Setting up Loan giving Company

callaway92

Hi folks,

Just a quick question - I'm working full time but have an itch with a few friends to start up a business of our own. Brainstorming, one idea was a lending company - Specifically for students (small nominal amounts).

I won't get into the idea too much, but how tough is it to set up a money lending company in Ireland or is it just a no-go legality-wise/ for other reasons.

Thanks

L.Jenkins

I would imagine you'd have to take quite a bit into consideration. Some considerations may involve considerable working capital or cash in reserve, interest rates, working with the financial regulator and so on.

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/loans_and_credit/moneylending_in_ireland.html
Money lending is heavily regulated.

Avatar MIA

Under law you'd need to charge a minimum 23% interest APR.

Actually, wonder why this has never been challenged. Is this to protect the banks from competition. Anyway, off topic.

ironclaw

Students?

Yikes. Your risk of defaulting would be enormous. How would you even secure the loan? Ok, maybe your thinking of 100 or 200EUR for a week to see someone over, but if that defaults even a couple of times per year, the cost of recovering it far exceeds the loan amount.

Nice idea, entirely impractical.

callaway92

Avatar MIA wrote: »

Under law you'd need to charge a minimum 23% interest APR.

Actually, wonder why this has never been challenged. Is this to protect the banks from competition. Anyway, off topic.

That's what I was not hoping to hear.

ironclaw wrote: »

Students?

Yikes. Your risk of defaulting would be enormous. How would you even secure the loan? Ok, maybe your thinking of 100 or 200EUR for a week to see someone over, but if that defaults even a couple of times per year, the cost of recovering it far exceeds the loan amount.

Nice idea, entirely impractical.

Cheers for the above. Ya that was something we were assuming - Loan default risk high. Ya, we were thinking small loan amounts.

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Thanks for the input guys. Back to the drawing board for now.

ironclaw

Shooting the breeze here, but you could look at it from two other angles (And I've given these zero thought):

- Crowdfunding. GoFundMe, but more honest e.g. 'I'm short 50EUR until the end of the week'

- Barter For Cash e.g. 'Looking for 100EUR to see me until the end of the month. These are my skills'

The second one happens a lot here in Toronto where I am on a few facebook groups. Generally business owners who need an extra set of hands or some odd jobs done, its pretty popular.

callaway92

Ya, the idea was something along the lines of very basic amounts ranging from probably €40 to €500 max. Like you mentioned above - the "RAG week coming up and I've no money. Don't want to have to go to the bank of Mam & Dad". For higher amounts; "I have repeat exams and need to fund them" etc. . .

Had a nice marketing campaign in my head and all.

My biggest worry was for loans of such a small amount anyway, if someone does default on a tiny amount there'd no be point chasing them. This could be a regular occurrence.

ironclaw

callaway92 wrote: »

My biggest worry was for loans of such a small amount anyway, if someone does default on a tiny amount there'd no be point chasing them. This could be a regular occurrence.

Unless you can secure collateral, it's a non-runner hence why I'd either set up a trade agreement e.g. 50EUR for X hours of work or maybe look at Cryptocurrency lending e.g. Convert coins to cash.

The latter is massively volatile but you could be 'up' when the time came for the loan to be repaid.

callaway92

Food for thought for sure.

Thanks for your help bud