The Ultimate Guide to Becoming a Lender

What Is a Lender Today?

Anybody can be a lender.

If you sell something, chances are people pay for it with a credit card. They’re already getting a loan—just not from you. So if they’re willing to buy on credit, why don’t you extend it to them directly, making a profit off interest and drawing in customers with more flexible purchase options?

We’ve seen firsthand the amazing things companies can do when they introduce lending into their business, from raising their bottom line to expanding their clientele into new markets. The question is: How to become a lender in this environment?

It really boils down to two things:

• A financing-friendly product
• A modern lending platform

Strategy for Becoming a Lender

Defining Your Financing-Friendly Product & Loan Types

To profitably pivot into financing as a private lender or specialty provider, your product needs to meet a minimum value threshold. If a customer is willing to spend at least $100 (for a single purchase or many), offering a direct financing option is likely worth the investment.

Installment Loans and BNPL

The goal is to break large purchases into smaller, more digestible pieces.

• Retail/Services: Consider auto repair shops or home service providers. They can make high-cost repairs more manageable by offering installment loans or a Buy Now, Pay Later (BNPL) loan.
• Case Study: Hotels typically require payment at booking. They could break that cost down into a BNPL loan: the guest makes two or three payments before their stay, paying the remainder afterward.

Lines of Credit (In-House Cards)

Even companies that don't sell big-ticket items, like restaurants or grocery stores, can launch an in-house credit card or offer customers lines of credit.

• Professional Services: Lawyers, construction contractors, and other businesses that charge by the hour can incorporate a line of credit into their billing. This encourages customers to make payments as the work is delivered, giving financial weight to the payment delay.

Hybrid Products

With the right platform, businesses can offer both installment loans and lines of credit.

• Example: A retailer could allow a customer to make a major purchase on their credit card, then allow them to roll part of that balance into a more predictable installment loan (a feature known as "Flip-to-Installment"). This attracts customers with convenience and control.

Unconventional Pivots: Commercial Lender & Direct Lender Opportunities

Many companies already have the data and customer relationships to pivot into lending, opening up new revenue streams and opportunities for specialized commercial lender activities.

• Embedded Finance: Consider rideshare companies. They have extensive data on their drivers. Why doesn't Lyft or Uber offer them auto loans, taking payments from a portion of each ride? They could even leverage review data to help drivers know when to finance repairs or upgrades.
• Contractor Finance: Any company that works extensively with contractors or vendors can apply this strategy, acting as a direct lender to strengthen those supply chains.

The Modern Lending Platform Requirement

The limiting factor for many companies who want to get into lending is technology. Small town mom-and-pop stores might be able to keep a running tab for their regulars, but managing interest-bearing accounts for ten of thousands of customers would be next to impossible without a modern lending platform. In the past decade, we’ve seen technology open the doors for greenfield lenders, allowing them to create scalable and profitable credit products.

The Core System

Lending involves a staggering amount of math and management. This requires a core system that can handle interest, fees, and calculations for an entire portfolio while adhering to federal and state requirements.

• The Problem: Many legacy cores deliver inaccurate numbers or simply cannot scale past a few thousand accounts. Right when you are poised for exponential growth, you have to backpedal and find a new core.

Get-Your-Money-Back Tools.

A good core is a necessity, but it can’t do the job on its own. It’s actually relatively easy to give money or goods out to strangers; getting paid back is the tricky part. There’s a whole slew of tools designed to help manage loans and encourage borrowers to pay you back, but if you’re new to lending, let’s start with the broad categories.

• Origination — As you consider each applicant, you can use origination tools to learn how much risk you’re taking on by lending to them. Everyone’s familiar with credit scores, which are influenced by one's credit report, but there are also tools that can get you more information, like a borrower’s bank account history or even social media activity. But remember, this information is only valuable if you can organize and use it. We recommend storing that data in your lending core and using it as a single source of truth among all your systems.
• Servicing — Servicing is how you handle most problems that come up throughout the lifecycle of a loan agreement, everything from questions about due dates to a borrower passing away. Handling these situations well can improve your customer experience, keeping borrowers engaged and current on their payments, but it requires a lot of work. Thankfully, the best credit platforms enable you to automate many servicing tasks, achieving that same level of customer satisfaction with a fraction of the human input.
• Collections — Collections are the direct efforts you make to get borrowers to make payments. Communication is essential here. Whether you’re sending emails, calling borrowers, or notifying them through a smartphone app, keeping them in the loop about due dates and grace periods will keep your money flowing back to you. The best platforms have both built-in communication tools and options to integrate your own.
• Payments — Finally, payments. Even if you carefully vet customers, potentially with a background check, keep them happy, and remind them about payments, they might still miss a due date if you're missing the technical flexibility to accept payments how they want to give them. Some borrowers prefer using a debit card, but others like to pay it directly from their bank account, like a direct deposit. Either way, you should make sure your system has a flexible system for automatic payments, giving borrowers options to pay you back how they want. Even if you don’t have storefronts that can accept cash payments yourself, there are partners who can accept cash payments around the country and then send the money to you electronically.

FAQ: Defining lender types and where to start

• How to become a private lender? To become a private lender, you must have capital (or access to it) and the technology to manage compliance, reporting, and collections. The regulatory burden is often lighter than for banks, but a robust modern lending platform is essential for scale.
• What is a direct lender vs. a correspondent lender? A direct lender funds and manages loans with its own capital (or capital it manages) and owns the process end-to-end. A correspondent lender originates the loan but then sells the mortgage or loan to a larger financial institution. Your best bet is to start as a direct lender providing unique, in-house products.
• How do I become a private money lender or hard money lender? A hard money lender or private money lender typically provides short-term, asset-backed loans (often real estate). To start, you must secure capital and then use a platform to manage the specialized calculations, collateral tracking, and rapid recasting unique to these high-interest, riskier loans.
• What is a commercial lender? A commercial lender specializes in lending to businesses (B2B loans, lines of credit, or equipment financing) rather than consumers. LoanPro supports launching any B2B loan, line of credit, or credit card configuration imaginable.
• What is a wholesale lender? A wholesale lender works exclusively through third-party mortgage brokers, rather than lending directly to the public. If you are new to lending, focusing on becoming a direct lender is usually the simplest path.

Conclusion: The Opportunity to Become a Lender

If you’ve got a financing-friendly product, you should be looking into lending. (Honestly, even if you don’t have one, you should be looking into ways you could pivot.) With the growing demand for buying on credit and the explosive growth in the private credit market (which at the start of 2025 was $3 trillion, compared to about $2 trillion in 2020, and is estimated to grow to approximately $5 trillion by 2029), the financing industry is fertile ground for newcomers.

With the right technology—one that offers configurability, scalability, and robust compliance—you can expand revenue, delight your customers, and open up new opportunities.

If we've piqued your interest, continue your journey by downloading the first volume of our lending series, "Lean Into Lending" Where we discuss how the world of financing is evolving and empowering more businesses to become lenders.