Posted on June 21st, 2009
In time of economic crisis like the recession that is happening worldwide, the industry of lending flourish. To deal with the crisis, people branches to sidelines, put up small business like sari- sari stores or work abroad. Some simply tighten their belt in order to fit into their budget. If thereâ€™s no more way, people simply try to lend money. Instead of going to banks which usually offers higher interest rates and longer processing time, they prefer to go to lending firms. In addition to this, lending firms are not that strict when it comes to requirements. These are some of the reasons for entrepreneurs to grab the opportunity and start a lending business.
Using the words â€œlendingâ€ or â€œfinanceâ€ in the name of your business can only be used if it is a corporation. But, you can also start a lending business with just a partner or being the sole owner, though there are some advantages if it would be a corporation.
Lending business requires at least 1 million pesos as starting capital. Documents and permits like the Mayorâ€™s permit, certification from the Bureau of internal Revenue and a registration from the Securities and Exchange Commissions (SEC). You will need at least three man power assigned for releasing the loans, collecting payments, and bookkeeping so Social Security System, Pag-Ibig, and Philhealth will also be necessary for your employees.
Upon starting the business, you can lend money ranging from 5,000 pesos to 15,000 pesos. Monthly interest is from 3-5 percent with a mode of payment of two to six months. To make up for the operating cost, an additional of 5 percent should be charged. Operating cost charge can be added to the interest rate or be deducted upon the release of the lent money. Payment schemes can be daily or weekly basis.
Usually, micro lending caters to sari-sari store owners, market stallholders, and employees or pensioners; with whom you can set the payment once a month or every pay day. You can also cater to overseas workers (OFW) which requires bigger loan amounts usually at a minimum of 50,000 pesos. Partnering with human resource or accounting department of the targeted company is another option to have more clients. To endorse your business to their employees, you can give them an incentive or commission.
For loans amounting to 50,000 or higher collateral is needed. Anything the borrower owns which has a value can be used as collateral like vehicles, real estate, or even jewelries. If the thing being used as collateral is owned by other person, not the borrowerâ€™s himself, an authorization letter or special power of attorney is needed. Meanwhile, for borrowers of small amount, a promissory note and other documents like certification of employment are the only requirements.