Is this a terrible idea?

Hi fellow investors weve sold quite a few of our Sydney properties we are cashed up and were looking at doing something crazy and starting a small personal loan financing company(<$10,000) I understand there is a large risk. But we are really keen to put all of our effort, time and money into it. How crazy are we? We will obviously abide by the rules and regulations and get all the certificates/compliance requirements and have very strict servicing calculations and have a lawyer draw all our agreements up. Just wondering if anyone has dealt with starting one of these up or helped some do this whether it be an accountant, lawyer and adviser etc. Our other main concern was how do we source funds once the business funds became low if we do get sufficient business. I assume banks/lending institutions lend to each other at very discounted rates?

Thanks Sarah
 
I understand there is a large risk.

I assume banks/lending institutions lend to each other at very discounted rates?

What security are you going to give your financiers?

It isn't your track record as a lender....

Will it be the quality of your loan book, perhaps?

What's that going to be made up of? People who couldn't get a loan for their beaten up car, holiday, wedding, etc, from other, more established means (even a credit card) so they had to come to you as a LLR and pay market interest + a very significant risk premium?

A large risk... being funded at very discounted rates.... yeah, sure.

Or will you put some real estate behind the deal as security? (the bank/s will want that)
 
Hi fellow investors weve sold quite a few of our Sydney properties we are cashed up and were looking at doing something crazy and starting a small personal loan financing company(<$10,000) I understand there is a large risk. But we are really keen to put all of our effort, time and money into it. How crazy are we? We will obviously abide by the rules and regulations and get all the certificates/compliance requirements and have very strict servicing calculations and have a lawyer draw all our agreements up. Just wondering if anyone has dealt with starting one of these up or helped some do this whether it be an accountant, lawyer and adviser etc. Our other main concern was how do we source funds once the business funds became low if we do get sufficient business. I assume banks/lending institutions lend to each other at very discounted rates?

Thanks Sarah

You might also want to consider looking at some of the peer to peer lending services that are coming online.

e.g. http://www.societyone.com.au/become-an-investor
https://www.marketlend.com.au
https://www.ratesetter.com.au/lending/lending_introduction.aspx

I haven't tried this sort of thing personally myself but toying with the idea for some smallish amounts as an alternative alongside the share investments I have. If I can make a better rate than the offset on my PPOR loan then great, although wouldn't do it for all funds.

One thing also to consider with these services is liquidity, if you want to get access to your funds. Some services allow loans to be sold in some form.

This lending model started some time ago in the states and UK but has taken a while to catch on here.
 
Give people money and hope they give it back...

You may need to say these things out loud for the full impact.
 
If you haven't any experience in this field, save yourself a headache.

Or start off as a pawnbroker/second hand dealer. There's my two bob, now can I borrow 100, I'll return it next pay day, promise.
 
look into vendor finance, lease option or installment contract.

You will have more security then lending purely just on personal credit.
 
Hi fellow investors weve sold quite a few of our Sydney properties we are cashed up and were looking at doing something crazy and starting a small personal loan financing company(<$10,000) I understand there is a large risk. But we are really keen to put all of our effort, time and money into it.

Thanks Sarah

Why not loan thru Kiva?

Apparently people at the BOP ("Bottom of the Pyramid") are more likely to pay back their loan (statistically).

The Y-man
 
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