First post here.... I am starting my own private money lending company with some little capital i saved. I am building a website and i want to integrate payment processing with it, in short i want the monthly payments and money transfer experience to be just like any online lender, like Kabbage or Lending Club or regular hard money lenders. I am not looking for something as fancy as these websites, but i just want to be able to pull credit, approve/deny and transfer money to approved people, and allow these approved customers to pay me back monthly directly through my website. I tried to use common eCommerce payment processors like Paypal, Stripe , Square pay and what not. The problem is in the terms of agreement on all these payment processing companies they prohibit the use of their services for issuing credit, debt collection and financial services. They are mainly for online businesses that sell physical merchandise.
So my question here is, how do private lenders process their payments in and out of their checking accounts to their customer online? What softwares do they use? Just to be clear, i am trying to lend unsecured revolving credit to regular people (consumer credit line) , which can be withdrawn as cash, think about it as hard money cash lending for regular people, it is not for real estate or backed by real estate, Any help is appreciated!
The company I work for does not take online payments. Customers can be give the checking account number and routing number and pay directly but that is the extent of it. You can use something like Venmo or Zelle if you'd like to smooth the process. Draw payments are normally made through a wire or ACH payment. Accounts are tracked in quickbooks. As for background checks and credit checks you will need to go through specific companies for that. We use Trans Union for background checks and a Creditco for credit checks.
All of the private mortgage lenders in my city require you to mail in a check every month.
Depends on what state you are in. Best place to look for "best practices" is networking with other private lenders, then develop a relationship with an attorney in your state.
Thanks everyone for the quick reply and feedback, i am in Massachusetts but most probably relocating to Palm Springs California next year. So do i need a lender license for tiny consumer line of credit in these states? What if i lend to someone in florida? does that mean i have to get licensed in each state that a customer might exist?
Now Tamara Deering, thanks for the input, really opened my eyes to an easier approach, but one question, when you say you dont accept online payment, are customers still able to login and see their current balance and due date of next payment? And when customers pay directly through a checking number that means they just go to their bank account and wire a payment to the company's business checking account? And is their wiring fees associated with each transaction? Sorry if i am asking too many elementary questions, i am new to this! Thanks!