Starting a Cash Advance Business

The initial establishment expenses can be very low in a cash advance business, even though you need capital available to have people borrow from you. The risks of the loan are mitigated by the small amounts that you lend, and the varied people you lend them to. The demand for such loans is very high and the returns are high. There are a few basic requirements:

Office Space

To start a cash advance business all you need is a five feet by five feet office space, a telephone line and a computer with a broadband connection. A computer is optional, if you do not want to get into the Internet leading part of the business.


You will need to invest some money on flyers, pamphlets, and other forms of local advertising. Local newspapers are your best bets. These costs will be minimal compared to the huge potential for profits that this business offers.


You need to have plenty of cash to start with. This is what you will be lending out to your borrowers.

Interest Rates

The interest rates vary from state to state and can range from $10 for $100 to $35 for $100. Most borrowers typically keep the money until next payday, or, for eight days. This interest rate works out to a stupendous 480% to 1200% annually.

Unsecured Debt

Be aware that the loans you will be giving are unsecured, that is, there is no collateral except the post dated check received from the borrower. The high rate of interest you charge is to cover your risk for this unsecured amount.

Vetting a Potential Customer

You will not get much time to vet a potential customer. You will have to judge quickly whether you want to lend money to a particular person or not. At the most you can ask for a copy of their last paycheck to see if they are currently employed and to check their income.

Great Demand

There is a great demand for these micro loans or payday loans as they are also called. You will never be short of potential customers. This is a business that is sure to keep growing as the demand for payday loans or cash advance loans is only expected to go up in the foreseeable future.

Complementary Business

A cash advance business can be a complement to your existing business especially if you are in the pawn broking line. Others who have profitable and successfully integrated a cash advance business with their existing line of business include those in the furniture rental, trucking and used car businesses.

Small Loans

Each individual customer asks for only a small loan ranging from $100 to $1,500. The average loan amount is $300. This works to your advantage as all your eggs are not in the same basket. This small loan component helps to minimize your risk. Even if you lend to a bad customer, all you stand to lose is a maximum of $1,500.

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