Finance companies provide loans to individual and commercial customers for a variety of reasons. Commercial customers can include retail stores, small businesses or large firms. Commercial loans can help established businesses construct a new office or retail space, or they can help new business get up and running. Personal loans for individual customers can include home equity loans, student loans and auto loans. Starting a finance company requires not only a thorough understanding of your target customer's needs and a comprehensive product line, but also a solid business plan that outlines how you will make your company successful. In addition,any new finance company must comply with strict state and federal regulations and meet initial funding requirements.
Creating a Business Plan
1. Write a business description. Your business plan will layout a blueprint for your company. The first part of your business, the description, is a summary of the organization and goals of your business. Begin by justifying the need for a new financial company in the industry or target location. You should briefly identify your target market, how you plan to reach them, descriptions of your products and services, and how your company will be organized. You should also briefly explain how there is room in the current market for your company (how it will compete against competitors).
2. Research and write a market analysis. Identify your target market, or the specific customers you intend to serve. Explain their needs and how you intend to meet them. This will require you to identify key demographics that are currently underserved and how you plan to draw these customers away from your competitors. You should list who these customers are and how your financial products will appeal to them. Include any advantages you have over competitors.
Describe your area of specialization. For example, if your market research indicates a growing number of small start-up companies needing loans, describe how the financial products and services you offer are strong enough to gain a significant share of that market.
3. Describe the organization and management of your company. Clarify who owns the company. Specify the qualifications of your management team. Create an organizational chart. A comprehensive, well-developed organizational structure can help a financial institution be more successful.
- The Chief Executive Office leads the "executive suite" of other company officers.
- The Chief Operating Officer manages the activities of the lending, servicing and insurance and investment units of the company.
- The Chief Administrative Officer’s responsibilities include marketing, human resources, employee training, facilities, technology and the legal department.
- The Chief Financial Officer ensures that the company operates within regulatory parameters. This person also monitors the company’s financial performance.
- In smaller companies, executives may fill more than one of these roles simultaneously.
4. Describe your product line. Explain the types of financial products and loans you provide. Emphasize the benefits your products offer to your target customers. Specify the need your product fills in the market.
For example, if your target customers are small business owners, describe how the financial products and investments you offer to help them run their businesses.
5. Explain how your business is financed. Determine how much money you need to start your finance company. Specify how much equity you own. State what percentage other investors own in the company. Indicate how you plan to finance your company with leverage (loans),where these loans are coming from, and how quickly they can be repaid. Stipulate exactly how you will use your borrowed funds.
In most cases, equity will not be enough to start a successful finance company. This is because profit is made in the spread, or the difference between your cost of acquiring capital and profit from lending it out.
Any funding request should indicate how much you need, how you intend to use the money, and the terms of the loan or investment.
6. Document your marketing and sales management strategies. Your marketing strategy should explain how you plan to attract and communicate with both customers and lenders/depositors. It should also show how you plan to grow your company. The sales strategy defines how you will sell your product.
Promotional strategies include advertising, public relations and printed materials.
Business growth opportunities not only include building your staff, but also acquiring new businesses or beginning to offer different kinds of products.
The sales strategy should include information about the size of your sales force, procedures for sales calls and sales goals.
7. Include financial statements in your business plan. Draft prospective financial data that explains how you expect your company to perform month-by-month over the next year. You may also want to cautiously estimate performance over the next two years after that. Perform a ratio analysis to document your understanding of financial trends over time and predict future financial performance.
- Prospective financial data should provide monthly statements for the first year and annual statements for the next two years.
- Ratio and trend analysis data helps you document whether you will be able to continue to serve your customers over time, how well you utilize your assets and manage your liabilities, and whether you have enough cash to meet your obligations.
- Add graphs to your analysis to illustrate positive trends
Source : http://www.wikihow.com/Start-a-Finance-Company