Business Guide: How to Start a Micro-Lending Business

In this world, most of the things we need for living actually come with a price – and if you don’t have money, then you just have to cope by substituting these things with something else or, as many of us are wont to do, borrow money from someone so we can but the things we needed.

For many, these lenders could come in the form of family or even friends [although we don’t recommend this route as this has been one of the main reasons for ruined relationships]. Others use their credit cards or borrow money from the bank – but while that is among the most reasonable thing to do, not a lot of people have access to these financial options.

This is the reason why micro-lending business is very common, especially in third world countries like the Philippines. For entrepreneurs, that could only mean one thing: this is a lucrative business option, too!

How to Start a Micro-Lending Business?

First, you have to understand the legal requirements not just in operating your business and obtaining the necessary permits but also what are allowed, by law, to do to ensure your customers pay their loans or make them pay delinquencies.

To operate a legitimate micro-lending business, not only are you required to register with the Securities and Exchange Commission (SEC), you also need to comply with all the necessary permits and put up a capital of at least Php1 million.

Get to know your market and find the best place to open up shop where you can find a lot of potential customers who will be able to pay up their debts.

Photo credit: Adventures of a Good Man
Photo credit: Adventures of a Good Man

Make sure to screen your customers – because making a lot of mistakes in lending your money to people who do not know how or could not afford to pay will just be throwing your cash down the drain.

But while screening your customers is very important, so is screening your employees! Remember that these people are going to be the ones who would handle your transactions – hire the wrong ones and you stand to lose a lot of money!

Lastly, learn as much as you can – be it attending seminars or brushing up on local laws and relevant issues pertaining to lending [such as the small claims court] as well as credit companies. If you made mistakes in hiring or accepting clients, learn from these and try to find ways to ensure that it doesn’t happen again.

You might not find success overnight in this business venture but you sure can earn back your capital within a year or two – or even half a year, if you get lucky!