Lending to Small Scale Traders

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One of the ways in which you can prosper in the lending business is by advancing loans to small scale traders. This, in more sophisticated terms, is all about lending to the small and micro enterprises (SMEs). It is true that the small scale traders are likely to have limited capacity to absorb loans individually. But collectively, they can end up borrowing much more than what you’d have lent to a few large scale businesses. And as you are likely to discover (once you start working with them), the small scale traders tend to take loan repayments very seriously. They are unlike the large scale traders, who have a detached attitude towards loan repayments: knowing that they can always seek bankruptcy protection the moment they have difficulties repaying their loans.

The typical small scale trader is likely to be a person who was previously formally employed. You could, for instance, be looking at a fellow who was previously working at Darden restaurants: meaning that he had to routinely go through the krowd login page, to access his paystubs. But he could have gotten to a point where he got tired with the routine of having to go through the krowd employee login page, to sign in and access rigid work schedules. He could therefore have decided to set up his own business, you know, in a bid to have greater control over his life.

Therefore the people you will be dealing with, while lending to small scale traders, will be (mostly) sensible people who know the importance of repaying loans.

You just need to run ads, informing people that you are offering loans to small and micro enterprises, and inviting interested traders to apply. You are likely to receive numerous applications. You should then sift through the applications, to identify the ones that are running viable businesses, and who are therefore likely to repay the loans with ease. Those are the people you should advance the loans to. After that, you can assign loan officers to them: those being the people they would be working with closely, towards the repayment of the loans.

Of course, you will need to make a provision for bad loans — because some of the small scale traders you advance loans to will inevitably be unable to repay. But what you are likely to get, in terms of interest repayments, is likely to be more than what you lose, in terms of bad debts.

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