You need to spend about 500,000–700,000 in registration and handling the legalities.
Start off with the typical ‘Secured Loan’ product where borrowers are required to leave you with security of a valued asset worth more than the loan amount. I’d suggest not lending anything above 50% the value of the security.
As much as possible try to understand the borrower; who he/she is, why the loan is needed, what their comfortable rate would have been if it were up to them, their source of income, their credibility by doing some research among his/her circles if possible or among other lenders, among other factors.
▪ Ensure that the documentation is intact so as not to be legally incapable of selling off the security if you are forced to. On that note, ensure you have your credit policy well laid out for you and your customers i.e. interest rate, min-max loan period, acceptable securities, costs of security valuation, other service charges such as processing fees etc.
▪ Your should be interested more in the borrower repaying than in selling his/her security. So you assess the ability to repay as much as the security but don’t be too strict about it as most clients that approach money lenders are generally not too properly documented and so may not easily prove their ability to repay hence the need to lend as low as possible the value of the collateral.
▪ Also try to ensure you know a few people that can buy the security if it comes down to it. They probably should be the same people to help you value the security before you confirm to the client how much you can lend them. Have a person for each type of collateral i.e land, phones, laptops, TVs etc … Only accept collaterals you are comfortable with.
▪ A fair rate to start at would be anywhere between 8%–15% per month but just ensure to keep your monthly costs of operation/expenses low as possible because then you are able to charge a low rate and still earn fair profit which makes you competitive.
So, With Shs9m at say 10% per month, you can make up to 900k each month. So target having your costs of operation at less than 30% of that if possible. Best start by managing the business yourself to keep costs low.
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