Tips For Starting Your Own Private Lending Business

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Tips For Starting Your Own Private Lending Business

Focus on a single region or area. When it comes to private lending, the most successful businesses are the ones that serve a specific local region. Ideally, all of your clients should be located within a 100-mile radius of where you have set up shop.

Keeping all of your business in a local region like this allows you to become intimately familiar with the market, which can help you make smarter decisions. At its core, private lending is an investment-based business model. By sticking to a region that you know well, you are less likely to make risky decisions. As an example, our business is based in Northern California. Because of that, we typically don’t accept applications from borrowers in Southern California.

Market yourself based on your average funding capacity. If most of the investments that you make fall between $50,000 and $250,000, you should use that range in all of your marketing materials. Ideally, the clients that you want to attract are the ones that you are best set up to serve. After all, someone who is looking to borrow $50,000 typically won’t do well if they approach a broker who primarily focuses on loans of $1 million or more. As a general rule of thumb, it is best to begin with small loans, focusing on increasing your volume.

As you become more successful, you can begin dealing with larger loans. There is a lot of money to be made in smaller loans. After all, the fees that you earn from five loans of $50,000 are higher than the fees that you would earn from one loan of $500,000. Smaller loans not only bring in more fees but they also usually carry more points. Closing these loans is a lot faster and requires less work, as well. Problems like a failure to close are much more common with large loans.

Keep your marketing message tightly focused. Don’t try to be everything to all people. If you advertise that you provide loans nationwide in every possible type or amount, you probably aren’t going to attract many borrowers. Creating a focused marketing message will usually yield far better results like TNL Car Title Loans have done – they know their space and they’ve flourished because of it.

Be as transparent as possible. Take a few minutes to look at our website. One of the first things that you will notice is that our site isn’t filled with images of towering skyscrapers or business people in stuffy suits. Instead, the pictures on our site feature the deals that we have actually funded. Our contact information and photos are clearly available.

We also provide a phone number that people can use to reach us directly. The phone number has a local area code, as well, so that people know we are truly a local business. If you search on Google, our profiles on LinkedIn come up in the search results. We aren’t trying to fool people into thinking that we are something we’re not. Instead, we are aiming to be as transparent and authentic as possible.

Skip brokering, opting for referrals instead. Our primary business model is to originate loans. It is extremely rare that we act as brokers. We do, however, refer deals to other brokers. If someone contacts us about a loan that is beyond our usual scope, we provide the caller with a referral to a qualified broker from a database that we maintain. Brokering loans is usually not the best use of your time.

This is particularly true if you are dealing with a lead that was referred to you from another broker. There is no point in getting stuck in the middle of a loop or daisy chain. These deals typically fail because the borrower doesn’t get the deal they are looking for. The primary reason for this is because everyone involved in the transaction is trying to get their piece of the pie.

This can lead to steep fees for the borrower. Instead of trying to hold onto every deal, refer them elsewhere when they are beyond your capabilities or scope. This type of selfless action usually will wind up being repaid. People that you refer loans to may reciprocate by referring clients your way, as well.

Continually invest in yourself. If you want to be more successful with your business, you should continually be working to improve your skills. Consider hiring a coach to help you with topics like leadership and success. Go to seminars, read educational books, and watch videos to constantly grow your knowledge and your skills. Going to conferences is another excellent way to use your time since it provides you with a chance to network with other successful professionals.

Consider hiring an outside expert to evaluate your company and your business practices to make sure that you are compliant with all existing regulations at both the state and federal level. As long as you take these steps, you should be able to grow your private lending practice while at the same time developing a solid reputation in your local area.

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