How to Start a Savings and Loan Company

A savings and loan company which is also known as a thrift institution is a financial institution that specializes in accepting savings deposits and making mortgages and other loans. Although savings and loan company is similar to a bank, they specialize in helping people get residential mortgages.

Generally, savings and loan companies provide higher interest rates on accounts to encourage more deposits. This allows the S&L to make funds available for borrowing. The global lending market reached a value of nearly $6,875.4 billion in 2019, having increased at a compound annual growth rate (CAGR) of 4.9 percent since 2015.

The market is expected to decline from $6,875.4 billion in 2019 to $6,751.2 billion in 2020 at a rate of -1.8 percent. In 2019, there were only 659 Savings and Loans companies, according to the FDIC. The agency supervised almost half of them.

Steps on How to Start a Savings and Loan Company

1. Conduct Market Research

The first step in the market research process for your savings and loan company is to develop market-based research questions in line with your overall business goal and objective. In this regard, you should source information that will help you maximize your business, that will help you operate your savings and loan company with less stress and of course, build the business to profitability within the shortest time frame.

a. Who is the Target Market for Savings and Loan Company?

• Businessmen and women
• Employees
• Entrepreneurs and Start-Ups

b. Is Savings and Loan Company a Profitable Business?

Yes, a savings and loan company is a very profitable business because, as of 2022, the industry generated a whopping sum of $6,751.2 billion.

c. Are There Existing Niches in the Industry?

No, there are no existing niche ideas when it comes to the savings and loan business.

d. Who are the Major Competitors?

• Alliant Credit Union
• Balance Credit
• Best Egg
• Westlake Financial
• CountryWide Debt Consolidation Loans
• Credit Direct
• Avio Credit
• Business Finance Advance
• LoanMe
• SoFi Personal Loans
• Happy Money
• Marcus by Goldman Sachs
• Discover® Personal Loans
• Rocket Loans
• The Hard Money Co.
• LendingClub
• PenFed Personal Loans
• Upstart
• Wells Fargo
• TD Fit Loan (TD Bank).

e. Are There County or State Regulations or Zoning Laws for Savings and Loan Company?

No, there are no county or state regulations or zoning laws for savings and loan companies, but players in this industry are expected to work with the existing regulations governing similar businesses in the county or state where their business is domiciled.

It means that at any point in time, the county office can determine whether the savings and loan company meets the zoning rules for the community. They also ensure that all savings and loan companies are properly licensed by county or state agencies.

Please note that the Federal Reserve Board (FRB) is one of the most recognized of all the regulatory bodies that regulates savings and loan companies in the United States of America. So also, the Office of Thrift Supervision (OTS), a bureau of the United States Treasury Department, was created to charter, regulate, examine, and supervise savings institutions.

f. Is There a Franchise for Savings and Loan Company?

No, there are no franchise opportunities for savings and loan businesses.

g. What Do You Need to Start a Savings and Loan Company?

• A Feasibility Report
• Business and Marketing Plans
• Business Licenses and Permits
• Office Space
• Computers, Laptops, and Servers
• EIN (Employer Identification Number)/Federal Tax ID Number.
• A Corporate Bank Account
• Software Apps
• Employees
• Startup Capital

2. Choose a Memorable Business Name

When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.

Some of the catchy business name ideas suitable for a savings and loan business are;

Creative Savings and Loan Business Name ideas

• Blue Gates© Savings and Loan Company, Inc.
• Denis Whitley® Lenders Services, LLC
• Cool Cash© Savings and Loan Company, Inc.
• Loan Solutions® Savings and Loan Company, Inc.
• Loan Serve™ Savings and Loan Company, Inc.
• Jerry Smith™ Savings and Loan Company, LLC.
• Loan Doctor© Savings and Loan Company, LLC
• Loan Guys® Savings and Loan Company, Inc.
• High Bank© Savings and Loan Company, Inc.
• Garry Mackson© Savings and Loan Company, Inc.
• Phil Jones® Savings and Loan Company, Inc.
• Zenith Group® Savings and Loan Company, Inc.
• Daniel Marshal® Savings and Loan Company, Inc.
• Loan Zone® Savings and Loan Company, Inc.
• Ed Lenders® Savings and Loan Company, Inc.
• Sally Abrahams© Savings and Loan Company, Inc.
• AB and Co™ Savings and Loan Company, LLC
• Chris Norman® Savings and Loan Company, Inc.
• Baston Brown® Savings and Loan Company, Inc.
• Zenon™ Savings and Loan Company, Inc.

3. Register Your Business

a. What Type of Business Structure is Best for Savings and Loan Company?

Even though there are several options when it comes to the business structure of a savings and loan company, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.

Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.

b. Steps to Form an LLC

• Choose a Name for Your LLC.
• File Articles of Organization.
• Choose a registered agent.
• Decide on member vs. manager management.
• Create an LLC operating agreement.
• Comply with other tax and regulatory requirements.
• File annual reports.

c. What Type of License is Needed to Open a Savings and Loan Company?

• General Business License
• Money Lending License
• Zonal Permits (Applicable in some cities)
• Signage Permit

d. What Type of Certification is Needed to Open a Savings and Loan Company?

You don’t need any special certification to open a savings and loan company in the United States.

e. What Documents are Needed to Open a Savings and Loan Company?

• DBA
• EIN
• Business and liability insurance
• Federal Tax Payer’s ID
• State Permit and Building Approval
• Certificate of Incorporation
• Business License and Money Lending License
• Business Plan
• Employment Agreement (offer letters)
• Operating Agreement for LLCs
• Insurance Policy
• Online Terms of Use
• Online Privacy Policy Document
• Contract Document
• Company Bylaws
• Memorandum of Understanding (MoU)

f. Do You Need a Trademark, Copyright, or Patent?

If you are considering starting a savings and loan company, usually you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

4. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Savings and Loan Company?

When it comes to starting a savings and loan company, the startup costs could range from $100,000 to over $500,000 depending on how much you intend to loan and the office space leased. Please note that this amount includes the salaries of all the staff for the first month of operation.

b. What are the Costs Involved in Starting a Savings and Loan Company?

• The total fee for registering a business in the United States of America – $750.
• Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines, and other software) – $3,300.
• Marketing expenses for $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
• The total cost for hiring a business consultant including writing a business plan – is $2,500.
• The total cost for the purchase of insurance (general liability, workers’ compensation, and property-casualty) coverage at a total premium of $2,400.
• The cost for renting or leasing operational office space – is $45,000.
• Operational Capital – $150,000
• Other start-up expenses include commercial satellite TV subscriptions, phone and utility deposits ($2,800).
• Operational cost for the first 3 months (salaries of employees, payments of bills, and software renewal fees et al) – $15,000
• The cost for the purchase of software apps: $10,000
• The cost for store equipment (cash register, security, ventilation, signage) – $1,750
• The cost of purchase and installation of CCTVs: $2,000
• The cost of launching a website: $2000
• Miscellaneous: $2,000

c. What Factors Determine the Cost of Opening a Savings and Loan Company?

• The size of the savings and loan company
• The choice of location
• The required licenses and permits
• The type of facility
• The additional service offerings
• The cost of hiring and paying a business consultant and attorney
• The cost for branding, promotion, and marketing of the savings and loan company
• The cost of furnishing and equipping the savings and loan company facility
• Cost of insurance policy cover
• Cost of registering the business
• Cost of recruiting and training your staff
• The cost for the purchase and customizing of uniforms

d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

You don’t need to build a facility for your savings and loan company because the business can easily be operated from a leased or rented office space or home office. You may just decide to operate from your home and just lease shared office space for corporate fronting if all your activities are carried out online.

e. What are the Ongoing Expenses of a Savings and Loan Company?

• Utility bills (internet subscriptions, phone bills, signage, and software renewal fees et al)
• Transport and logistics
• Salaries of employees

f. What is the Average Salary of your Staff?

• Chief Executive Officer (President) – $45,000 Per Year
• Human Resources and Admin Manager – $37,000 Per Year
• Accountant – $36,000 Per Year
• Loan Officer – $34,500 Per Year
• Sales and Marketing Executive – $30,000 Per Year
• Client Service Executive (Help Desk Office) -$28,000 Per Year

g. How Do You Get Funding to Start a Savings and Loan Company?

• Raising money from personal savings and sale of personal stocks and properties
• Raising money from investors and business partners
• Sell shares to interested investors
• Applying for a loan from your bank/banks
• Source for soft loans from your family members and friends.

5. Write a Business Plan

a. Executive Summary

Loan Doctor™ Savings and Loan Company, Inc. is a standard savings and loan company that will be based in Brooklyn, New York, United States of America, but operate all over the United States via our online portal and app. The company has been able to secure a standard and well–positioned office facility in a conducive business district in Brooklyn, and that is where we intend to coordinate all our business activities.

b. Products and Service

• Accepting savings deposits
• Making mortgage and issuance of other loans

c. Mission Statement

Our mission is to provide professional and highly reliable savings and loan services that will assist businesses, individuals, and busy corporate executives in effectively managing their savings and mortgage-related services. We want to build a savings and loan company that can favorably compete with other leading brands in the industry.

Vision Statement

Our vision is to establish a standard savings and loan company whose services and brand will not only be accepted in Brooklyn, New York, but also throughout the United States of America.

d. Goals and Objectives

The goals and objectives of the savings and loan company are to help businesses and individuals who may not meet the requirement of banks to access mortgages and other loans.

e. Organizational Structure

• Chief Executive Officer (President)
• Human Resources and Admin Manager
• Loan Officer
• Accountant
• Sales and Marketing Executive
• Client Service Executive (Help Desk Office)

Marketing Plan

a. SWOT Analysis

Strength:

• Excellent operational history
• Robust relationships with key stakeholders
• Experience and trained professionals.
• Excellent customer testimonials (trust).
• Reliable and efficient business processes.

Weakness:

• The owner is new to large scale marketing
• Lack of economies of scale.

Opportunities:

• Increase in the demand for mortgages and the services offered by savings and loan companies.

Threat:

• Loans diminish profitability until they are paid off
• The first year will be financially tight while we gain customers and pay off loans
• Competition in the area could increase
• Management of employees requires time, money, and efforts
• The regulatory department could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses.

b. How Do Savings and Loan Companies Make Money?

Savings and loan companies make money from investing and interest generated from loans issued.

c. Payment Options

• Payment via bank transfer
• Payment with cash
• Payment via credit cards
• Payment via online bank transfer
• Payment via check
• Payment via mobile money transfer

d. Sales & Advertising Strategies

• Introduce your savings and loan company and the services your offer by sending introductory letters alongside your brochure to corporate organizations, and other key stakeholders throughout the city where your savings and loan company is located.
• Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
• Create a basic website for your business to give your business an online presence
• Directly market your services
• Advertise your business in community-based newspapers, local TV and radio stations
• List your business on yellow pages ads (local directories)
• Encourage the use of word-of-mouth marketing (referrals)

Financial Projection

a. How Much Should You Charge for your Product/Service?

Savings and loan companies generally charge interest based on the amount borrowed. Please note that savings and loan associations have unique legal restrictions as to how their assets can be used: they may only lend up to 20 percent of their assets in commercial loans and must lend at least 65 percent of their assets as mortgages.

b. How Much Profit Do Savings and Loan Company Owners Make a Year?

There is no fixed amount the owner of a savings and loan company is expected to make. But on average, they should expect to make well above $65,000 annually.

c. What Factors Determine the Amount of Profit to Be Made?

• The capacity of the savings and loan company
• The location of the savings and loan company is covering
• The management style of the savings and loan company
• The business approach of the savings and loan company
• The advertising and marketing strategies adopted by the savings and loan company
• The number of years the savings and loan company is in business

d. What is the Profit Margin of a Savings and Loan Company?

The profit margin of a savings and loan company is not fixed. It could range from 4 percent to 20 percent.

e. What is the Sales Forecast?

Below is the sales forecast for a savings and loan company. It is based on the location of the business and other factors as it relates to such startups in the United States;

• First Fiscal Year (FY1): $1.5 million
• Second Fiscal Year (FY2): $3.3 million
• Third Fiscal Year (FY3): $5 million

6. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for Savings and Loan Company?

• The demography of the location especially as it relates to small and medium scale businesses
• The demand for the services of savings and loan companies in the location
• The purchasing power of businesses and residents of the location
• Accessibility of the location
• The number of savings and loan companies in the location
• The local laws and regulations in the community/state
• Traffic, parking and security et al

b. What State and City are Best to Open a Savings and Loan Company?

• New York City, New York
• Los Angeles, California
• Las Vegas, Nevada
• Dallas, Texas
• Columbus, Ohio
• Oklahoma City, Oklahoma
• Chicago, Illinois
• Boston, Massachusetts.
• Miami, Florida
• Washington DC
• San Francisco, CA

c. What Equipment is Needed to Operate a Savings and Loan Company?

You should be prepared to purchase software applications, computers/laptops, servers, storage, internet facility, telephone, fax machine, and office furniture (chairs, tables, and shelves) amongst others.

7. Hire Employees

When it comes to hiring employees for a standard Savings and loan company, you should make plans to hire a competent Chief Executive Officer (President), Human Resources and Admin Manager, Sales and Marketing Executive, Accountant, Loan Officer, and Client Service Executive (Help Desk Office).

8. Launch the Business Proper

In recent times, no savings and loan company open its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.

The bottom line is that with a proper launching of the savings and loan company, you will officially inform people in your city that your savings and loan company is open for business.

a. What Makes a Savings and Loan Company Successful?

• Attention to details
• Willingness to take chances
• Tenacity
• Customer-centric business approach
• Good marketing
• Strong vision
• Passionate leadership
• Empowered employees.

b. What Happens During a Typical Day at a Savings and Loan Company?

• The office is open for the day’s work
• The To-do list is reviewed
• Employees go straight to their job description (savings are collected and deposited, loans are disbursed)
• Marketers go all out to market the services of the company
• Reports are written and submitted to superior officers
• The business is closed for the day.

c. What Skills and Experience Do You Need to Build a Savings and Loan Company?

• Excellent savings and loan administrative skills
• Excellent computer skills
• Ability to Pay Attention to Details
• Good managerial and human development skills
• Good Accounting and Bookkeeping Skills
• Visionary Leadership
• Team-building & Interpersonal Skills
• Excellent communication and negotiation skills
• Organizational skills
• Problem-solving ability
• Good Supervisory skills
• Experience in managing savings and loans related services business
• Experience in the financial services industry
• Experience in business administration
• Experience in handling relevant savings and loan software.