Consumers struggling to make timely payments to clear-off their unmanageable debts are seeking professional debt consolidation or debt management help nowadays. Previously, it was regarded as the last resort for low wage earners. This trend has changed and people of all walks of life and income level are seeing it as a bright idea to get debt relief. This gradual change was evident due to the incessant financial turmoil in the world economy.
Primarily, debt consolidation service providers have to organize all the debts of their clients into a single manageable debt. This unified debt is repaid over a longer period of time with a low interest rate. The interest paid here is lower than sum of interest paid on all the debts combined.
Venturing into this sort of business has always been risky. But, there is a necessary evil associated with every business. The return on investment in it is quite commendable. Keeping this in mind, the market is flooded with such companies.
If you’re pondering to set up a debt consolidation company, you must go through the essential points mentioned herein:
Finance: You have 2 options in hand to finance your upcoming project. First is direct lending. Here you will consolidate debts of clients from your own capital. This option is for those entrepreneurs who have a huge capital at their disposal. Several entrepreneurs can join hands to raise a capital and invest in the project. Thus, it reduces stress on a single investor. Second, you can borrow to materialize your business start-up plan, termed as margin lending. Here, you’ll have to get credit from larger investors or finance institutions. The risk factor in this method is higher and there are much stricter federal rules and regulations to follow.
Competition: Investigate the level of competition in the industry you are targeting to enter. Study your local competitors thoroughly to come up with an innovative idea that is not put to use by your competitors. Find out ways to market your services in your locality.
Business Plan: Setting up a new debt consolidation business requires same parameters to be followed as with any other business project. There should be a proper answer to questions like, where should be the location of the company & why and how much capital is required to cover the costs of setting it up. In addition to that, its operating & marketing expenses should also be taken into consideration.
License: In many states, you need license to run this kind of business. You will come across a lot of government laws and regulations. Licensing will cost you both time and resources. But consumers have faith in an accredited debt consolidation company and look up to them as reliable, people to get help from. There are state offices or Business.gov website to apply for the accreditations.
Income: It is very important to note that people getting debt consolidation or debt management help from you, are already running short of cash. So, chart out an honest and fair service rate for the clients. This pricing should be in a way to encourage them to ask for help from you and not from others.
Finally, no start-up venture could establish itself without effective social relationship. You have to be proactive in building a strong and reliable network of financiers and well wishers who will further your cause of helping people to get out of debt and run a profitable business. Send a good official proposal letter with all the copies of licenses to the creditors and their service providers. This gesture will create a good reputation for your company amongst the creditors.
Marlon Powell is a contributory writer associated with the Debt Consolidation Care Community and has written several articles for various financial websites. He holds his expertise in the Debt industry and has covered these topics – debt settlement, debt management help, debt consolidation, debt relief etc.