How to start a money lending business in Uganda. (2022)

Business is about solving people’s problems and the people pay you in return for solving their problems. Startup capital is a big problem that stresses people on a daily basis. Solve it and earn. Starting a money lending business is a way you can solve people’s problem of startup capital. People will pay you interest in return as appreciation for solving their problem.

Have you ever thought about this as a money-making machine? Here we are. We shall discuss the topic in detail in this blog post. “How to start a money lending business” from scratch. We shall discuss how you can plan it out, how to deal with people and money, and finally, some tips to make the venture a success. All that is there to know in this business we shall discuss.

What is a money lending business?

A money lending business is an enterprise that lends money to different people and organizations that pay back with interest. Usually, there is security that the borrower provides to the lender for his money, and these range from property, bank guarantees, job payment cards, and more of the sort.

Is it worth it to start a money lending business?

I’ll not speak heaven and earth about the money lending business. It’s just about planning it well and managing finances like any other business. Take an example, you gave out a loan of 100000 to a Client at an interest rate of 10% monthly. They shall have to pay you back 1100000 by the end of the month. You earn 100000. This is how profitable it is to do money lending. It’s worth every penny investing in the money lending business the right way that we shall clearly discuss in this article.

How much money is needed to start?

Based on the scale of production and anticipated turn-up and the economy. But generally, money lending businesses require lots of cash. I advise you to get in hand with an expert to give a detailed cost estimate.

How does money lending work?

Money lending works in such a way that the lender gives the customer a given amount of money that is payable back to the lender after a given period of time at an interest rate of say 20%. By the time of paying back, the lender is paid back the initial sum and the interest as a reward for the service.

Procedures to start a money lending business.

A money lending business isn’t something you’ll just dive in headfirst. To start a money lending business, you need to make proper preparation with the challenge ahead in mind. As a lay businessman, you man not just research and know and have the full knowledge of what actually is required. There are a lot of legalities involved. For this matter, we recommend consulting a professional for advice and perhaps help in setting up the business and doing some documentation.

These are the steps to follow to start a money lending business.

Make a business plan for your money lending businesses.

This is a document that outlines the goals and objectives of your money lending business as well as how you will achieve them. It’s an essential tool for you as it shall help you take control over your future by clearly showing what you want from your money lending business. When writing this business plan, it’s important to follow an outline and address all points in order to create one that is good. Some of the key elements you can include in your money lending business plan include;

Executive Summary

An executive summary should contain a brief introduction and summary of your entire business plan. It should describe the business, the problem that it solves, your target market, financial sources, and all one needs to know.

Business Description.

In this part, you describe your business in full depth clearly describing where your business will be located, the products you will sell, who your target customers are, your projected growth, and more of the sort.

Business goals and objectives

Goals are guidelines or achievements you want to attain. On the other hand, Objectives implementation steps to attain the identified goals. You should have these clear if you are on the path of moving your business forward.

Market research.

Market research is an assurance of your market. It shall clearly show you how you can organize and implement your money lending business to fully serve customers well and raise your money lending business to heights. Some more components you can include in your plan are;

• Organization and Management Structure
• Sales Strategies
• Funding and Financial Projections.

You can consider one of our articles on how to write a business plan for more information on this.

Raise capital for your business

You surely need some reasonable money on whichever level you want to start your money lending business. Since it’s about money, then this should be sufficiently planned for. You can raise money through your savings, and bank loans to mention but a few.

Register your money lending business and acquire all licenses.

There are many benefits you’ll get from registering your money lending business, but what is most important is to avoid clashing with authority. To proceed with your money lending business in Uganda, you’ll need to acquire a money lending license from the Uganda Microfinance Regulatory Authority. (UMRA). for details on how to acquire this license, this link can be of use.

For details on how to register your money lending business in Uganda, you can read one of our articles at the link below. If you mind the stress, you can contact us and we perform for you the whole process in one piece.

Read also: How to register your business in Uganda.

Understand the laws.

There is a lot to do with the law when it comes to a money lending business. How do you deal with defaulters? What does the law say? How do you auction one’s security if they’ve failed to pay a loan? I know you’ll need the services of a lawyer but it is to your advantage if you know some of these things. As a driver in this business, you’ll speed fast if you know all these things off the head.

Come up with lending guidelines.

These can also be termed as terms and conditions that govern the two people that get into a contract that is legally binding. Usually, you should come up with terms and conditions which remove liability from your hands and the businesses’ but rather shift it to the client. They should be easy to understand and reserve the right to change them when you feel necessary. Nevertheless, it’s not a good idea to use terms and conditions to steal from clients. Some businessmen do this. It’s against God and the law.

Get a lending credibility measurement method.

What tells you as a lender that someone is capable of paying the money they have asked for? It’s the credibility measurement mechanism.

Some of the methods you can tell is through;

• Carefully study the borrower’s bank statement.
• Accepting valuable security from the borrower.
• A contract and proof of employment from the borrower.

Further, to start a money lending business, you’ll need to;

Obtain business insurance.

like most of them say “do not accept liability”, that’s their principle and so let’s let it hold. You should talk to experienced insurance personnel and determine the different business risks you need to ensure your business.

Establish an online presence.

This is one of the ways you can get yourself marketed in the money lending business. You need to develop this prior to the start of your business so that by the start, your website is up and running and people already know about your business and what you offer.

Read also: 3 ways to get your business online in Uganda.

Purchase equipment and tools.

To start a money lending business, you’ll need some key tools and equipment. most of these are office tools like tablets, computers, seats, printers, files, and books to keep records.

Hire staff.

Of course, you’ll not operate the money lending business, especially on a large scale alone. You’ll need to hire some staff for the Smith operation of your money lending business.

Some of the key staff you’ll need are, Lawyers, accountants, loan officers, managers,s and other minor staff to keep the business running.

Look for good office locations.

Depending on your target market, you can have offices in an accessible location or have an online system. With the development in technology, it’s possible to have an online system where customers can access the service online.

Start the business.

When you are through with all the above, what’s next is starting off with business. Having all that is mentioned above in place before officially starting your business will guarantee you success. All that shall be left is persistence and good management.

Advertise your business.

Now that you’ve started your money lending business, it’s time to look for some customers. This you’ll do through marketing. There are many ways you can achieve this. Some of the many for your consideration are.

Creating a website for your money lending business.

Leveraging the power of social media platforms like Facebook, Twitter, Instagram, and more.

Tips to make your business a success.

Here are some tips to make more money if you are to start a money lending business.

• Make the processes of loan acquisition simple and short.

This makes it easy for people to acquire a loan. Nevertheless, you shouldn’t forget that this can be a disadvantage as people can easily get loans and run with your money. Therefore, improve the loan credibility system and let the process be short.

• Have customer care and let your loans office be an easy person.

A persuasive loan officer can influence one to get a loan even though their intention wasn’t to.

• Have a fair interest rate.

Oftentimes, people don’t get loans due to high interest rates. 50, 40, 60 % rates. This is total madness. And it’s only the blind that take such loans. To get a customer in your loan business, let the interest rate be genuine.

• Have good capital.

It’s bad when someone wants a loan and your business can’t grant it even when they are credible. Invest good capital in the business and let it grow steadily to keep in business.

Conclusion.

There you are. You are now set to start a money lending business. Now is the right time to start. Remember doing business is one of the ways that shall set you and your family to financial freedom. So don’t look back on your decision to start a money lending business. In case of any issues starting, feel free to contact us and we shall be happy to help push for your money lending business to the next level. Thank you.