with government regulations, being open about your rates and procedures, and responding to customer demands appropriately are essential to your success. There will always be someone who’s been in the business longer. Don’t be too proud to ask for advice and mentorship from them.

With hard work, dedication, and a little luck, you’ll be brokering hard money loans with ease and realizing great returns on your new business.

Contact the Commercial Loan Broker Institute

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If you are interested in receiving affordable loan broker training on your terms, contact the Commercial Loan Broker Institute. We can make specific accommodations for your schedule, the speed at which you learn and your location. We provide intensives, weekends, a virtual academy and one-on-one coaching support to new and established loan brokers. A dedicated coach will provide you with full support throughout the process to make learning easier for you. We can also provide you with a package of useful tools that will make it easier to run your firm effectively. 

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What Lenders Look for in a Business Plan

Helena Hauk

3 min. read

Updated October 27, 2023

Your business plan is the foundation of your business. It defines your vision and mission, and serves as a road map as you move forward. It’s one of the most important documents you’ll ever create. It’s also an invaluable tool when it comes time to apply for a business loan. What lenders look for in a business plan may surprise you, but knowing what they want (and how to give it to them) will dramatically improve your chances of getting the money you need to continue to drive your business forward.

When lenders ask for a business plan, they are looking specifically for the following items:

• History of the business

Where did your business start and how has it grown? Be sure to note any unique challenges you faced and how you addressed them, as this will demonstrate your business acumen and your ability to adjust to changing market needs.

• How revenues are generated

Lenders want to get their money back, so they are especially interested in knowing how you make yours. Explain exactly how customers are served, how the product or service is delivered, and how money is collected.

Let lenders know who is at the helm and what relevant skills, knowledge, and experience they bring to the table. I emphasize the word “relevant” here because lenders want to see how adept your management team is at leading and growing your specific business.

Lenders want to know who you serve, how large the population is, and how viable the market is (e.g. affluence, room for growth, etc.). Lenders also want to know who you are competing with in this space and how you are setting yourself apart. Note all marketing and publicity you are doing (regular social media, strategic partnerships, presentations, broadcast advertising, etc.) so you can demonstrate activity toward continual revenue creation and growth.

• Historical financials with debt coverage ratios

Detailed financials showing all revenue, assets, liabilities, and repayment structures are necessary to give lenders a clear snapshot of the financial health of the business. This is one area where many business loans are killed either because of poor or inaccurate accounting by the business or due to insufficient cash flow and debt service coverage ratios – in other words, not having enough cash on hand to make your loan payments.

• Projections

Lenders also want to see what you expect to happen financially, looking forward. Discuss both what will occur without funding as well as what projected growth you expect should you receive financing. Be sure to include projections regarding job creation, market growth (e.g. if you receive financing, you will be better able to serve your market or serve additional markets), product development, and anything else impacted. It is also important to consider seasonal changes or cyclical changes to the business and what financial impacts those changes might have.

What assets does the company currently own? Include any patents, real property, or other collateral that can be leveraged against your debt. Personal property that is available like rental properties, ranch land, etc. can also provide additional collateral for underwriting consideration.

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• Purpose of the project

Last but not least, you need to state why you are asking for this loan. What need does it serve? Is it to expand, to open a new location, to move to a better location, to install new equipment, or some other business goal? Be as detailed as possible, especially if you are looking to get an SBA loan or other economic incentive that is tied to specific policy directives. They want to know exactly where their money is going.

Of course lenders look for items beyond the business plan, including things such as secondary repayment sources (for certain loans), residency, criminal record, and more. Be responsive to all lender requests, no matter how daunting or seemingly unnecessary the request, as this will help keep the process moving. The key is to be as prepared as possible with as much information as possible so you can demonstrate to the lender that your company is “good for it.” With lending the way it is today, you need to do everything you can to improve your chances. Don’t let your business plan be the thing that keeps you down.

Create a business plan that maximizes your chances of securing funding

As the President of 5th Gear Consulting Helena Hauk assists small to mid-sized businesses with preserving and generating capital, project management, strategic planning, and business development.

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Hard Money Lender Business Plan and SWOT Analysis

Hard Money Lender Business Plan, Marketing Plan, How To Guide, and Funding Directory

The Hard Money Lender Business Plan and Business Development toolkit features 18 different documents that you can use for capital raising or general business planning purposes. Our product line also features comprehensive information regarding to how to start a Hard Money Lender business. All business planning packages come with easy-to-use instructions so that you can reduce the time needed to create a professional business plan and presentation.

Your Business Planning Package will be immediately available for download after your purchase.

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Real estate developers and real estate entrepreneurs are always going to need capital to complete their projects. Given that it is very difficult to obtain ongoing capital commitments from traditional financial institutions, many people turn to hard money lenders in order to get the short-term financing they need in order to complete a real estate project. For many real estate developers, this can be an expensive form of capital given that there are usually a significant amount of upfront fees, with a very high interest rate. Additionally, most hard money lenders only provide a loan-to-value percentage of 65% to 70%. This is mainly due to the fact that to a certain extent hard money lending is a risky investment activity. Many hard money lenders often source or capital from a number of private individuals from which they have a ongoing and pre-existing relationship. The barriers to entry for a new hard money lender are considered moderate given that most of these firms are required to have appropriate licensure in place to act as a mortgage brokerage. This is primarily in cases where residential mortgages are being provided. Startup costs, outside of raising capital, usually range from $50,000 to $150,000 covers the working capital, professional fees, licensure, and initial marketing costs that are required in order to watch this type of lending business.

A hard money lender business plan usually focuses on the closing fees and interest is charged to borrowers in exchange for the capital they need. A well formulated hard money lender business plan also has a three-year profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page. Generally, the balance sheet should be completed by a CPA or an accountant that understands how hard money loans are valued. It should be noted that in some instances specialized corporate structures are used so that loans are held by a third-party entity and that by the hard money lender themselves.

A hard money lender marketing plan is required in order to market lending services to real estate investors, entrepreneurs, and developers. As it relates to marketing for investors, an attorney should be retained to make a determination as to how you can reach potential investors and marketing to the general public. Some states and the federal government have rules in regards to how investment vehicles can be marketed to potential investors. Usually, only people that are considered to be accredited investors can place a significant amount of money with a hard money lending business.

For a SWOT analysis for a hard money lender, dispenser that these businesses are generally able to thrive in any economic climate. There are always going to be real estate opportunities that require very fast lending decision so that they can be completed. Additionally, the gross margins generated from interest fees and closing fees are extremely high. As it pertains to weaknesses, there are a number of regulatory requirements must be adhered to at all times when a person engages in hard money lending. Also, there are significant competitive issues that must be dealt with. Relating to opportunities, most hard money lenders expand their business operations by acquiring additional rounds of capital to provide a larger number of loans. For threats, changes in the underlying interest rate as well as regulatory changes pertaining to lending can have a negative impact on a hard money loan business.

In closing, hard money lenders are one of the oldest types of lenders within the United States. They are always going to be in demand given that there is a substantial amount of real estate within the United States, and there are always going to be developers and entrepreneurs that want to capitalize on potential opportunities.

How To Buy A Small Business With No Money Down

Chelsea mandel and her firm ascension advisory are on a mission to help small business buyers borrow a $17 billion a year tactic from private equity’s playbook known as sales leasebacks. but finding the right deal is nearly impossible., by brandon kochkodin , forbes staff.

A ccording to the U.S. Small Business Administration (SBA), the final week of April marks National Small Business Week. It’s a time to celebrate the role of small businesses in the U.S.—all 33 million of them. Despite the “small” tag, these businesses are a big deal. They account for about 40% of the U.S.’ $27 trillion gross domestic product and, even more importantly, are an essential part of the American Dream. For proof one only need consider the success of ABC’s Shark Tank, now entering its 16th season. In fact, a 2023 survey by Incfile, found that 90% of Americans dream of being their own boss, and three-quarters already have a business idea they’re itching to start.

Money is the big barrier to entry according to Incfile’s survey which shows that finding the funds to kickstart or buy a business is the top challenge for half of those surveyed.

Chelsea Mandel, the founder and managing director of Ascension Advisory , believes she has a novel solution to the seemingly insurmountable challenge of funding small businesses. Mandel has gathered a sizable social media following preaching the virtues of “sale leasebacks,” a clever financing technique typically used by sophisticated institutional investors in billion dollar transactions. On LinkedIn Mandel has more than 27,000 followers and on X another 8,000-plus. Her firm, Ascension, not only hosts a podcast devoted to leasebacks, but also offers email crash courses like “102: Acquisition Financing Utilizing Sale Leasebacks.”

In a sale leaseback, a business sells some of its assets, like property or equipment, and then rents or leases it back so that it can continue operating as it did before. In some ways it's similar to a home equity loan, in that it effectively unlocks potential cash tied up in the value of the assets that can be used for growth or other investments. It also offers tax benefits, including certain deductions for the seller who is now effectively renting the business it just sold. Mandel's strategy is simple: time it right and a business buyer can use a sale leaseback to finance the purchase by leveraging the property that comes with the business. In this way, according to Mandel, a new buyer is simultaneously acquiring a business and selling the property it owns to an investor who will receive rent from the buyer, who embarked on the entire transaction without putting up any initial capital.

Brian Dennis, the founder of Dennis & Co. , is one of Mandel's success stories. Dennis & Co., which owns 15 dealerships including Chevrolet, Dodge, Chrysler, Infiniti and Kia mostly around New York City, added a new location to its portfolio last year without putting any money down by executing a sales leaseback with Ascension Advisory's help.

Dennis purchased a dealership where just the real estate was valued at $20 million. The whole package—real estate, dealership operations, and other assets—was being sold for just $17 million. By arranging a sale leaseback, Dennis managed to cover this entire cost of the acquisition. “We were able to cover the lion’s share of the acquisition just by leveraging the property,” Brian Dennis says. “Using sales leasebacks provides the lowest cost of capital. When you go into a deal, it's inherent that you look for sales leaseback opportunities. We've done three of them so far.”

S ale-leasebacks are nothing new. They are commonly used in commercial real estate and by private equity firms. According to New York’s SLB Capital Advisors there were more than $17 billion in real estate-based leaseback transactions in the U.S. in 2023. VICI Properties, a real estate investor focusing on “experiential” properties, laid out $776 million in Q4 2023 alone for leases including Manhattan’s Chelsea Piers and 38 Bowlero bowling alleys.

“Looking back twenty years ago, sales leasebacks were mostly driven by real estate investment trusts. They were buying the leases on retail properties,” says Scott Merkle, the managing partner SLB Capital Advisors. “But over the past five years, the sales leaseback market has been driven by private equity funds that operate in the middle and lower middle market. The median deal size is less than $10 million and they tend to happen in smaller cities and towns.”

Mandel believes wannabe small business owners, sometimes called “acquisition entrepreneurs” or “searchers” should be considering this creative no-money down financing to leap into business ownership. She warns though that finding a target company that will pay for itself isn’t easy. “We say finding a deal where you can finance the whole acquisition through a sale leaseback of the target’s real estate is like finding a needle in a haystack,” says Mandel. “But the opportunities are out there.”

Mandel ought to know. Since graduating from Dartmouth in 2015 with a degree in economics, Mandel’s career has been dedicated to real estate finance. She got her start as an acquisitions analyst for real estate billionaire Barry Sternlicht’s Starwood Capital Group and later joined New Mountain Capital, where she developed and helped lead their sale leaseback strategy, executing over $400 million in transactions. She then joined a sale leaseback advisory firm, where she structured deals exceeding $1 billion. Mandel launched Ascension Advisory in 2022. Since its inception, her firm has sealed $700 million in sale leasebacks.

Despite the potential to use sale leasebacks to finance acquisitions, Mandel cautions against chasing them for the wrong reasons. “If someone buys a business just because they can finance it with a sale leaseback, but they don’t actually know how to run the company, it’s actually worse for them than if they hadn’t done anything at all. They’re now locked into a lease agreement and if they can’t run the business, they’re going to struggle to pay their rent. If we’re able to help you acquire a business with zero equity through a sale leaseback, that should be an outcome, it should not be your only search criteria.” she says.

W hen everything falls into place, the payoff from a sales leaseback can be impressive. Mandel describes these moments on her blog as a “free roll” —occasions when her clients not only secure a business through the deal but sometimes even earn money in the process. She highlighted a standout scenario on X (formerly Twitter), involving a client acquiring 14 gas stations across four transactions for $54 million. While these purchases were underway, Ascension was already on the hunt, leveraging its network to identify investors interested in buying and then leasing back the properties. The negotiations demanded flexible closing dates and a bit of secrecy; the original owners were kept out of the loop to prevent them from attempting a sales leaseback on their own. The strategy was a success, netting Mandel’s client $69.3 million from the sales leasebacks—a $15.3 million profit over the initial investment in the businesses and their properties. Mandel’s firm Ascension charges fees of approximately 1 to 6% of the transaction cost, depending upon the size of the deal, she says.

Sale-leasebacks, used in this way, are actually a form of arbitrage. Often, the initial sellers, especially if they’re small businesses, might not realize there’s a strong market for sales leasebacks. Or, they might simply want to wrap up the sale quickly and smoothly, perhaps eager to retire without the hassle of going through multiple transactions.

But there’s more to it than just selling; figuring out how much rent your newly purchased business can afford is crucial. The higher the rent you agree to, the more an investor is willing to pay for the property. However, if you push the rent too high, you risk drowning a previously solvent business in unmanageable costs. So, the new buyer is essentially being compensated for assembling the deal and assuming the risk of paying rent on property the business used to own outright.

Ryan Holder is the managing director at Strategic M&A Advisors, a Little Rock, Arkansas based sell-side advisory firm. It’s his job to make sure sellers aren’t creating an arbitrage opportunity for the “sharks” out there. And Holder says there are certainly sharks in the M&A waters. “We try to take out that arbitrage opportunity to get the most value for our clients,” Holder says. “One of our jobs is to keep sophisticated buyers from taking advantage of an unsophisticated or poorly advised seller. Sellers need to know that there are sharks out there looking for these types of deals.”

If the “free rolls” are out there, they’re not commonplace.

Robert Dolan has been brokering small business deals in South Florida for over 45 years. He says that in that time he hasn’t done any deals where a sales leaseback was used to finance the entire transaction. “Not saying you can’t do it, but most of the time when you have a transaction like that there’s something kinky about it or the risk is too high,” he says. “Are these deals out there, yes, and there’s some merit to them, but it’s nothing that I’ve seen in person.”

That’s part of the reason why Mandel struck out on her own. She says the market for providing sale leaseback advisory services – especially to those acquiring small-to-medium size businesses – is largely untapped. “I don’t think we have a ton of competition, especially for sale leasebacks that are financing M&A deals,” she says. “These deals are higher risk given the uncertainty of the broader acquisition, and especially for smaller deals, these tend not to be interesting for the big one-stop-shop brokerages. It’s a game of expected value and maybe the expected value isn’t there to make it worth their while. But we feel like it’s an underserved part of the market and perhaps we have a different risk profile than our larger competitors.” Those larger competitors would be behemoths like CBRE Group, a member of the S&P 500 Index with a $30 billion market capitalization and $9 billion in annual revenue.

L easebacks are not without their risks.

Consider the case of Art Van Furniture, a Detroit-based furniture retailer that opened its doors in 1959 and eventually expanded its footprint across the Midwest. In 2017 it was acquired by the Boston-based private equity firm Thomas H. Lee Partners LP for around $550 million. To cover the sale price, Lee opted for sale-leasebacks on Art Van’s properties.

However, that backfired, at least from the perspective of Art Van and its employees. Within three years, the sixty year old furniture store was bankrupt. A lawsuit by investors claimed that the new private equity owner over leveraged the company. They accused Thomas H. Lee of draining the company’s assets and burdening it with unmanageable debt. Before its private equity owners began their financial engineering, Art Van's lease obligations were under $23 million annually, according to the lawsuit, with future lease commitments of $136.5 million. Post-transaction, these figures skyrocketed to $46 million per year and over $877 million in future lease obligations. The dispute ultimately settled for $8 million in August 2023.

Recently, Red Lobster also seems to have run into trouble. Back in 2014, the seafood chain entered a $1.5 billion sales leaseback deal (Golden Gate Capital used the money to buy the chain from Darden Restaurants) with American Realty Capital Properties for about 500 of its locations. Fast forward to April 2024, and reports from Bloomberg suggest that Red Lobster is contemplating bankruptcy. The reports point to “onerous leases” as a partial cause, noting they’ve hampered the restaurant’s cash flow.

“If you’re doing this haphazardly for the pure sake of financial engineering, it may be a good deal today, but an awful one five years from now,” insists Mandel. “The deal should be based on the merits of the real estate and the company you’re acquiring. This structure makes buying a business more accessible.”

If, of course, you can find the needle in the haystack.

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As a financial planner, I give my clients 4 tips to make their money last a lifetime

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• I'm a financial planner, and I remind clients to look at a long timespan and plan for the worst.
• There's no easy answer to earning more money, but it's important to not ignore that factor.
• I encourage my clients to focus less on frugality and more on how they'll invest in the future.

As a certified financial planner , my goal is to help self-made professionals build wealth that they can enjoy throughout their lives. To do that, we have to make sure their money will last throughout their lifetimes.

But we also need to make sure that clients actually have opportunities to use their money now  while they're young, healthy, and able to fully experience life.

Here's the process we use to build long-term financial plans that work, including what your investment strategy should consider and why living frugally is a poor strategy for getting rich.

1. Plan for change

Your goals for retirement planning will probably evolve over time. The person you are today will not be the same person who retires in 10, 20, or 30 years.

A long-term financial plan that works accounts for inevitable shifts in goals, values, priorities, and circumstances. Although you might not know exactly what will change, you can still plan for an evolving life.

First, save more than you think you need to when you can. If you find you have excess cash flow, don't default to spending it or upgrading your lifestyle. Direct that money to investments instead so you can grow wealth.

Avoid unrealistic assumptions about future income and expenses. For my own planning, I assume a lower-than-expected growth in income and a higher-than-expected run rate for my cost of living.

When making decisions, opt for choices that allow you to walk away at a low cost. This makes it possible to change or adjust course as needed. Be cautious about decisions that demand fixed commitments (like buying a house) that are difficult to reverse.

2. Look for ways to earn more

Personally, I've shifted from "retire as soon as possible" to a more balanced approach to my financial goals.

I save less money now because I want to use some of my income for important experiences throughout life. I don't want to save everything for use on a distant (and unreliable!) "someday" in the future.

My financial plan can accommodate this choice for two main reasons:

First, I saved aggressively when I could for almost a decade. I've saved at least 30% to 40% of my income . The fact I did so in the past gives me increased flexibility now.

I also put a lot of time and energy into earning more money through growing my business.

If you want to grow wealth, increasing your income will fast-track your efforts. Too many people who want to throw out money tips ignore this reality.

I understand why no one wants to talk about it. Earning more is not easy to do, and there's no one piece of prescriptive advice to give that will help everyone.

But we cannot ignore the importance of making more money if our goal is to create more wealth. There are many avenues that can get you to a higher income, so you don't need one right answer. You need to select and stick with a strategy that makes sense for you.

3. Remember, frugality will only get you so far

No matter what you want to do, you'll need money to afford your chosen lifestyle in the future. And you won't be able to work to earn an income forever. By choice or by circumstance, you will eventually need another way to pay for your needs other than your own work.

This means we must recognize the necessity of saving money and investing . There's no disputing that. The question is how .

Living frugally to get wealthy is possible; it's a simple fact that the lower your expenses are, the more you can save.

But it's an inefficient path to building wealth. There are only so many costs you can cut. And only saving money misses out on opportunities to create assets that increase in value over time.

4. Develop an investment strategy

If you want to grow wealth without pinching pennies, you have to invest — and you have to do that wisely.

A sound investment strategy needs to consider:

• What investment vehicles to use
• The right asset allocation based on your goals and your time horizons
• The expenses associated with your chosen investments and how that may impact your returns
• How to leverage diversification across your portfolio as well as across the specific  brokerage accounts  or assets you invest into
• The tax implications of your choices
• Mistakes to avoid, including speculating, market timing, and taking on too much (or the wrong type) of risk

That just scratches the surface of comprehensive investment management here. But in general, if you want to build an investment strategy that will help you grow wealth, you want to look for:

• Long-term time horizons : The longer your money can be invested, the better your odds of a successful outcome where you see growth of your assets.
• Risk-adjusted strategies : You want to take on enough risk to see a return, but not more than you can actually afford to realize (or more than you need to meet your goals).
• Globally diversified portfolios : Remember that there is a literal world of financial markets out there. Throwing your money into one to three index funds that are all US large-cap stocks or US bonds is not a good example of true diversification.

One final key to keep in mind: You're better off sticking with a decent strategy that works over time than constantly hopping from one thing to another in search of the best strategy ever. Consistency is an underrated element on the road to building wealth.

Watch: 6 simple investing tips for beginners

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Biden announces a fresh round of $7.5 billion in student loans canceled

Income-driven repayment plan faces legal challenges.

The Biden administration announced ]more student loans are eligible for cancellation.  ( iStock )

President Joe Biden is keeping the ball rolling on student loan forgiveness, canceling a new round of loans as his administration crafts a new plan to target even more outstanding student debt.

The latest round of cancelations targets $7.4 billion in student loans for 277,000 borrowers, the Department of Education said in a  statement . This brings the total debt forgiven over Biden's presidency to $153 billion. The discharges are part of the Saving on a Valuable Education (SAVE) Plan, which offers a faster route to forgiveness.  

"Today we are helping 277,000 borrowers who have been making payments on their student loans for at least a decade," U.S. Under Secretary of Education James Kvaal said. "They have paid what they can afford, and they have earned loan forgiveness for the balance of their loan."

More people are becoming eligible for student loan cancelation as they hit 10 years of payments. Since the launch of SAVE, nearly 8 million borrowers have received relief, including 4.5 million with a $0 monthly payment. Student loan forgiveness has reached millions even as the  Supreme Court blocked Biden's original debt forgiveness plan  last June.  

The Biden Administration has also  released initial details  of a new set of plans that would provide student debt relief to over 30 million borrowers, including the 4 million who have already been approved for debt cancelation over the past three years. The new plan also proposes to eliminate accrued interest for 23 million borrowers and automatically discharge debt for borrowers eligible for loan forgiveness under SAVE, closed school discharge, or other forgiveness programs, even if not enrolled. Additionally, student debt for borrowers who entered repayment for 20 or more years would be discharged.

Private student loan borrowers can't benefit from federal loan relief. But you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered. 

BUY A HOME IN THESE STATES TO GET STUDENT LOAN DEBT RELIEF

Some borrowers miss out on SAVE

Biden's SAVE plan could lower borrowers' monthly payments to zero dollars, reduce monthly costs in half and save those who make payments at least $1,000 yearly. Yet roughly three out of four borrowers who make $75,000 or less annually and would benefit from the SAVE plan still need to be enrolled, according to a recent Student Debt Crisis Center (SDCC)  survey .

Part of the problem is the lack of communication between student loan servicers and borrowers, according to the survey. Every student loan borrower is assigned a loan servicer to help them navigate repayment options, including income-driven repayment (IDR), which can make payments more affordable. 

More than half of borrowers who contacted their student loan servicers with questions about resuming payments were left with unanswered questions. Moreover, a quarter of borrowers don't trust the information they get from their servicer, and 75% said the information they got was inaccurate or incomplete.

"As a student loan borrower myself, I know firsthand how frustrating and harmful these communication errors can be, "SDCC Managing Director Sabrina Calazans said. " Borrowers need more communications coming directly from the Department of Education, given their lack of trust in their respective service providers."

If you're having trouble making payments on your private student loans, you won't benefit from federal relief. You could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes without affecting your credit score.

HOMEOWNERS COULD SAVE TENS OF THOUSANDS IN DAMAGES BY USING SMART DEVICES

Legal challenges to student loan forgiveness mount

Republican-led states  filed suit  against President Joe Biden and the U.S. Department of Education to stop the SAVE Plan. 

The lawsuit seeks to halt the SAVE plan immediately, arguing that the U.S. Department of Education has no authority to alter student loan repayment plans. This would essentially cancel more than $156 billion in student loan debt. The attorneys general from Alabama, Alaska, Idaho, Iowa, Louisiana, Montana, Nebraska, South Carolina, Texas and Utah joined the suit.

The lawsuit also argues that the U.S. Supreme Court ruled that Biden's original forgiveness program violated federal law and that only Congress can authorize the forgiveness of student loans, which requires spending taxpayer money. 

A  statement from the Education Department  said Congress gave the agency the authority to define the terms of income-driven repayment plans.

If you hold private student loans, you won't be enrolled in a federal income-driven repayment plan, but you could refinance your loans to a lower rate. Visit Credible to compare options from different lenders without affecting your credit score.

MORTGAGE LOAN LIMIT RISES ABOVE $1.1M AS HOME PRICES SURGE

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at  [email protected]  and your question might be answered by Credible in our Money Expert column.

Money: '£2,000 landed in my account' - The people who say they're manifesting riches

We delve into the world of manifestation - but will a one-day course help our reporter land some extra cash and an engagement ring? Enjoy our weekend reads, and leave a comment, below, and we'll be back with all the latest personal finance and consumer news on Monday.

Saturday 27 April 2024 10:13, UK

Weekend Money

• '£2,000 landed in my account' - The people who say they're manifesting riches
• Iceland's new slogan and cash for grades: What our readers said this week
• Calculate how much your take-home pay will change this month with national insurance reduction
• Why are mortgage rates going up?

Best of the week

• The world of dark tourism - what is it, is it ethical and where can you go?
• Virgin Media customers share their bad experiences of customer service
• More Britons paying inheritance tax after chancellor freezes threshold - so how can you beat it?
• 'More important than a will': What are lasting power of attorneys and how much do they cost?
• 'I have a mortgage offer - will it change now rates are rising?'

Ask a question or make a comment

By Jess Sharp , Money team

My journey into the world of manifestation (the belief that you can attract success in your life through positive affirmations and visualisation) has taken me places I never thought I'd go.

Like woods in Edenbridge, where I stood meditating under a tree in the pouring rain. I don't yet know where my journey will end (I've been hoping for an engagement ring but my boyfriend hasn't yet seen my visualisations), but it started with a conversation with Jamie Greenlaw-Meek, one of many people who say manifestation has transformed their lives.

"About a year ago, there was something happening and I thought we just need two grand to cover the expense," Jamie, a former dancer from London, told me. "The following day £2,000 landed in my account."

It sounded like a coincidence to me, too.

But Jamie was adamant. His husband calls him "the master manifester" because of his "ability to bring in money".

"It's happened on so many occasions, like four, five times," he said. "I've become very clear on what I want and the amount of money I need and literally it can be within 24 hours that I get a phone call for a job and it's almost identical to what I asked for money-wise."

When I asked the now-psychic where the £2,000 actually came from, he said it was payment for a modelling job he had been offered.

"With manifesting you don't get caught up in the how, and often it comes in ways that you don't expect," he added, explaining it could come as the result of a claim after being in a car crash.

"It's not always coming in the way that you think but money is out there for us to take in the world. It's just having the confidence to receive it and we are worthy of it."

"Even if it is a placebo effect, does it matter?" he said.

The 43-year-old also believes he manifested his husband Fiongal after being diagnosed with cancer. While going through treatment and dating "a lot" of people, he decided to take matters into his own hands, or rather his own head, and started visualising his perfect partner.

"I decided to spend a good couple of weeks getting really, really, super clear in my mind what this person looked like. Then I started creating lists asking about personality traits, and all the things that I wanted that person to be," the former dancer said.

"The day I got the all clear from cancer I randomly met my husband and when I look at the list of the things I asked for, he pretty much ticks every single box. I really, really believe that is because I got super clear on what I wanted and I put that out to the universe to bring to me."

Jim Carrey and manifestation

If you think this is a new practice, it isn't. Jim Carrey was doing it back in the 90s. He famously wrote himself a $10m cheque for "acting services rendered" and dated it years in advance. Then in 1995, he was told he was going to make the exact amount for filming Dumb and Dumber.

The idea shot up in popularity again in 2006 after Rhonda Byrne published her self-help book The Secret.

Since then, it has hit every inch of the internet and has resurfaced on TikTok with videos posted under #manifesting accumulating a huge 13 billion views.

I tried to learn manifesting - I felt like an idiot

After hearing Jamie's story and seeing the idea was popular with so many people, I thought it best to try to learn manifestation myself. I mean, who wouldn't want money landing in their account and a work promotion from the universe?

As I stood in the woods, in the pouring rain, being told to imagine roots growing from the soles of my feet, I felt like an idiot.

I was soaking wet (of course I had forgotten a coat with a hood) and while my mind kept wandering through thoughts about being cold, if I'd hit traffic on the way home and how dirty my white trainers were getting, a gentle, soothing voice kept bringing me back to what I was supposed to be thinking about.

"How we are all connected, how the trees and plants produce oxygen that we breathe, and we breathe out carbon dioxide which they need to survive"

While some people focus their manifestation practices on being grateful to the universe, Tansy Jane Dowman believes we need to get "out of our heads, into our bodies", connect with nature and find our true selves before we can practice it successfully.

My meditation in the woods was just one part of a six-hour workshop run by Tansy, which aimed to send me off with a clearer vision of what I truly desired.

Tansy charges anywhere from £25 to £580 for her courses, which range from one-on-one sessions and an online six-week programme, to forest bathing workshops and weekend-long nature retreats.

But some courses have popped up online which cost more than £1,000.

Tansy started practising manifestation in 2018 after going through a difficult period in her life. She eventually quit her job in events management and started teaching others how to do it successfully.

"The way I manifest is not to focus on material wealth or gain. I would ask my clients what an abundant life means to them in terms of feelings, experiences, connections, people and places," she explained.

"The more authentic you are, the more of a beacon you become for those things to find you."

After spending time walking in the rain and meditating under a tree, Tansy and I sat in her dining room and explored some of the happiest moments in my life and the feelings I experienced. It became clear I like feeling accomplished, needed and excited.

We also spoke about challenging times, but the conversation focused on the positives, like how I had overcome them and what I had learned.

"It's so important to bring in your values with manifestation because sometimes we can get really confused with what we want, with social media especially," she told me.

Throughout her house, Tansy has a number of "abundance boards" proudly on display - some she has made with her children, others are from her annual January tradition of setting out her desires for the year.

"I've had some really wonderful goosebump things happen to me. I did a board at the beginning of 2020... I put a picture of a microphone on it. I just thought I really like that image and I didn't immediately place any meaning onto it," she said.

"Then as the world was shutting down for lockdown, I did a press event and I met a lady who worked for Wellbeing Radio and she wondered if I would be interested in trying out as a presenter."

She explained that some people will be very specific with their desires, like selecting a photo of the exact car they want, or the perfect house, but that isn't how manifestation works. There needs to be an element of trust in the universe giving them what they attract.

As we created my abundance board, which Tansy describes as being like a "personal algorithm", she told me to select images and words from heaps of magazines that called to me intuitively.

As you can see from the picture below, mine calls for being "financially fabulous", travelling, getting engaged (coughs loudly in earshot of boyfriend) and living stress-free.

And while I'd love a big cash injection, Tansy explained to me that money is "only a stepping stone to a feeling" and, ultimately, I'm aiming to create an emotion with it.

Manifesters more likely to go bankrupt

While all the manifestation believers I spoke to said there was no downside to the practice, a researcher has been looking into whether it really does pay off.

Based in Australia, Dr Lucas Dixon (who specialises in consumer psychology) created a scale from one to seven to rank a person's strength of belief and found those who practice it are more likely to have been victims of fraud and declared bankruptcy.

He said there was a "danger" that manifesting could become harmful if taken to an extreme level.

He found those who believe in manifesting tend to think more positively and have a confident attitude when it comes to success, and while that can be helpful in business, it can also cause them to take unnecessary risks.

"They weren't more objectively successful in terms of having higher income or higher education attainment," he said.

"We also found that they are more likely to believe in get-rich-quick schemes, more likely to take higher risks... to have risky financial investments and more likely to have investments in cryptocurrency rather than traditional stock."

Using the scale he created, Dr Dixon found those who have "very strong beliefs", ranking at a seven, were 40% more likely to have gone bankrupt.

"The danger comes in a couple of different forms," he said, explaining that a "worst case scenario" could see people getting into financial difficulty by being encouraged to "just look at the positives".

"Someone might say it's not harmful because it is really just thinking positively but I think even that can be harmful because of what you might call an opportunity cost," he said.

"You're spending time, energy and money doing something that doesn't have a lot of evidence behind it. We found it does make you feel good but you don't need to pay thousands to do it."

Okay, so back to me...

I did my manifestation course about two months ago, and I have done as I was instructed - my abundance board is up in sight inside the flat, and I often have a cup of coffee in front of it.

But, so far I'm still using a credit card, the most travelling I've done has been to work and back and there is still no rock on my finger. I have been given an annual pay rise, though, and would say I am less stressed.

Perhaps believing that I'm just doing my best and there's a chance that I'll be rewarded for that one day, eventually, in the future, maybe, is making me feel better... who knows?

Each week, Money blog readers share their thoughts on the subjects we've been covering, and over the last seven days your correspondence has been dominated by these topics...

• Iceland's new slogan
• Rising mortgage rates
• Giving kids cash for grades

Iceland's new catchphrase

We learnt on Monday that Iceland had dropped its tagline "That's why mums go to Iceland", replacing it with "That's why we go to Iceland".

The move was made to reflect the store is for everybody, said brand ambassador Josie Gibson. Readers were split - with some feeling so strongly that they're prepared, they suggest, to sacrifice those frozen Greggs steak bakes forever...

I previously contacted Iceland about their slogan because I didn't think it did single dads justice, as dads can go to Iceland too. Their response was that people understood that it's not just mums that go to Iceland. It's about time they changed the message. Dave T  

Neither I, my wife or my children will shop in Iceland again due to this stupidness and woke attitude. To hell with you [Iceland boss] Richard Walker. John  

Banks hike mortgage rates

This week we reported that high street lenders such as Halifax, TSB, NatWest, Barclays, Leeds Building Society, HSBC and Coventry had all hiked mortgage rates (see 7.33 post for details). 

You said...

With house prices at already extortionate levels, now mortgage rates rising again, is there any hope for first-time buyers? Honestly, the situation is so bleak, people may need to consider other countries. GenZ 

Why would this happen? So many young couples struggling to get on the property ladder. I live in Dorset - a one-bedroom flat costs from £230,000. In Scotland, one can get a beautiful two-bed house for that price. Feel sorry for all couples living down in the South. Need huge deposits. Barbs

Why are they called high-street banks? Most banks in my town have closed. Martin J

Parents offering cash for good grades

A lot of views came in after our feature exploring the positives and negatives of parents incentivising good school grades with cash...

We had scores of comments on this - with a fairly even split...

We did it for our son at GCSE time. We think it made a difference of about a grade on most subjects. Got a two-grade lift on maths. Cost us £350. Thought it was good value as it has taught him how things work in the world. Andy

The whole world is built on a reward system which symbolises access to money commensurate with effort and excellence. The Nobel prize goes with a cash reward! Tom Deggs

Employees are offered incentives for achieving targets, so why not offer kids incentives for better grades? Claire228 

But others had concerns...

I think it puts too much pressure on kids who are under enough pressure at exam time. Parents should encourage their kids to do the best they can, not add to their stress levels. Emma

Children should value their education without it being monetised. My parents expected my brother and I to have the motivation, maturity and self-discipline to work hard for our GCSEs. We both achieved all As and A*s. Eliza 

When I was at school, from 1964-83, my parents never gave me money for good exam results, because "I should want to do well for myself". No matter what my grades were, they said that they would be proud of me if I had tried my best. Cash kills self-motivation. Nicola B 

National insurance was cut this month, for the second time this year, from 10% to 8% on employee earnings between £12,570 and £50,270.

The change, announced by the chancellor in his March budget, impacts around 27 million payroll employees across the UK - starting this pay day.

The cut is worth almost £250 to someone earning £25,000 a year and almost £750 for those earning £50,000

Use our tool below for a rough guide to what tax changes can be expected for most people, as there are other variables not included which might affect how much tax you pay including being in receipt of the blind person's allowance or the marriage allowance. It also assumes you are not self-employed and are under pension age...

There are also national insurance cuts for the self-employed. This includes the scrapping of Class 2 contributions, as well as a reduction of the rate of Class 4 contributions from 9% to 6% for the £12,570 to £50,270 earnings bracket.

These will impact nearly two million self-employed people, according to the Treasury.

While many campaigners welcomed the national insurance announcement last month, they pointed out that the tax burden remains at record high levels for Britons - thanks in part to the threshold at which people start paying income tax being frozen, rather than rising with inflation.

The money story of the week has been mortgage rates - with a host of major lenders announcing hikes amid fears the Bank of England may delay interest rate cuts.

Swap rates - which dictate how much it costs to lend money - have risen on the back of higher than expected US inflation data, and concerns this could delay interest rate cuts there. 

US trends often materialise elsewhere - though many economists are still expecting a base rate cut from 5.25% to 5% in the UK in June.

The reliable Bloomberg reported this week: "Still, while some economists have since scaled back their predictions for BOE cuts, most haven't changed expectations for a summer move.

"Analysts at Morgan Stanley, Goldman Sachs Group, Capital Economics and Bloomberg Economics are all among those still anticipating a shift toward easing in June."

The publication also quoted Sanjay Raja, chief UK economist at Deutsche Bank, as saying: "Markets have superimposed the US cycle on the UK, but the US and UK are on very different tracks.

"The UK is coming out of technical recession. Inflation is falling more convincingly. Pay settlements are following inflation expectations. And crucially, real policy rates in the UK will be higher than in the US."

None of this reassurance changes the fact that financial markets, which dictate swap rates, are pricing in delays.

This week's hikes came from Halifax, BM Solutions, TSB, NatWest, Virgin, Barclays, Accord, Leeds Building Society, HSBC and Coventry.

This is what average mortgage rates looked like as of Thursday...

The next Bank of England decision on rates comes on 9 May - and pretty much no one is expecting a cut from the 16-year high of 5.25% at that stage.

The Money blog is your place for consumer news, economic analysis and everything you need to know about the cost of living - bookmark news.sky.com/money.

It runs with live updates every weekday - while on Saturdays we scale back and offer you a selection of weekend reads.

Check them out this morning and we'll be back on Monday with rolling news and features.

The Money team is Emily Mee, Bhvishya Patel, Jess Sharp, Katie Williams, Brad Young and Ollie Cooper, with sub-editing by Isobel Souster. The blog is edited by Jimmy Rice.

The family home where Captain Sir Tom Moore walked 100 laps to raise nearly £40m for the NHS during the first COVID lockdown is up for sale for £2.25m.

The Grade II-listed Old Rectory is described as a "magnificent seven-bedroom property" by estate agents Fine & Country.

In a video tour of the house, a sculpture of Captain Tom with his walking frame can be seen in the hallway, while a photo of the fundraising hero being knighted by the Queen is on a wall in the separate coach house building.

Introducing the property, an estate agent says in the tour video: "I'm sure you'll recognise this iconic and very famous driveway behind me as it was home to the late Captain Sir Tom Moore who walked 100 laps of his garden, raising over £37m for NHS charities."

It comes less than three months after the demolition of an unauthorised spa pool block in the grounds of the property in Marston Moretaine, Bedfordshire.

Speaking at an appeal hearing over that spa, Scott Stemp, representing Captain Tom's daughter Hannah Ingram-Moore and her husband, said the foundation named after the fundraising hero "is to be closed down" following a Charity Commission probe launched amid concerns about its management.

For the full story, click here ...

"Status symbol" pets are being given up by owners who get scared as they grow up, an animal charity has said, with the cost of living possibly paying a part in a rise in separations.

The Exotic Pet Refuge, which homes parrots, monkeys, snakes and alligators among others, says it receives referrals across the country, including from zoos and the RSPCA.

"They're a status symbol. People will say, 'OK, I'll have an alligator or a 10ft boa constrictor'," co-owner Pam Mansfield told the BBC.

"But when the animal gets big, they will get too frightened to handle them, and then the pet has to go."

She added people who want to get rid of the pets sometimes call zoos for help, which then call on her charity.

In some cases, owners don't have licences to own dangerous animals, she says, blaming a "lack of understanding" for what she says is a rise in the number of exotic animals needing to be rehomed.

She says people "just don't have the space" for some snakes, for example, with some growing to as much as 12ft and needing their own room.

The cost of living crisis has also forced owners to give their pets away, she says.

Her charity has also been affected by those increased costs, with the electricity bill rising to £10,000 a month at their highest, to fund things like heated pools for alligators.

Private car parks are accused of "confusing drivers" after introducing a new code of conduct - despite "doing all they can" to prevent an official government version.

The code of practice launched by two industry bodies - British Parking Association and the International Parking Community - includes a ten-minute grace period for motorists to leave a car park after the parking period they paid for ends.

It also features requirements for consistent signage, a single set of rules for operators on private land and an "appeals charter".

Private parking businesses have been accused of using misleading and confusing signs, aggressive debt collection and unreasonable fees.

That comes after a government-backed code of conduct was withdrawn in June 2022, after a legal challenges by parking companies.

RAC head of policy Simon Williams said: "We're flabbergasted that the BPA and the IPC have suddenly announced plans to introduce their own private parking code after doing all they can over the last five years to prevent the official government code created by an act of Parliament coming into force.

"While there are clearly some positive elements to what the private parking industry is proposing, it conveniently avoids some of the biggest issues around caps on penalty charges and debt recovery fees which badly need to be addressed to prevent drivers being taken advantage of."

BPA chief executive Andrew Pester said: "This is a crucial milestone as we work closely with government, consumer bodies and others to deliver fairer and more consistent parking standards for motorists."

IPC chief executive Will Hurley said: "The single code will benefit all compliant motorists and will present clear consequences for those who decide to break the rules."

Sky News has learnt the owner of Superdry's flagship store is weighing up a legal challenge to a rescue plan launched by the struggling fashion retailer.

M&G, the London-listed asset manager, has engaged lawyers from Hogan Lovells to scrutinise the restructuring plan.

The move by M&G, which owns the fashion retailer's 32,000 square foot Oxford Street store, will not necessarily result in a formal legal challenge - but sources say it's possible.

Read City editor Mark Kleinman 's story here...

NatWest says its mortgage lending nearly halved at the start of the year as it retreated from parts of the market when competition among lenders stepped up.

New mortgage lending totalled £5.2bn in the first three months of 2024, the banking group has revealed, down from £9.9bn the previous year.

The group, which includes Royal Bank of Scotland and Coutts, also reported an operating pre-tax profit of £1.3bn for the first quarter, down 27% from £1.8bn the previous year.

An unexplained flow of British luxury cars into states neighbouring Russia continued into February, new data shows.

About £26m worth of British cars were exported to Azerbaijan, making the former Soviet country the 17th biggest destination for UK cars - bigger than long-established export markets such as Ireland, Portugal and Qatar.

Azerbaijan's ascent has coincided almost to the month with the imposition of sanctions on the export of cars to Russia.

Read the rest of economics and data editor Ed Conway 's analysis here...

Rishi Sunak has hailed the arrival of pay day with a reminder his government's additional National Insurance tax cut kicks in this month for the first time.

At last month's budget, the chancellor announced NI will be cut by a further 2p - so some workers will pay 8% of their earnings instead of the 12% if was before autumn.

The prime minister has repeated his claim this will be worth £900 for someone on the average UK salary.

While this additional cut - on top of the previous 2p cut in January - does equate to £900 for those on average full-time earnings of £35,000, there are two key issues with Mr Sunak's claim:

• Once the effect of all income tax changes since 2021 are taken into account, the Institute for Fiscal Studies reports an average earner will benefit from a tax cut of £340 - far less than £900;
• Moreover, anyone earning less than £26,000 or between £55,000-£131,000 will ultimately be worse off.

In short, this is because NI cuts are more than offset by other tax rises.

We explain below how this is the case...

Tax thresholds

This is partly down to tax thresholds - the amount you are allowed to earn before you start paying tax (and national insurance) and before you start paying the higher rate of tax - will remain frozen. 

This means people end up paying more tax than they otherwise would, when their pay rises with inflation but the thresholds don't keep up. 

This phenomenon is known as "fiscal drag" and it's often called a stealth tax because it's not as noticeable immediately in your pay packet.

That low threshold of £12,570 has been in place since April 2021. 

The Office for Budget Responsibility says if it had increased with inflation it would be set at £15,220 for 2024/25.

If that were the case, workers could earn an extra £2,650 tax-free each year.

Less give, more take

Sky News analysis shows someone on £16,000 a year will pay £607 more in total - equivalent to more than three months of average household spending on food. 

Their income level means national insurance savings are limited but they are paying 20% in income tax on an additional £2,650 of earnings.

In its analysis , the IFS states: "In aggregate the NICs cuts just serve to give back a portion of the money that is being taken away through other income tax and NICs changes - in particular, multi-year freezes to tax thresholds at a time of high inflation."

Overall, according to the institute, for every £1 given back to workers by the National Insurance cuts, £1.30 will have been taken away due to threshold changes between 2021 and 2024.

This rises to £1.90 in 2027.

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We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

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Best Medicare Supplement Plan G Companies in 2024

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

Medigap Plan G is the most comprehensive Medicare Supplement Insurance plan that all Medicare members can buy. It’s also the most popular of these plan types [0] AHIP . The State of Medicare Supplement Coverage . Accessed Feb 9, 2024. View all sources .

Plan G covers nearly all of the out-of-pocket expenses associated with Medicare Part A and Part B, such as copays, coinsurance and deductibles. (Medigap plans sold to people who became eligible for Medicare after 2019 can’t cover the Medicare Part B deductible — $240 in 2024 — so Plan G doesn’t cover that cost [0] Centers for Medicare & Medicaid Services . Compare Medigap Plan Benefits . Accessed Feb 9, 2024. View all sources .)

Since it can be difficult or impossible to change Medigap plans after the end of your Medigap open enrollment period , it’s a good idea to choose your Medigap Plan G company carefully.

Here are NerdWallet’s picks for the best Medicare Supplement Plan G companies in 2024.

Best Medicare Supplement Plan G companies

NerdWallet compares Medicare Supplement Insurance companies based on plan availability, member satisfaction, pricing, extra perks, state footprint and more.

Best overall: AARP/UnitedHealthcare

AARP/UnitedHealthcare

AARP Medicare Supplement Insurance plans from UnitedHealthcare have low complaint rates when compared with most competitors. Some plans have several variations with different prices, wellness extras and/or network restrictions, which could make choosing a plan confusing.

M-F 9am-9pm ET, Sa 10am-9pm ET

Speak to a licensed insurance agent on askchapter.org

from askchapter.org

Plan types offered Medigap plan types the company generally offers (availability may vary by location). Options include Plans A, B, C, D, F, G, K, L, M and N

A, B, C, F, G, K, L and N.

NAIC complaint rate How often the company’s members file complaints about their policies as compared to the industry average, according to data from the National Association of Insurance Commissioners (NAIC). NerdWallet conducts its data analysis and reaches conclusions independently and without the endorsement of the NAIC.

Far fewer than expected

Premium discounts available Based on the number and size of a company’s available discounts on monthly premiums, in comparison to other insurance companies.

Above average

• Offers as many as eight out of 10 plan types.
• Available in every state.
• Few customer complaints and strong third-party customer satisfaction ratings.
• Plans with health and wellness discounts may cost extra, while some competitors offer them for free.
• Plan variations and extras can get confusing.
• Network requirements for lower-cost Medicare Select plans.

Service area: 50 states and Washington, D.C. [0] UnitedHealthcare . AARP Medicare Supplement Insurance Plans for Retirees . Accessed Feb 9, 2024. View all sources .

Why we like it: AARP and UnitedHealthcare make Medigap Plan G policies widely available with low prices and few member complaints. Unless you’re looking for specific side benefits or a high-deductible Plan G option, AARP/UnitedHealthcare Plan G can be hard to beat.

» MORE: Read our review of AARP/UnitedHealthcare Medicare Supplement Insurance

Best for additional coverage options: Anthem

Anthem stands out from most other Medigap companies by offering options to add dental and vision coverage to Medigap plans. It offers only a few Medigap plan types, though, and serves fewer states than most competitors.

A, F, G and N.

Close to expected

• Mix and match dental and vision add-ons.
• Several discounts based on household and payment methods.
• Extra perks for fitness, health and wellness products and services.
• Lower-coverage plans are sometimes more expensive.
• Few Medigap plan types available.
• Available in only about one-third of states.

Service area: 14 states [0] Anthem . Medicare Supplement Plans (Medigap) from Anthem . Accessed Feb 9, 2024. View all sources .

Why we like it: If you want to roll dental, hearing and vision coverage into your Medigap Plan G purchase, Anthem is a strong option. The company’s Anthem Extras packages offer multiple tiers of dental, hearing and/or vision coverage that you can mix and match with most Anthem Medigap policies to fit your needs [0] Anthem . Anthem Extras Packages . Accessed Feb 9, 2024. View all sources .

» MORE: Read our review of Anthem Medicare Supplement Insurance

Best for high-deductible Medigap Plan G: Mutual of Omaha

Mutual of Omaha

Mutual of Omaha's household discount of up to 12% is larger than most competitors' discounts, and members file few complaints about their policies.

• Complaint rates are well below the market average.
• Available in every state but Massachusetts.
• Up to a 12% discount for living with another adult.
• Few choices for plan type.

Service area : Every state except Massachusetts, plus Washington, D.C. [0] Mutual of Omaha Corporate Communications . Email Confirmation . Accessed Feb 9, 2024. View all sources .

Why we like it: Mutual of Omaha makes high-deductible Medigap Plan G widely available, whereas many competitors offer it in fewer states. Mutual of Omaha plans get far fewer complaints than average and have reasonably competitive pricing. The pricing gets even better for applicants who qualify for a household discount of up to 12% (terms and discount levels can vary by location) [0] Mutual of Omaha . Medicare Solutions Product Portfolio . Accessed Feb 9, 2024. View all sources .

» MORE: Read our review of Mutual of Omaha Medicare Supplement Insurance

Honorable mention: Blue Cross Blue Shield

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Blue Cross Blue Shield is a collective of 33 companies. BCBS plans are available throughout the country, but plan types, prices and performance vary.

A, B, C, D, F, G, K, L, M and N.

• "Blue to Blue" program could mean easier changes to coverage in the future.
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• Offerings and experiences vary depending on BCBS company.
• Higher prices for Plan N.
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Service area: 50 states and Washington, D.C. [0] Blue Cross Blue Shield . BCBS Companies and Licensees . Accessed Feb 9, 2024. View all sources .

Why we like it: Blue Cross Blue Shield licensees offer Medigap policies everywhere in the country. Broadly speaking, BCBS companies offer competitive prices and have roughly average complaint rates — but because different BCBS companies serve different locations, pricing, perks and member experience can vary. It’s worth looking at the Blue Cross Blue Shield options in your area to see how their Plan G offerings compare to other top companies.

» MORE: Read our review of Blue Cross Blue Shield Medicare Supplement Insurance

Find the right Medicare Supplement Insurance plan

Because Medigap plans are standardized, you can get precisely the same Medicare benefits from any company offering the plan. So when you shop, keep these considerations in mind to find the best policy to fit your needs:

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Best overall: AARP/UnitedHealthcare Medicare Supplement Insurance

Best for additional coverage options: Anthem Medicare Supplement Insurance

Best for high-deductible Medigap Plan G: Mutual of Omaha Medicare Supplement Insurance

Honorable mention: Blue Cross Blue Shield Medicare Supplement Insurance

Note regarding NAIC complaint data: NerdWallet conducts its data analysis and reaches conclusions independently and without the endorsement of the NAIC.

Medicare Supplement Insurance ratings methodology

NerdWallet’s Medicare Supplement Insurance (Medigap) ratings are based on pricing, discounts, plan types offered, complaint data from the National Association of Insurance Commissioners, consumer experience, additional perks and benefits, and more. To calculate each health insurance company's rating, we adjusted the scores to a curved 5-point scale, rounded to the nearest half star.

NerdWallet reviewed 13 Medicare Supplement Insurance companies based on highest enrollment and greatest online search volume. These ratings are a guide, but we encourage you to shop around and compare several insurance quotes to find the best coverage and rate for you. NerdWallet does not receive compensation for any reviews. Read our editorial guidelines and full ratings methodology for Medicare Supplement Insurance.

Insurer complaints methodology

We examined complaints received by state insurance regulators and reported to the National Association of Insurance Commissioners. To assess how insurers compare to one another, the NAIC calculates a complaint index each year for each subsidiary, measuring its share of total complaints relative to its size, or share of total premiums in the industry. To evaluate a company’s complaint history, we calculated a similar index for each insurance company, weighted by market shares of each subsidiary. We score companies based on this index of how many complaints the company receives relative to its market share. NerdWallet conducts its data analysis and reaches conclusions independently and without the endorsement of the NAIC.

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The Crackdown on Student Protesters

Columbia university is at the center of a growing showdown over the war in gaza and the limits of free speech..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

[TRAIN SCREECHING]

Well, you can hear the helicopter circling. This is Asthaa Chaturvedi. I’m a producer with “The Daily.” Just walked out of the 116 Street Station. It’s the main station for Columbia’s Morningside Heights campus. And it’s day seven of the Gaza solidarity encampment, where a hundred students were arrested last Thursday.

So on one side of Broadway, you see camera crews. You see NYPD officers all lined up. There’s barricades, steel barricades, caution tape. This is normally a completely open campus. And I’m able to — all members of the public, you’re able to walk through.

[NON-ENGLISH SPEECH]

Looks like international media is here.

Have your IDs out. Have your IDs out.

Students lining up to swipe in to get access to the University. ID required for entry.

Swipe your ID, please.

Hi, how are you, officer? We’re journalists with “The New York Times.”

You’re not going to get in, all right? I’m sorry.

Hi. Can I help please?

Yeah, it’s total lockdown here at Columbia.

Please have your IDs out ready to swipe.

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.” Today, the story of how Columbia University has become the epicenter of a growing showdown between student protesters, college administrators, and Congress over the war in Gaza and the limits of free speech. I spoke with my colleague, Nick Fandos.

[UPBEAT MUSIC]

It’s Thursday, April 25.

Nick, if we rewind the clock a few months, we end up at a moment where students at several of the country’s best known universities are protesting Israel’s response to the October 7 attacks, its approach to a war in Gaza. At times, those protests are happening peacefully, at times with rhetoric that is inflammatory. And the result is that the leaders of those universities land before Congress. But the president of Columbia University, which is the subject we’re going to be talking about today, is not one of the leaders who shows up for that testimony.

That’s right. So the House Education Committee has been watching all these protests on campus. And the Republican Chairwoman decides, I’m going to open an investigation, look at how these administrations are handling it, because it doesn’t look good from where I sit. And the House last winter invites the leaders of several of these elite schools, Harvard, Penn, MIT, and Columbia, to come and testify in Washington on Capitol Hill before Congress.

Now, the President of Columbia has what turns out to be a very well-timed, pre-planned trip to go overseas and speak at an international climate conference. So Minouche Shafik isn’t going to be there. So instead, the presidents of Harvard, and Penn, and MIT show up. And it turned out to be a disaster for these universities.

They were asked very pointed questions about the kind of speech taking place on their campuses, and they gave really convoluted academic answers back that just baffled the committee. But there was one question that really embodied the kind of disconnect between the Committee — And it wasn’t just Republicans, Republicans and Democrats on the Committee — and these college presidents. And that’s when they were asked a hypothetical.

Does calling for the genocide of Jews violate Penn’s rules or code of conduct? Yes or no?

If the speech turns into conduct, it can be harassment.

And two of the presidents, Claudine Gay of Harvard and Elizabeth Magill of the University of Pennsylvania, they’re unwilling to say in this really kind of intense back and forth that this speech would constitute a violation of their rules.

It can be, depending on the context.

What’s the context?

Targeted at an individual. Is it pervasive?

It’s targeted at Jewish students, Jewish individuals. Do you understand your testimony is dehumanizing them?

And it sets off a firestorm.

It does not depend on the context. The answer is yes. And this is why you should resign. These are unacceptable answers across the board.

Members of Congress start calling for their resignations. Alumni are really, really ticked off. Trustees of the University start to wonder, I don’t know that these leaders really have got this under control. And eventually, both of them lose their jobs in a really high profile way.

Right. And as you’ve hinted at, for somewhat peculiar scheduling reasons, Columbia’s President escapes this disaster of a hearing in what has to be regarded as the best timing in the history of the American Academy.

Yeah, exactly. And Columbia is watching all this play out. And I think their first response was relief that she was not in that chair, but also a recognition that, sooner or later, their turn was going to come back around and they were going to have to sit before Congress.

Why were they so certain that they would probably end up before Congress and that this wasn’t a case of completely dodging a bullet?

Well, they remain under investigation by the committee. But also, as the winter wears on, all the same intense protests just continue unabated. So in many ways, Columbia’s like these other campuses. But in some ways, it’s even more intense. This is a university that has both one of the largest Jewish student populations of any of its peers. But it also has a large Arab and Muslim student population, a big Middle Eastern studies program. It has a dual degree program in Tel Aviv.

And it’s a university on top of all that that has a real history of activism dating back to the 1960s. So when students are recruited or choose to come to Columbia, they’re actively opting into a campus that prides itself on being an activist community. It’s in the middle of New York City. It’s a global place. They consider the city and the world, really, like a classroom to Columbia.

In other words, if any campus was going to be a hotbed of protest and debate over this conflict, it was going to be Columbia University.

Exactly. And when this spring rolls around, the stars finally align. And the same congressional committee issues another invitation to Minouche Shafik, Columbia’s President, to come and testify. And this time, she has no excuse to say no.

But presumably, she is well aware of exactly what testifying before this committee entails and is highly prepared.

Columbia knew this moment was coming. They spent months preparing for this hearing. They brought in outside consultants, crisis communicators, experts on anti-Semitism. The weekend before the hearing, she actually travels down to Washington to hole up in a war room, where she starts preparing her testimony with mock questioners and testy exchanges to prep her for this. And she’s very clear on what she wants to try to do.

Where her counterparts had gone before the committee a few months before and looked aloof, she wanted to project humility and competence, to say, I know that there’s an issue on my campus right now with some of these protests veering off into anti-Semitic incidents. But I’m getting that under control. I’m taking steps in good faith to make sure that we restore order to this campus, while allowing people to express themselves freely as well.

So then the day of her actual testimony arrives. And just walk us through how it goes.

The Committee on Education and Workforce will come to order. I note that —

So Wednesday morning rolls around. And President Shafik sits at the witness stand with two of her trustees and the head of Columbia’s new anti-Semitism task force.

Columbia stands guilty of gross negligence at best and at worst has become a platform for those supporting terrorism and violence against the Jewish people.

And right off the bat, they’re put through a pretty humbling litany of some of the worst hits of what’s been happening on campus.

For example, just four days after the harrowing October 7 attack, a former Columbia undergraduate beat an Israeli student with a stick.

The Republican Chairwoman of the Committee, Virginia Foxx, starts reminding her that there was a student who was actually hit with a stick on campus. There was another gathering more recently glorifying Hamas and other terrorist organizations, and the kind of chants that have become an everyday chorus on campus, which many Jewish students see as threatening. But when the questioning starts, President Shafik is ready. One of the first ones she gets is the one that tripped up her colleagues.

Does calling for the genocide of Jews violate Columbia’s code of conduct, Mr. Greenwald?

And she answers unequivocally.

Dr. Shafik?

Yes, it does.

And, Professor —

That would be a violation of Columbia’s rules. They would be punished.

As President of Columbia, what is it like when you hear chants like, by any means necessary or Intifada Revolution?

I find those chants incredibly distressing. And I wish profoundly that people would not use them on our campus.

And in some of the most interesting exchanges of the hearing, President Shafik actually opens Columbia’s disciplinary books.

We have already suspended 15 students from Columbia. We have six on disciplinary probation. These are more disciplinary actions that have been taken probably in the last decade at Columbia. And —

She talks about the number of students that have been suspended, but also the number of faculty that she’s had removed from the classroom that are being investigated for comments that either violate some of Columbia’s rules or make students uncomfortable. One case in particular really underscores this.

And that’s of a Middle Eastern studies professor named Joseph Massad. He wrote an essay not long after Hamas invaded Israel and killed 1,200 people, according to the Israeli government, where he described that attack with adjectives like awesome. Now, he said they’ve been misinterpreted, but a lot of people have taken offense to those comments.

Ms. Stefanik, you’re recognized for five minutes.

Thank you, Chairwoman. I want to follow up on my colleague, Rep Walberg’s question regarding Professor Joseph Massad. So let me be clear, President —

And so Representative Elise Stefanik, the same Republican who had tripped up Claudine Gay of Harvard and others in the last hearing, really starts digging in to President Shafik about these things at Columbia.

He is still Chair on the website. So has he been terminated as Chair?

Congresswoman, I —

And Shafik’s answers are maybe a little surprising.

— before getting back to you. I can confirm —

I know you confirmed that he was under investigation.

Yes, I can confirm that. But I —

Did you confirm he was still the Chair?

He says that Columbia is taking his case seriously. In fact, he’s under investigation right now.

Well, let me ask you this.

I need to check.

Will you make the commitment to remove him as Chair?

And when Stefanik presses her to commit to removing him from a campus leadership position —

I think that would be — I think — I would — yes. Let me come back with yes. But I think I — I just want to confirm his current status before I write —

We’ll take that as a yes, that you will confirm that he will no longer be chair.

Shafik seems to pause and think and then agree to it on the spot, almost like she is making administrative decisions with or in front of Congress.

Now, we did some reporting after the fact. And it turns out the Professor didn’t even realize he was under investigation. So he’s learning about this from the hearing too. So what this all adds up to, I think, is a performance so in line with what the lawmakers themselves wanted to hear, that at certain points, these Republicans didn’t quite know what to do with it. They were like the dog that caught the car.

Columbia beats Harvard and UPenn.

One of them, a Republican from Florida, I think at one point even marvelled, well, you beat Harvard and Penn.

Y’all all have done something that they weren’t able to do. You’ve been able to condemn anti-Semitism without using the phrase, it depends on the context. But the —

So Columbia’s president has passed this test before this committee.

Yeah, this big moment that tripped up her predecessors and cost them their jobs, it seems like she has cleared that hurdle and dispatched with the Congressional committee that could have been one of the biggest threats to her presidency.

Without objection, there being no further business, the committee stands adjourned. [BANGS GAVEL]

But back on campus, some of the students and faculty who had been watching the hearing came away with a very different set of conclusions. They saw a president who was so eager to please Republicans in Congress that she was willing to sell out some of the University’s students and faculty and trample on cherished ideas like academic freedom and freedom of expression that have been a bedrock of American higher education for a really long time.

And there was no clearer embodiment of that than what had happened that morning just as President Shafik was going to testify before Congress. A group of students before dawn set up tents in the middle of Columbia’s campus and declared themselves a pro-Palestinian encampment in open defiance of the very rules that Dr. Shafik had put in place to try and get these protests under control.

So these students in real-time are beginning to test some of the things that Columbia’s president has just said before Congress.

Exactly. And so instead of going to celebrate her successful appearance before Congress, Shafik walks out of the hearing room and gets in a black SUV to go right back to that war room, where she’s immediately confronted with a major dilemma. It basically boils down to this, she had just gone before Congress and told them, I’m going to get tough on these protests. And here they were. So either she gets tough and risks inflaming tension on campus or she holds back and does nothing and her words before Congress immediately look hollow.

And what does she decide?

So for the next 24 hours, she tries to negotiate off ramps. She consults with her Deans and the New York Police Department. And it all builds towards an incredibly consequential decision. And that is, for the first time in decades, to call the New York City Police Department onto campus in riot gear and break this thing up, suspend the students involved, and then arrest them.

To essentially eliminate this encampment.

Eliminate the encampment and send a message, this is not going to be tolerated. But in trying to quell the unrest, Shafik actually feeds it. She ends up leaving student protesters and the faculty who support them feeling betrayed and pushes a campus that was already on edge into a full blown crisis.

[SLOW TEMPO MUSIC]

After the break, what all of this has looked like to a student on Columbia’s campus. We’ll be right back.

[PHONE RINGS]

Is this Isabella?

Yes, this is she.

Hi, Isabella. It’s Michael Barbaro from “The Daily.”

Hi. Nice to meet you.

Earlier this week, we called Isabella Ramírez, the Editor in Chief of Columbia’s undergraduate newspaper, “The Columbia Daily Spectator,” which has been closely tracking both the protests and the University’s response to them since October 7.

So, I mean, in your mind, how do we get to this point? I wonder if you can just briefly describe the key moments that bring us to where we are right now.

Sure. Since October 7, there has certainly been constant escalation in terms of tension on campus. And there have been a variety of moves that I believe have distanced the student body, the faculty, from the University and its administration, specifically the suspension of Columbia’s chapters of Students for Justice in Palestine and Jewish Voice for Peace. And that became a huge moment in what was characterized as suppression of pro-Palestinian activism on campus, effectively rendering those groups, quote, unquote, unauthorized.

What was the college’s explanation for that?

They had cited in that suspension a policy which states that a demonstration must be approved within a certain window, and that there must be an advance notice, and that there’s a process for getting an authorized demonstration. But the primary point was this policy that they were referring to, which we later reported, was changed before the suspension.

So it felt a little ad hoc to people?

Yes, it certainly came as a surprise, especially at “Spectator.” We’re nerds of the University in the sense that we are familiar with faculty and University governance. But even to us, we had no idea where this policy was coming from. And this suspension was really the first time that it entered most students’ sphere.

Columbia’s campus is so known for its activism. And so in my time of being a reporter, of being an editor, I’ve overseen several protests. And I’ve never seen Columbia penalize a group for, quote, unquote, not authorizing a protest. So that was certainly, in our minds, unprecedented.

And I believe part of the justification there was, well, this is a different time. And I think that is a reasonable thing to say. But I think a lot of students, they felt it was particularly one-sided, that it was targeting a specific type of speech or a specific type of viewpoint. Although, the University, of course, in its explicit policies, did not outline, and was actually very explicit about not targeting specific viewpoints —

So just to be super clear, it felt to students — and it sounds like, journalistically, it felt to you — that the University was coming down in a uniquely one-sided way against students who were supporting Palestinian rights and may have expressed some frustrations with Israel in that moment.

Yes. Certainly —

Isabella says that this was just the beginning of a really tense period between student protesters and the University. After those two student groups were suspended, campus protests continued. Students made a variety of demands. They asked that the University divest from businesses that profit from Israel’s military operations in Gaza. But instead of making any progress, the protests are met with further crackdown by the University.

And so as Isabella and her colleagues at the college newspaper see it, there’s this overall chilling effect that occurs. Some students become fearful that if they participate in any demonstrations, they’re going to face disciplinary action. So fast forward now to April, when these student protesters learned that President Shafik is headed to Washington for her congressional testimony. It’s at this moment that they set out to build their encampment.

I think there was obviously a lot of intention in timing those two things. I think it’s inherently a critique on a political pressure and this congressional pressure that we saw build up against, of course, Claudine Gay at Harvard and Magill at UPenn. So I think a lot of students and faculty have been frustrated at this idea that there are not only powers at the University that are dictating what’s happening, but there are perhaps external powers that are also guiding the way here in terms of what the University feels like it must do or has to do.

And I think that timing was super crucial. Having the encampment happen on the Wednesday morning of the hearing was an incredible, in some senses, interesting strategy to direct eyes to different places.

All eyes were going to be on Shafik in DC. But now a lot of eyes are on New York. The encampment is set up in the middle of the night slash morning, prior to the hearing. And so what effectively happens is they caught Shafik when she wasn’t on campus, when a lot of senior administration had their resources dedicated to supporting Shafik in DC.

And you have all of those people not necessarily out of commission, but with their focus elsewhere. So the encampment is met with very little resistance at the beginning. There were public safety officers floating around and watching. But at the very beginning hours, I think there was a sense of, we did it.

[CHANTING]: Disclose! Divest! We will not stop! We will not rest. Disclose! Divest! We will not stop!

It would be quite surprising to anybody and an administrator to now suddenly see dozens of tents on this lawn in a way that I think very purposely puts an imagery of, we’re here to stay. As the morning evolved and congressional hearings continued —

Minouche Shafik, open your eyes! Use of force, genocide!

Then we started seeing University delegates that were coming to the encampment saying, you may face disciplinary action for continuing to be here. I think that started around almost — like 9:00 or 10:00 AM, they started handing out these code of conduct violation notices.

Hell no! Hell no! Hell no!

Then there started to be more public safety action and presence. So they started barricading the entrances. The day progressed, there was more threat of discipline. The students became informed that if they continue to stay, they will face potential academic sanctions, potential suspension.

The more they try to silence us, the louder we will be! The more they —

I think a lot of people were like, OK, you’re threatening us with suspension. But so what?

This is about these systems that Minouche Shafik, that the Board of Trustees, that Columbia University is complicit in.

What are you going to do to try to get us out of here? And that was, obviously, promptly answered.

This is the New York State Police Department.

We will not stop!

You are attempting participate in an unauthorized encampment. You will be arrested and charged with trespassing.

My phone blew up, obviously, from the reporters, from the editors, of saying, oh my god, the NYPD is on our campus. And as soon as I saw that, I came out. And I saw a huge crowd of students and affiliates on campus watching the lawns. And as I circled around that crowd, I saw the last end of the New York Police Department pulling away protesters and clearing out the last of the encampment.

[CHANTING]: We love you! We will get justice for you! We see you! We love you! We will get justice for you! We see you! We love you! We will get justice for you! We see you! We love you! We will get justice for you!

It was something truly unimaginable, over 100 students slash other individuals are arrested from our campus, forcefully removed. And although they were suspended, there was a feeling of traumatic event that has just happened to these students, but also this sense of like, OK, the worst of the worst that could have happened to us just happened.

And for those students who maybe couldn’t go back to — into campus, now all of their peers, who were supporters or are in solidarity, are — in some sense, it’s further emboldened. They’re now not just sitting on the lawns for a pro-Palestinian cause, but also for the students, who have endured quite a lot.

So the crackdown, sought by the president and enforced by the NYPD, ends up, you’re saying, becoming a galvanizing force for a broader group of Columbia students than were originally drawn to the idea of ever showing up on the center of campus and protesting?

Yeah, I can certainly speak to the fact that I’ve seen my own peers, friends, or even acquaintances, who weren’t necessarily previously very involved in activism and organizing efforts, suddenly finding themselves involved.

Can I — I just have a question for you, which is all journalism, student journalism or not student journalism, is a first draft of history. And I wonder if we think of this as a historic moment for Columbia, how you imagine it’s going to be remembered.

Yeah, there is no doubt in my mind that this will be a historic moment for Colombia.

I think that this will be remembered as a moment in which the fractures were laid bare. Really, we got to see some of the disunity of the community in ways that I have never really seen it before. And what we’ll be looking to is, where do we go from here? How does Colombia repair? How do we heal from all of this? so That is the big question in terms of what will happen.

Nick, Isabella Ramírez just walked us through what this has all looked like from the perspective of a Columbia student. And from what she could tell, the crackdown ordered by President Shafik did not quell much of anything. It seemed, instead, to really intensify everything on campus. I’m curious what this has looked like for Shafik.

It’s not just the students who are upset. You have faculty, including professors, who are not necessarily sympathetic to the protesters’ view of the war, who are really outraged about what Shafik has done here. They feel that she’s crossed a boundary that hasn’t been crossed on Columbia’s campus in a really long time.

And so you start to hear things by the end of last week like censure, no confidence votes, questions from her own professors about whether or not she can stay in power. So this creates a whole new front for her. And on top of it all, as this is going on, the encampment itself starts to reform tent-by-tent —

— almost in the same place that it was. And Shafik decides that the most important thing she could do is to try and take the temperature down, which means letting the encampment stand. Or in other words, leaning in the other direction. This time, we’re going to let the protesters have their say for a little while longer.

The problem with that is that, over the weekend, a series of images start to emerge from on campus and just off of it of some really troubling anti-Semitic episodes. In one case, a guy holds up a poster in the middle of campus and points it towards a group of Jewish students who are counter protesting. And it says, I’m paraphrasing here, Hamas’ next targets.

I saw an image of that. What it seemed to evoke was the message that Hamas should murder those Jewish students. That’s the way the Jewish students interpreted it.

It’s a pretty straightforward and jarring statement. At the same time, just outside of Columbia’s closed gates —

Stop killing children!

— protestors are showing up from across New York City. It’s hard to tell who’s affiliated with Columbia, who’s not.

Go back to Poland! Go back to Poland!

There’s a video that goes viral of one of them shouting at Jewish students, go back to Poland, go back to Europe.

In other words, a clear message, you’re not welcome here.

Right. In fact, go back to the places where the Holocaust was committed.

Exactly. And this is not representative of the vast majority of the protesters in the encampment, who mostly had been peaceful. They would later hold a Seder, actually, with some of the pro-Palestinian Jewish protesters in their ranks. But those videos are reaching members of Congress, the very same Republicans that Shafik had testified in front of just a few days before. And now they’re looking and saying, you have lost control of your campus, you’ve turned back on your word to us, and you need to resign.

They call for her outright resignation over this.

That’s right. Republicans in New York and across the country began to call for her to step down from her position as president of Columbia.

So Shafik’s dilemma here is pretty extraordinary. She has set up this dynamic where pleasing these members of Congress would probably mean calling in the NYPD all over again to sweep out this encampment, which would mean further alienating and inflaming students and faculty, who are still very upset over the first crackdown. And now both ends of this spectrum, lawmakers in Washington, folks on the Columbia campus, are saying she can’t lead the University over this situation before she’s even made any fateful decision about what to do with this second encampment. Not a good situation.

No. She’s besieged on all sides. For a while, the only thing that she can come up with to offer is for classes to go hybrid for the remainder of the semester.

So students who aren’t feeling safe in this protest environment don’t necessarily have to go to class.

Right. And I think if we zoom out for a second, it’s worth bearing in mind that she tried to choose a different path here than her counterparts at Harvard or Penn. And after all of this, she’s kind of ended up in the exact same thicket, with people calling for her job with the White House, the Mayor of New York City, and others. These are Democrats. Maybe not calling on her to resign quite yet, but saying, I don’t know what’s going on your campus. This does not look good.

That reality, that taking a different tack that was supposed to be full of learnings and lessons from the stumbles of her peers, the fact that didn’t really work suggests that there’s something really intractable going on here. And I wonder how you’re thinking about this intractable situation that’s now arrived on these college campuses.

Well, I don’t think it’s just limited to college campuses. We have seen intense feelings about this conflict play out in Hollywood. We’ve seen them in our politics in all kinds of interesting ways.

In our media.

We’ve seen it in the media. But college campuses, at least in their most idealized form, are something special. They’re a place where students get to go for four years to think in big ways about moral questions, and political questions, and ideas that help shape the world they’re going to spend the rest of their lives in.

And so when you have a question that feels as urgent as this war does for a lot of people, I think it reverberates in an incredibly intense way on those campuses. And there’s something like — I don’t know if it’s quite a contradiction of terms, but there’s a collision of different values at stake. So universities thrive on the ability of students to follow their minds and their voices where they go, to maybe even experiment a little bit and find those things.

But there are also communities that rely on people being able to trust each other and being able to carry out their classes and their academic endeavors as a collective so they can learn from one another. So in this case, that’s all getting scrambled. Students who feel strongly about the Palestinian cause feel like the point is disruption, that something so big, and immediate, and urgent is happening that they need to get in the faces of their professors, and their administrators, and their fellow students.

Right. And set up an encampment in the middle of campus, no matter what the rules say.

Right. And from the administration’s perspective, they say, well, yeah, you can say that and you can think that. And that’s an important process. But maybe there’s some bad apples in your ranks. Or though you may have good intentions, you’re saying things that you don’t realize the implications of. And they’re making this environment unsafe for others. Or they’re grinding our classes to a halt and we’re not able to function as a University.

So the only way we’re going to be able to move forward is if you will respect our rules and we’ll respect your point of view. The problem is that’s just not happening. Something is not connecting with those two points of view. And as if that’s not hard enough, you then have Congress and the political system with its own agenda coming in and putting its thumb on a scale of an already very difficult situation.

Right. And at this very moment, what we know is that the forces that you just outlined have created a dilemma, an uncertainty of how to proceed, not just for President Shafik and the students and faculty at Columbia, but for a growing number of colleges and universities across the country. And by that, I mean, this thing that seemed to start at Columbia is literally spreading.

Absolutely. We’re talking on a Wednesday afternoon. And these encampments have now started cropping up at universities from coast-to-coast, at Harvard and Yale, but also at University of California, at the University of Texas, at smaller campuses in between. And at each of these institutions, there’s presidents and deans, just like President Shafik at Columbia, who are facing a really difficult set of choices. Do they call in the police? The University of Texas in Austin this afternoon, we saw protesters physically clashing with police.

Do they hold back, like at Harvard, where there were dramatic videos of students literally running into Harvard yard with tents. They were popping up in real-time. And so Columbia, really, I think, at the end of the day, may have kicked off some of this. But they are now in league with a whole bunch of other universities that are struggling with the same set of questions. And it’s a set of questions that they’ve had since this war broke out.

And now these schools only have a week or two left of classes. But we don’t know when these standoffs are going to end. We don’t know if students are going to leave campus for the summer. We don’t know if they’re going to come back in the fall and start protesting right away, or if this year is going to turn out to have been an aberration that was a response to a really awful, bloody war, or if we’re at the beginning of a bigger shift on college campuses that will long outlast this war in the Middle East.

Well, Nick, thank you very much. Thanks for having me, Michael.

We’ll be right back.

Here’s what else you need to know today. The United Nations is calling for an independent investigation into two mass graves found after Israeli forces withdrew from hospitals in Gaza. Officials in Gaza said that some of the bodies found in the graves were Palestinians who had been handcuffed or shot in the head and accused Israel of killing and burying them. In response, Israel said that its soldiers had exhumed bodies in one of the graves as part of an effort to locate Israeli hostages.

And on Wednesday, Hamas released a video of Hersh Goldberg-Polin, an Israeli-American dual citizen, whom Hamas has held hostage since October 7. It was the first time that he has been shown alive since his captivity began. His kidnapping was the subject of a “Daily” episode in October that featured his mother, Rachel. In response to Hamas’s video, Rachel issued a video of her own, in which she spoke directly to her son.

And, Hersh, if you can hear this, we heard your voice today for the first time in 201 days. And if you can hear us, I am telling you, we are telling you, we love you. Stay strong. Survive.

Today’s episode was produced by Sydney Harper, Asthaa Chaturvedi, Olivia Natt, Nina Feldman, and Summer Thomad, with help from Michael Simon Johnson. It was edited by Devon Taylor and Lisa Chow, contains research help by Susan Lee, original music by Marion Lozano and Dan Powell, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

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Hosted by Michael Barbaro

Featuring Nicholas Fandos

Produced by Sydney Harper ,  Asthaa Chaturvedi ,  Olivia Natt ,  Nina Feldman and Summer Thomad

With Michael Simon Johnson

Edited by Devon Taylor and Lisa Chow

Original music by Marion Lozano and Dan Powell

Engineered by Chris Wood

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music

Columbia University has become the epicenter of a growing showdown between student protesters, college administrators and Congress over the war in Gaza and the limits of free speech.

Nicholas Fandos, who covers New York politics and government for The Times, walks us through the intense week at the university. And Isabella Ramírez, the editor in chief of Columbia’s undergraduate newspaper, explains what it has all looked like to a student on campus.

On today’s episode

Nicholas Fandos , who covers New York politics and government for The New York Times

Isabella Ramírez , editor in chief of The Columbia Daily Spectator

Background reading

Inside the week that shook Columbia University .

The protests at the university continued after more than 100 arrests.

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We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

Research help by Susan Lee .

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Nicholas Fandos is a Times reporter covering New York politics and government. More about Nicholas Fandos

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