Make sure your payday loan and pawn shop meets all requirements.
When you are short of money, one option is to go to a pawn shop. Here you leave an object easy to store that will maintain its value -- a gold watch or a camera, for example -- for a cash loan against the item. A payday loan can be arranged online and deposited into your bank account within hours and the "single fee" for the transaction can be up to 30 percent. "There's a constant demand for loans in this recession and some customers feel the need to tell me their tale of woe. Cash-flow is an ongoing battle and to make money you need to be pretty hard-nosed," says Mike Simon, a New Zealand pawnbroker.
Instructions
1. Research the laws in your state. In Georgia, for example, payday lending is prohibited under the racketeering laws and in New Jersey and New York it goes against their criminal usury statutes. Check the restrictions for pawn broking. Hire a lawyer to check the fine print and make sure you would be operating legally within your municipality's or county's jurisdiction.
2. Determine what interest rate you are allowed to charge. In some states, the interest rate for payday loans is limited to 30 percent. Generally customers have 30 days to repay the loan and get their item out of pawn, but the regulations vary from state to state.
3. Access your skills for being a payday loan and pawn-broker. If you can't immediately calculate how much an item is worth and how likely you are to sell it if the person doesn't pay, you run the risk of losing money.
4. Draw up a business plan. Like any business, you need to be able to convince a lending institution that your proposal is financially viable and that you will be able to make your loan repayments. Otherwise, you may end up being a customer to someone else's pawn shop down the road.
5. Find a suitable location for your payday loan and pawn broker business. Check the local zoning laws and make sure your operation is legal. Running a payday loan and pawn-shop as a home business in the suburbs, for instance, often is prohibited.
6. Make your payday loan and pawn shop operational. Identify space to store the pawn items you accept. Print and frame your policy and display it in a prominent place to refer to. Decide on the sort of security system you want in place.
7. Decide if you are going to offer online facilities for payday loans or if you are going to use cash or checks. Study the lifestyle of your target group to determine whether it has the computer skills to apply online.
