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Ask HN: How to start a lending business?

4 points by lukasm ↗ HN
I'd like to start a company that allows people for an easy access to loans.

First scenario: One person in a family lost a job due to lockdown and his/her partner has a stable employment. The employer has a lot of capital and instead of giving people gym passes and other benefits, employer could use that money to give people interest-free loans.

There is no such thing in my country, but I'm not sure how to start. I have no knowable of the business and I'm a bit worried about regulations.

How to start?

10 comments

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pesfandiar
I imagine lending is highly regulated in most jurisdictions, and has a high barrier to entry. If you share your location, someone might have more accurate information.
lukasm
I was thinking about starting just as a CRM tool. Employer would make a loan to the employee. I'm based in Poland and as far I'm aware under some circumstances they are tax free.
shoo
I agree. The up front regulatory & capital requirements might be similar to starting a bank.

Perhaps the traditional banking lending product that matches this idea is "unsecured personal loan". Traditional bank would need functions to assess credit risk of loan applications, handle disputes, chase up loans in default, offer assistance to borrowers in financial hardship. Also need a way to obtain capital to lend.

Not obvious to me why a business that is not already a bank would want to take on some/all of these functions to offer loans to employees.

Also, there is increased potential to create messy situations by combining employer:employee relationship with lender:borrower. E.g. current economic environment where companies have massive drops in revenue and need to lay off staff. If employer lays off staff who have borrowed money from employer, quite unlikely that loan will be paid back. Perhaps situation is structurally more risky (due to correlated risks that impact employer and employee) than if a third party (e.g. a bank) was lender. Similarly if employee has borrowed from employer but is fired.

smarri
If the employer already has access to the employee bank account (e.g. to pay salary) then do they need your service?
lukasm
For CRM and financial education. Later on I'd automate the process so they don't have spend any resources on it.

The benefit for employees in a low-cost debt

https://www.salaryfinance.com/uk/borrow/

smarri
I still dont understand the proposition. Do you want to make loans to employees and get repayment from their salary like the link? Or provide employees with financial education? I have experience in the Polish financial services market, and worked in partnership with Polish banks, so would like to offer my view.
lukasm
I'm considering just selling software to employers to manage loans OR get repayment from their salary like the link. Financial education would be just something extra.

I'm still playing with the idea. The inspiration comes from the fact that a few friends work for companies that use pen and paper to manage employee loans.

smarri
Ah okay I see thank you. I bet there are many places using paper and excel so there will definitely be room for your product. I've been in the lending market before, we partnered with banks to do it e.g. Alior in Poland. So the business would make a payment to the employee, and you're software could track the payment and repayments? Would you want to initiate the payments too or just track them?
justaguyhere
Have you checked Kiva.org and related organizations? They are asking for recommendations for small loans now, to help deal with Covid-19.

It would help if you indicate which country you are from

lukasm
I'm based in Poland at the moment.