Do you think you have enough financial resources to delve into commercial lending? Do you feel that you have business-savvy enough to survive and excel in the cutthroat world of banking and finance? Then it’s time for you to seriously think of starting a commercial lending business. These days, individuals and businesses are looking for sources of loans other than banks and the usual financial institutions. That source could be you.
Make sure you have sufficient capital. It’s called commercial lending because you will be doing exactly that – lending, and you can’t do that unless you have cash to hand out.
Write a business plan. It should be complete and extensive. If possible, make a study of the commercial lending businesses in your prospective area of operation, and review their performance for the past five years or so. This will help you ascertain if the economic climate in your area is conducive for commercial lending or not. Be ready to offer lower interest rates if there are many competitors nearby, or even to move to another area.
If you lack training or knowledge about commercial lending, you can enroll in special courses that focus on this subject matter. An online education site has a very helpful directory, which will help you locate the commercial lending Universities, Colleges and Trade Schools in your area. You can also gain good training by finding an existing commercial lending business owner who would be willing to take you on as an intern and teach you the ropes.
Know the registration requirements in your state or city. You would probably have to pay registration fees and bonds.
Decide on what kind of commercial lending business you’ll participate in. You could delve into asset-based lending, where you’ll be lending money to a borrower provided the loan is secured by an asset. In case of default, this collateral will become yours. If you choose to go into asset-based lending, you would have to investigate if the asset is safe collateral.
You must have an office in the business area of your town, and it must be equipped with a telephone, a computer and a fax line. Your office must look professional and must give the impression that you are financially able. Otherwise, commercial borrowers may not believe that you have loan packages that they could use.
Be part of the loop. Meet other financiers in your area. Meet all kinds of people. Let them know what your business is.
Start small and build your client base from there. Do not be greedy; offer reasonable rates and acceptable loan packages. You won’t become successful in commercial lending if people can’t approach you for loans.
Keep in mind everyday that commercial lending is a risk, but it could give you fabulous financial returns if you do it right.
Take that risk now, follow the steps given above and you’ll surely have a grand time as a commercial lender.