How to Use PayPal to Start a Loan Business

Making Loans and Receiving Payments via PayPal
1. Ask your lawyer to draft a standard loan agreement that leaves blanks in which to specify the amount to be borrowed, amount to be repaid, monthly payments and associated due dates, amount of interest that will be repaid, and collateral (if any) that will be used to secure the loan. Make sure it outlines what will happen if the borrower defaults. Ensure that the loan agreement is legal for residents of your state.
2. Create an application form where borrowers can provide their contact details and contact information for their employer. Add a section to the form that gives you permission to run a credit history on them. Add another that lets them tell you what collateral they can provide for the loan. Add a section that lets them specify much they want to borrow, what interest rate they can afford to pay and how they want repayment structured.
3. Find borrowers and ask them to complete your application. Given the state of the economy, it is easy to find people who need to borrow money. What is more difficult is finding people who will be able to repay the loan. Craigslist.com and the classified ad section of your local newspaper are places you can place ads for people seeking 'Private Lenders.' Make sure that the ads you place are legal for the state in which you will make the loan.
4. Review completed applications from borrowers. If they meet your lending requirements, create a standard loan agreement that references this information. Give them time to review the agreement, and to show it to their lawyer if desired. Ask them for a signed, notarized, copy.
5. Create a PayPal account if you don't already have one. To do this, go to www.paypal.com. Click the sign up button. You will be required to provide email address, first and last name, street address, state and ZIP code. You also will be required to provide checking account and credit card information.
6. Give the borrower the money using PayPal.
7. Invoice your borrower every month. Send the invoice to them through PayPal two days prior to the day their payment is due. If they do not make payment on the due date, contact them by phone to ask them for payment. If the borrower fails to make payments, you will probably have to take them to court in order to get paid. You may be able to take them to Small Claims Court if the loan amount is under the legal limit for small claims cases in your state. It usually costs under $100 to take someone to small claims court. Small Claims Court is only an option if the borrower resides in your state.
8. Mark the contract Paid In Full when all payments are complete. Send a copy to the borrower along with a note thanking them for working with you.