How To Make Big Money With Your Own Business Financing Service (Part 2)
Thus it's absolutely essential that you learn to qualify your would-be borrower before you get too deeply involved or waste too much of your time. For those who can't or don't want to pay your retainer fee - I say skip them. And those who can't or don't want to pay the high risk interest rates when you let them in on the real facts of life - forget them too. And those that have been turned down by practically every lending institution in the country, I would advise you - let some beginner gain practice on them. And these are the ones you need to learn to spot while you are a beginner. You should determine exactly how much cash and other assets your client can or is willing to put into his proposed business.
You'll have to be satisfied with the character of your client as a borrower; his record of paying his bills, how he gets along with people, and his overall chances of success. You'll have to do the checking of his references and credit record. You'll have to judge how he'll make good on the loan if the business goes sour. When these questions are answered to your satisfaction, you can go on with helping him put together a proper loan proposal and work toward getting him the money he wants. Most successful money brokers charge according to the size and type of loan being requested. This is based on the amount of work they have to put in to place the loan. If it looks like a pretty solid business with a good record on the part of the borrower, and good collateral, the fees are usually lower.
On the other hand, if it's a high risk proposal or if the borrower has very little business experience and you' re going to end up doing a lot of selling to get the loan approved, your fee should be accordingly higher. Remember that not all loans are approved, even though they might have looked good to you in the beginning. With this in mind, you have to charge for your services and make up for the time you spend with those proposals that don't get approved by charging and collecting on those that do get approved. An example of the typical commission charges is shown below. Loan Amount Your Fee Commission $5,000,000 1/2% $25,000 $2,000.000 1% $20,000 $1,000,000 1.5% $15,000 $500,000 2% $10,000 $100,000 3% $3,000 $50,000 4% $2,000 $30,000 5% to 10% $1,500 to $3,000 Under $30,000 10% $750 minimum As we stated earlier, you can start this kind of business from the comfort of your own home or apartment, and do very well. However, just as soon as you can possibly afford to, it would be to your benefit to set up an office with access to the general public. Your success and gross income will definitely benefit with an office. You should set up your operation in a prestige location within or fairly close to the business and financial district in your area. Basically, this will be for impressing your clients, but at the same time, by locating in or near your local loan sources, you'll quickly come to know the important people on a first name basis. Perhaps the best idea would be to sublet space in a suite of offices used by an insurance company, accounting firm, or a group of lawyers.
An arrangement can often be made for their receptionist to answer your phone calls and receive your clients. With a little bit of finesse, you might even be able to have one of their secretaries handle your typing and filing. Your office should be neat and functional, but still impressive. A large desk, comfortable chair and a credenza; perhaps a four-drawer file cabinet also. The image you project is of great importance, and being associated with a big name firm, even if only on the basis of sharing their suite of offices, will definitely be to your advantage in gaining ultimate success. You should try to cover the walls of your office with your certificates of awards, extra-curricular courses completed, association memberships and seminar courses completed over the years. Documents of affiliation with civic groups or even reproductions of national write-ups should be framed and displayed on your office walls.
Don't forget: when planning and furnishing your office, you should also include at least one, and preferably two, visitor's chairs. A small sofa would be desirable, but really isn't necessary until your really firmly established. The thing is, you want to project the impression of affluence and professionalism to anyone coming into your office. The ideal situation is to have a two-person team - someone to be on the outside doing the selling, and someone on the inside handling all the processing. If you have the marketing skills, and enjoy selling, you might look for a sharp and impressive appearing person to handle the processing for you. Or if you've got the processing know-how, you might keep your eyes open for a professional appearing person who could be your "outside arm" and do most of the selling for you. Basically, and except for the actual preparation and selling of the loan packages, most of the inside work can be handled by clerical personnel. As you grow, however, you'll find it in your best interest to have a full- time secretary. You would train her to field incoming telephone calls, take care of filing, and do your personal typing for you. A typical loan proposal usually requires about eight hours of typing.
Regardless of how you get started, and even after you've moved into a suite of plush offices, you'll have to advertise to keep new business coming in. Besides running regular advertising in your local newspapers, you should also advertise in the local financial publications as often as you can afford it. Once you get your business rolling, you should expand your advertising coverage to include such national publications as the Wall Street Journal and the business opportunity publications. Regarding the type of advertisement to run in these publications, we recommend that you look at money brokerage ads in these publications. Clip out some of those you especially like and have your local typesetter make one up for you, using those you've clipped as patterns. Any ad you run should include or list a minimum loan amount you'll handle - that is, a statement such as "$50,000 minimum to $...." This procedure will screen out the people looking for small personal loans. At the same time, it's a good idea to list a maximum amount you're capable of handling - for instance, "$50,000 minimum to $10,000,000."
This will attract those who are looking for large business financing. In addition to your local newspapers, business publications and nationally distributed papers, newsletters and magazines, it will be to your advantage to run an advertisement in the yellow pages of your telephone book and in area business directories. Besides "regular" advertising, you should be sending out direct mail letters, letting people know that you can help them with their money problems. Some money brokers have a combination letter-display ad made up and printed on the back of postcards. This is quite a bit less expensive than sending out letters, and could possibly downgrade your image somewhat, but on the other hand, those money brokers using postcards say they're very effective because the recipients are more likely to save a postcard than a letter. A general description of the way the direct mail system works is: You mail out your letters or postcards to the real estate brokers and small businesses in your area. Then a couple of days later, you follow up with a phone call to these people. You identify yourself, ask if the card or letter had been received, and then ask how things are going - if perhaps you can be of any help to them. Finally, you ask them to keep you in mind, and to be sure to let you know if something comes up that you can handle. About one-third of the people you talk to will say that they don't immediately need money, but they know of individuals or business looking for help.
When you do get a referral, be sure to elicit as much information as possible, then make a contact with them. You can also send out letters in search of lenders or private investors. All of these efforts are helpful in establishing and building your business. When you have put a loan or an investment proposal together, and you intend to sell it to a lender, you should first call the lending officer or the head of that lending organization. If you want to present your package to a private investor, you will more than likely have to call his attorney, broker or investment counselor. The purpose of your telephone call is to set up an appointment in order to present your package in person. Thus, during the course of this telephone call, you should brief the lender on the highlights of your client's loan proposal.
If he's interested, he'll probably want you to send him a written summary. After he's received the summary and decided he's interested, he'll get back to you and set up an interview with you, and then with you and your client. You and the borrower should rehearse the entire loan proposal and have all examples, charts and graphic illustrations ready to go for a winning presentation. Any lender willing to listen at all wants to hear the full story, and when they have a question, they want the answer without hesitation. So be sure you're ready when you show up for that loan-selling interview - with a complete presentation. Once you start processing loan applications, you'll find that about 80 percent of the loans granted to small businesses are made by commercial banks. A few more than ten percent are made by friends or relatives of the borrower, and about three percent by finance companies. Another three percent will be granted by insurance companies. This will give you an idea of possible money sources for your clients.
You must remember, when a prospective borrower tells you how much money he needs, and what he wants to use it for, it is your job to evaluate his proposal and match his particular proposal with sources likely to be interested. As you build your list of money sources, you will find those that specialize in specific categories of loans - for apartment buildings, ......
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