Last Updated on: 22nd November 2023, 05:53 am
Loans companies have grown in popularity across the UK, especially given the financial impact of last year’s global pandemic. Stricter lending policies from banks, in addition to more online loan offerings such as peer-to-peer lending, has caused the loans industry to soar. In fact, figures reached over 21 billion pounds in September 2020 (data from Statista).
If you are looking to set up your own loan company in the UK, here we share our knowledge on the how-to as well as the different aspects involved.
Think About Your Point of Sale
While many lenders in the UK have a physical storefront, there is a growing range of companies who offer fully online solutions.
If setting up a physical storefront, you will need to consider geographic location and your target demographic as well as taking into consideration the associated costs of a physical store.
On the other hand, if you prefer to set up an online business, think about both the front-end website that is presented to clients, as well as the back-end system to make sure that it efficiently handles all the necessary day-to-day processes. You can outsource the bank-end system to a specialised company in order to avoid building your own software.
If opting for a website, you will need to prioritise security as you will be handling sensitive data and personal details.
What Sets Your Business Apart?
When setting up a business, you need to consider your value proposition or USP (unique selling point). In other words, what sets your company apart from other lender businesses? For this sector this could be the ability to offer both short-term and long-term loans, offering loans for those with bad credit or a competitive APR.
The more types of loans you are able to offer, the broader your market. However, you may prefer to specialise in something and become the best in that particular field.
These decisions will impact everything from market size, to the campaigns that you share. It will also affect the lending criteria and your target client.
Setting Up a Team
When creating your loans company, you need to think about the team you want to set up and the different services you will need to offer your clients.
The majority of lender businesses will have a customer support team, be it through phone, email or live chat. This is a hugely important aspect of setting up a lending company as clients will inevitably have many questions regarding eligibility and the application process.
Investing in high-quality customer service will ensure client loyalty and will make sure that your company is adhering to responsible lending. Customer service agents should have good people skills, be patient, easy to talk to and reassuring.
Underwriting is the name given to the loan approval process. Lenders will have specific lending criteria including things such as loan history, credit score and affordability, which will be agreed upon when you set up your company.
Typically, underwriters will need to have good analytical skills and ability to assess risk as well as high accuracy when reviewing applications
Each lending business will need to have a collections team designed to follow up with clients whose payments did not go through successfully. This could be an aspect of the customer service agent role or a specific department depending on the size of the company.
In order to operate as a lender in the UK, you will need to have proper authorisation from the relevant government bodies. This will include applying for a license and making sure that this license number is correctly displayed on the website as well as clearly in every document. You must also ensure that you are adhering to the guidelines laid out by the governing body.