How to Launch a Successful Financial Services Business

Important elements to think about when starting your finance company:

1. Develop a sound financial strategy and risk management plan — Create a comprehensive financial strategy that includes your business model, revenue streams, and risk management plan. This will guide your company’s operations and ensure long-term success.
2. Funding — Secure adequate funding to start your finance company. This can include personal savings, bank loans, venture capital, or investors. Ensure you have sufficient capital to cover initial setup costs and operational expenses.
3. Expertise — Develop a thorough understanding of the finance industry, including regulations, market trends, and best practices. Consider gaining additional certifications or qualifications to enhance your knowledge.
4. Licenses and permits — Obtain all necessary licenses and permits to operate your finance company legally. This includes state and federal licenses, as well as any specific certifications required for your financial services.
5. Trained and expert staff — Hire experienced and qualified staff with expertise in finance, accounting, and customer service. Provide ongoing training to keep them updated on industry changes and regulatory requirements.
6. Software solutions — Invest in reliable and advanced financial software to manage your operations efficiently. This includes accounting software, customer relationship management (CRM) systems, and risk management tools.
7. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
8. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
9. Location — Choose a strategic location for your office that is accessible to clients and staff. Consider proximity to business districts or financial hubs to enhance your company’s visibility.
10. Legal team — Assemble a competent legal team to handle regulatory compliance, contracts, and any legal issues that may arise. Ensure your operations comply with all relevant laws and regulations.
11. Marketing and promotion — Use a mix of online marketing, networking, and industry events to promote your finance company. Highlight your expertise, comprehensive services, and client success stories to attract new clients.
12. Client education and support — Offer educational resources and support to your clients. This can include financial planning advice, investment tips, and personalized financial strategies.

You May Also Wonder:

Is a finance company profitable?

Finance companies can be profitable, but it depends on factors such as the specific services offered, market conditions, competition, risk management practices, and the ability to attract and retain clients.

What happens during a typical day at a finance company?

During a typical day at a finance company, activities may include client interactions, financial analysis and decision-making, loan origination or investment activities, risk management, administration and documentation, and business development and marketing efforts.

What is the growth potential of a finance company?

The growth potential of a finance company relies on factors such as market demand, competition, industry trends, innovation, and the ability to adapt to changing customer needs. Growth can be achieved through expanding services, entering new markets, attracting clients, or acquiring other firms.

What type of business is finance company?

Finance companies act as intermediaries, connecting borrowers and lenders, and offering access to capital, financial products, and specialized expertise to individuals, businesses, or other entities.

Step 1: Decide if the Business Is Right for You

Pros and cons

Finance company industry trends

Industry size and growth

• Industry size and past growth – The U.S. finance and insurance industry is worth $6 trillion in 2023 after growing 1.3% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/finance-and-insurance-sector/))
• Growth forecast – The U.S. finance and insurance industry is projected to grow .2% in 2023.
• Number of businesses –  In 2023, 1,230,923 finance and insurance businesses are operating in the U.S. 
• Number of people employed – In 2023, the U.S. finance and insurance industry employs 7,605,892 people. 

Trends and challenges

Trends

• More and more consumers are turning to digital lending companies, presenting an opportunity for a new finance company to offer customers a digital lending experience.
• Automation is making the back office functions of finance companies much more efficient and reducing labor expenses.

Challenges

• Data breaches are an increasing risk for financing companies, forcing them to invest more in cybersecurity.
• To stay competitive, finance companies must continuously invest in new technologies.

Demand hotspots

• Most popular states – The most popular states for lenders are South Dakota, Minnesota, and Maine.((https://www.zippia.com/lender-jobs/best-states/))
• Least popular states – The least popular states for lenders are Virginia, Louisiana, and Mississippi.

What kind of people work in finance companies?

• Gender –  51% of lenders are female, while 49% are male.((https://www.zippia.com/lender-jobs/demographics/))
• Average level of education – The average lender has a bachelor’s degree.
• Average age – The average lender in the US is 44.6 years old.

How much does it cost to start a finance company business?

Startup costs for a finance company range from $40,000 to $70,000. Costs include licensing and insurance, office space rental and preparation, and capital reserves. Requirements for the bonding of finance companies and capital reserves vary by state.

You’ll need a handful of items to successfully launch your finance company business, including: 

• Computer and software
• Office furnishings

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$1,000 - $2,000	$1,500
Insurance	$2,500 - $5,000	$3,750
Website	$500 - $1,000	$750
Computer	$1,000 - $2,000	$1,500
Office space rental and furnishings	$4,000 - $6,000	$5,000
Business Software	$300 - $700	$500
Capital reserves	$30,000 - $50,000	$40,000
Sales and marketing budget	$500 - $1,000	$750
Total	$39,900 - $68,200	$54,050

How much can you earn from a finance company business?

Generally, finance companies make money from an upfront fee based on the amount of the loan, usually 5%. The interest paid on the loan will be paid either to the partner lending institution or your investors, depending on your business model.

These calculations will assume that you’ll make an average loan amount of $20,000, but your loan amounts can vary based on the types of financing you offer. Your profit margin after overhead should be about 60%.

In your first year or two, you could make 10 loans per month, bringing in $120,000 in revenue. This would mean $72,000 in profit, assuming that 50% margin. 

As you gain traction, you might make 30 loans a month. At this stage, you’d hire staff, reducing your margin to around 40%. With annual revenue of $360,000, you’d make a tidy profit of $108,000.

What barriers to entry are there?

There are a few barriers to entry for a finance company. Your biggest challenges will be:

• Funding the capital reserve requirements
• Meeting licensing requirements
• Breaking into a competitive industry

Step 2: Hone Your Idea

Now that you know what’s involved in starting a finance company, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research finance companies in your area to examine their products and services, price points, and customer reviews.

• Make a list of finance companies that offer similar products or services. 
• Review your competitors’ products – their features, pricing, and quality – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing an alternative lender that specializes in small business loans or start up loans. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

Your products will be loans. Your best bet is to choose a niche such as small business loans. 

How much should you charge for financial services?

Your fees should be based on market prices in your area, but also on your costs.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will depend on your niche. If you decide to specialize in small business loans, your customers will be business owners who you can find on LinkedIn or by calling on them directly. 

Where? Choose your business premises

You’ll need to rent out an office space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Finance Company Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “finance” or “financing”, boosts SEO
• Name should allow for expansion, for ex: “Horizon Financial Group” over “Retirement Ready Financials”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Financial Services Business Plan

Here are the key components of a business plan:

• Executive Summary: Provide a concise summary of your business plan, highlighting your mission, target market, and unique value proposition in the financial industry.
• Business Overview: Describe your financial services firm, its location, the range of financial products and services offered, and the specific needs of your target clients.
• Product and Services: Detail the financial products and services your firm provides, such as investment advisory, retirement planning, tax consulting, or wealth management.
• Market Analysis: Analyze the financial market, including trends, regulatory environment, and the demographics of clients seeking financial services in your area.
• Competitive Analysis: Identify and assess your competitors in the financial services sector, emphasizing what sets your firm apart, such as specialized expertise or innovative technology solutions.
• Sales and Marketing: Outline your strategies for acquiring clients, including networking, referrals, online marketing, and partnerships with other financial professionals.
• Management Team: Introduce the key members of your team, highlighting their qualifications, certifications, and experience in the financial industry.
• Operations Plan: Explain how your financial services firm will operate, covering areas like client onboarding, portfolio management, compliance, and technology infrastructure.
• Financial Plan: Present financial projections, including revenue forecasts, fee structures, and expense budgets, to demonstrate the financial viability and growth potential of your business.
• Appendix: Include any additional materials, such as client testimonials, case studies, or regulatory compliance documentation, to support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to finance companies. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your finance company will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

If you decide to partner with investors to fund your loans, you’ll need to find local venture capitalists to fund your business. 

Step 8: Apply for Financial Service Business Licenses and Permits

Starting a finance company business requires obtaining a number of licenses and permits from local, state, and federal governments.

Check with your state for finance company licensing requirements. You’ll also need to make sure that you follow all federal and state lending laws, including those of the Consumer Financial Protection Bureau. 

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your finance company business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked, yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Digifi, bakerhill, or Finastra, to manage your applications, deal flows, underwriting, and compliance.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Apply Now”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

• Content Marketing with Educational Material: Produce insightful blog posts, videos, or infographics that educate your target audience on financial topics, showcasing your expertise and building credibility.
• Strategic Partnerships with Local Businesses: Forge alliances with local businesses such as real estate agencies, law firms, or small businesses, offering mutual referrals to expand your client base.
• Seminar and Workshop Hosting: Conduct workshops or seminars on financial literacy at community centers, libraries, or local events to position your company as an authority in financial education.
• Referral Programs: Implement a referral program that rewards existing clients for referring new customers, fostering client loyalty and expanding your customer base through word of mouth.
• Social Media Engagement: Leverage social media platforms to share relevant financial tips, engage with your audience, and showcase success stories, creating a strong online presence.
• Targeted Direct Mail Campaigns: Develop targeted direct mail campaigns to specific demographics, offering personalized financial solutions and incentives to attract potential clients.
• Local Sponsorships and Events: Sponsor local events, sports teams, or community gatherings to increase brand visibility and establish a positive association with your finance company in the community.
• Customer Testimonials and Case Studies: Feature client testimonials and case studies on your marketing materials and website, highlighting successful financial outcomes to build trust and credibility.
• Offer Free Financial Consultations: Provide complimentary financial consultations for potential clients, showcasing your expertise and demonstrating the value of your services.
• Optimize for Local SEO: Ensure your online presence is optimized for local search engine optimization (SEO) to increase visibility in local search results and attract clients in your geographic area.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your finance company meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your finance company business could be:

• Fast and hassle-free loans tailored to your financial needs
• Flexible repayment options designed to fit your budget
• Quick loan approval with minimal documentation

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a finance company business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in finance companies for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in finance companies. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a finance company business include:

• Loan Processors – handle loan documentation
• Receptionist – take calls, greet clients
• Marketing Lead – create and implement marketing strategies

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Financial Company – Start Making Money!

Finance companies play a crucial role in any community, helping people to finance purchases or other expenses. By starting your own finance company, you’ll be providing value to your customers and making a healthy living. Eventually, you could hire a whole team to take your company to the next level.

Now that you understand the business, you’re ready to get your successful finance company off the ground!