Stricter lending criteria and the boost of digital technology has led to a huge demand in the loans industry in the UK.
With more and more applications being taken out online and by mobile and the ability to make faster payments, consumers are ditching their traditional bank managers to apply for finance online.
With this in mind, you may be looking for resources on how to set up your own loans company. This guide will offer you an insight into how to set up a loans company efficiently and the different teams involved to make this happen.
You need authorisation
The Financial Conduct Authority took over from the Office of Fair Trading in 2014 as the main financial regulator for loans and insurance products in the UK.
As a result, all companies providing or promoting consumer credit are required to have a license (loans including payday, guarantor, peer to peer, logbook, personal and more).
Applying for FCA authorisation is a sophisticated process and is a minimum of 12 to 18 months for lenders and 6 months for brokers. The fees involved for your application ranges from £1,500 to £25,000 based on the complexity of your application.
Given the costs and timescale involved, this may impact whether you want to be a lender or broker/comparison.
Where will you operate from?
Do you want to be an online company or have a high street store?
Whilst there are some high street stores like CashConverters and Loans2Go, the majority of lenders and brokers operate online. The decision will have an implication on costs of premises, insurance, servers, staff and more.
What is your “Unique Selling Point”?
Since the loans industry is growing, plenty of companies are beginning to pop up. What makes your business different from the competitors? Things to consider include:
- Will you be offering a competitive APR?
- Are you providing short or long-term loans?
- Will you be providing loans to those with good credit, for bad credit, or both good credit and bad credit?
- Will you offer something completely different?
- Will you compete with payday loans, peer to peer loans or guarantor loans?
Your decision will have an impact on:
- The size of your market
- Potential for growth
- Your marketing material
- The number of people you can reach
Surprisingly, successful and profitable loan companies do not necessarily need a lot of people to run them. There is a crossover of skills and people that do customer service can also help with marketing and underwriting, and visa-versa.
It is essential that you build a team of great costumer support workers. These workers should be available over the phone, email or on a live chat to deal with customers queries, and help with basic questions such as eligibility and part of the application process.
When considering who to employ, your team should be made up of great communicators and all possess good people skills. Other qualities which they should have include being patient, reassuring and easy to talk to.
The customer service team will typically be reading from a script that has been approved by the senior staff and is compliant with responsible lending.
Underwriting refers to the steps which are taken by the loan provider when they are deciding whether to approve a loan. Each provider will have a particular criterion based on a variety different factors, such as credit score or loan history which they adhere to when underwriting.
Underwriters are required to have analytical and risk related skills since they are reviewing applications and other types of details such as customer pay-slips and bank statements.
Every lender-company will have a collections team, made up of customer service agents who follow up a customer or a guarantor for their payments that did not go through. Their payment may have failed due to a card error or a lack of funds. The debt will be collected via this team through phone calls, emails and follow-up style letters.
When you start your journey into setting up a loans company, it may surprise you, but most of the biggest lenders in the UK have less than a dozen people working in their offices in teams. So you do not have to have too many people involved in the startup.
All this being said, the most important things when setting up your own loans company are making sure that you have the correct authorisation and are working within UK regulatory guidelines.
Finally, your company should follow have a policy for responsible lending and treating customers fairly and that this culture is instilled by the company and always implemented by all staff.