International money lending licenses and operations
A relatively new offshore business opportunity is available in various jurisdictions. This is the business of making small loans for amounts of at least $ 100 and no more than $ 5,000. Such a company can operate internationally, but it must be based in the jurisdiction in which it is licensed. Generally, the majority of on-site employees must be residents of the host country, but loans cannot be made to residents of the country. A typical interest rate cap is 48 percent, and not compounded, per year. A typical limit for these loans will be one year with refinancing available.
These loans can be collected by various means, including ACH transfer, but are not secured by real property title, motor vehicle, tangible personal property, or any other type of collateral other than the loan agreement and authorization agreement. ACH.
Such an international money loan license must be held by a company with a designated number of employees with clear proof of having worked in the short-term loan business.
Opportunity for an international money loan license
The possibility of obtaining an annual income stream of 48 percent on the invested capital speaks for itself. In addition to charging interest, a business may charge additional fees and penalties as allowed by local law. For the interested investor with experience in the loan business, this can be a potentially very profitable venture.
Although these loans are generally not secured by property, they can be collected by ACH transfer. Although such an enterprise will not make loans to residents of the host country, it will be able to operate worldwide.
Nature and scope of business
Generally, such a company will be limited in the amount it lends based on the amount of capital it has in reserve. Typical upper limits for a loan will be $ 5,000, but cannot exceed 30 percent of the borrower’s net monthly income. All borrowers will be residents of any country except the host country. Most of the company’s employees will normally be from the host country. Any and all work that exceeds the legal licensing requirements can be outsourced to reduce overhead and promote profits.
Starting
An international money loan operation with limits as discussed above will generally cost around $ 27,000 to set up and around $ 12,500 annually, including the cost of application, licenses, and other legal requirements. The scope of the business will determine the additional capital requirements. Because more business means more borrowed money, the business will need to increase financial reserves as more money comes in. Since the annual license fee is generally tied to the outstanding loan balance from the previous year, a very successful business will pay a higher license fee. For a very small operation, there is typically an upper limit for loans of 15 percent of the company’s paid-up capital.
When applying for an international money loan license, all company officers, shareholders and directors must disclose financial and personal information.
When setting up advertising and a web presence, the business will often want to leverage the business expertise of the advisory firm in the jurisdiction in question to effectively enter the loan market and ensure that everything is done in accordance with the International Money Lending License Requirements.
Why are these licenses available?
In most jurisdictions that offer money lending licenses, the specific law is clear and the purpose is to bring capital and employers into the country offering the license. Because the loans are made entirely abroad to what the investor will already consider an “overseas” location, the issue is not providing credit to the country in question. However, the company that makes loans under the government-issued license will normally carry out banking operations in the same country.
Rules and limitations
In general, the rules and restrictions for setting up a money lending operation in an offshore jurisdiction are similar to those seen elsewhere. For example, loans to minors may not be granted. The age of 18 is a typical cutoff.
The company must meet minimum capital requirements, provide evidence of due diligence on the creditworthiness of borrowers, maintain operations in the host country, employ a specified percentage of host country employees, not lend to residents of the country , and operate under the laws of the jurisdiction granting the license.
Although the business requirements for setting up and running a business abroad are often less intrusive and costly than those for working in your home country, there are still rules. The business must maintain loan records, usually for five years. The company must present the current rates to the corresponding commission and comply with the local rules regarding the content of the loan agreements. This specifically concerns a clear statement of loan rates and repayment terms and amounts, as well as dispute resolution mechanisms and late fees.
The business must post loan rates and have written proof of collection practices. Generally, confidential borrower information should be kept confidential unless the lender has written confirmation that the borrower will allow their information to be used for purposes other than the loan in question.
Summary
An international money lending license for unsecured loans outside the licensing country is a relatively new business opportunity. Most likely it is a business for someone who has worked before lending money or is willing to hire competent staff for all critical aspects of their operation. As with all potentially lucrative businesses, there will be paperwork and management responsibilities.
The limiting factors for such a business are that most office work will need to be done in the country where the license is granted and that the majority of employees will need to be residents of the host country. Not being able to offer loans to residents of the country where they are licensed is a small limiting factor considering that the rest of the world is open for the company to do business.