Business Venture: Loan Sharking

crazyegg

New member
Jan 24, 2010
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Hi All,

How viable is private money lending as a business venture in the DR?

My wife's mom owns a successful compra y venta business in La Romana and she routinely lends out small sums of money to locals for a staggering 5% interest every two weeks.

Apparantly, these loads are secured (i.e. she only lends to those who own houses, cars or gold). As such, I invested $US5000 and things are going as planned!

I am seriously thinking about injecting some more money into this business (up to $50,000).

Are there any pitfalls that I should be watching out for (i.e. crime, corrupt police etc.)?

Any insights would be greatly appreciated.

Regards,
ed...
 

Adrian Bye

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Jul 7, 2002
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i tried it when i first got here and i made some money with it.

it was stressful and especially not a great thing to do when you're new to the country. you're effectively creating bad feelings with people to get your money back. there was a book on amazon which was extremely helpful but i can't find it. the biggest principal was to maintain good relationships with the people, and followup quickly and regularly after the initial loan was made.. check in to make sure they are happy with their loan, and stay in contact every week or two to make sure you get repaid. the key is that first payment and staying on top of them to make sure its paid on time -- that sets the tone for the rest of the relationship. any problems with that first repayment and you may lose all your money.

it does work, but i would not recommend it for a foreigner without deep connections and contacts to protect them. i never had any issues but i could see how it could turn quite negatively.
 

Hillbilly

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Jan 1, 2002
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Shrks have been killed and debts cancelled...I would not invest much....play it cool...big interest big risks...

HB
 

crazyegg

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Jan 24, 2010
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Hi All,

Thanks for your insights thus far!

Has there been any reports of violence by those people who were turned down for a loan by a loan shark?

The reason I ask is that my loan shark partner in the DR turns away many potential clients due to their poor financial health. If I were to inject more money into the venture, there will undoubtedly be MORE clients turned away.

Regards,
ed...
 

Adrian Bye

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Jul 7, 2002
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turning someone down for a loan is unlikely to cause a problem and sounds like good business to me.

still, i strongly recommend you don't get involved. people die over weird stuff here, this place has far less rules and support structures than you're used to.

you don't hear someone was killed because of loan sharking, they just "went missing on a weekend trip" and nobody really understands why.

there's a lot of business you can do, find something better.
 
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May 29, 2006
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I wonder if there are any pawn shops in the DR. It sounds to me that he is using property as equity and putting a lien on it, but pawn shop make as much interest because the loans are for a fixed time and there is a "fee" rather than interest on the loans. So you would lend $500 to someone, but keep their(newer) motoconcho and charge them a $50 for a 10 week loan. If they don't pay by the end of the ten weeks, you can sell the motoconcho or ask for another fee to extend the loan. The motoconcho would have to be worth $700 to sell to get a $500 fee.

They have a show on the History Channel now with a family working a pawn shop in Vegas. It looks like good money, but they have to figure out what things are worth all the time.
 

crazyegg

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Jan 24, 2010
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Hi All

In La Romana and San Pedro at least, pawn shops (or compra y venta) are extremely popular (even more so than in Las Vegas).

In my experience people pawn everything here from gold to a spatula!

However, some folks need to borrow more substantial sums of money and the only thing they have that will act as security for the loan is their home or car.

That is where loan sharks come...

Regards,
ed...
 

Lambada

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Mar 4, 2004
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I've done it too, after I had lived here a few years. I'm female & my Dominican partner was female - like your wife's mother you'll find a lot of Dominican neighbourhood female community leaders involved in this type of business. Much of the negotiation seemed to involve the person wanting the loan (also frequently female) sharing her problems which necessitated the loan with the lady doing the loaning. As an insight into how that neighbourhood community operated it was invaluable and yes I gained some financial profit as well.

BUT...........one thing my Dominicana partner protected me from was an explicit description of methodology sometimes used to ensure repayment (probably thought the gringa would be a bit horrified). She was right! So I pulled out when I had been repaid my initial investment. Such, shall we say, unambiguous methods of extraction might not be used by all such businesses but little-old-wet-behind-the-ears here :rolleyes: had no idea, in those days, that her partner took it as the norm so....................worth checking just in case such direct intervention isn't your cup of tea either ;).
 
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Chrismic

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Mar 28, 2008
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In my first visit in Sosua, got I a problem with my visa card and it didn't worked, and i didn't know I had a weekly limit on my master card, after I had pay 7 weeks rent in advance. So then was I suddenly without money ,my landlord found a local loan shark in the neighbourhood. I borrowed 3000 peso for 5 days with 20% interest. I had to give my passport as security for the loan, he put in a safe, but when I should pay my debt back, was my passport in a drawer in his desk and it was a little business office in the street with open door,so anybody could walk in and it was not always people inside the office .

After read about so many foreigners that has been killed and robbed in their apartment the last weeks, would I not be famous in the neighbourhood for have a lot of money in my house . A safe only work when you are not home, A thief with a gun will easy force you to open the safe, and since they normally kill their victim, so he can not identify them later, would I not take the risk of be a loan shark famous for have a lot of money.
You must at least have a licensed gun and several people that can protect you all the time, will maybe not be cheap and it will take a lot of time to protect your money.
 

Chip

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Jul 25, 2007
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Thre are casas de cambio on every corner. No doubt they are a target and no doubt they make a lot of enemies by calling a loan on someone who has defaulted. Some have recommended me investing in this and I said no thanks, I'll buy some land and plant yucca and plantain.
 
Mar 1, 2009
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I know someone very well connected who does this. He loans them the money for the proper rate and obtains car or home as collateral (is that how you spell that?), but he doesn't want those things he wants the cash back. Then, I don't know how he does it, he told me but we we're already drunk and tired at 3:00am when we hung out. But he finds out when the persons check from work is deposited. So when it comes in he calls em. If they tell him they haven't got paid yet, he will pull up the info and call them on it. He is very well connected and is a bad ass. If you don't pay you will pay in some other way. He said if someone ever screwed him he would look soft. So he has to protect his street cred. I ordered another bottle of Johnny Walker so we could change the subject. I put him on my list of "hang out with, never", I don't like tigeraje, it's harmful to one's health.

So my point if you like intrigue and super tense situations go for it. Forget it, I wouldn't.
 

dv8

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Sep 27, 2006
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i take it that prestamista is a dangerous job. easy to get you in trouble. but yes, there is money to made there for sure...
 
Feb 7, 2007
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Here in Higuey the prestamistas get an ATM card as a collateral, they withdraw all the money form the card that is deposited on the 1st and 15th to the hotel workers. That's why you see on those days people with backpacks with stack of ATM cards making the withdrawals. They take the interest + part of principal (if that agreed) and pay the remaining money to the worker.

They are also well connected with the hotel's human resources, they get a notice when the person is being fired, so they can go and secure their loan (usually by canceling the loan from the compensation the worker gets when he's fired).
They ahve several rules, like:
- They know where the borrowers live
- They have their ATM card
- They know the paydates and money the worker gets
- They are well connected with the hotels' HR
- They lend only to people that have worked at least 6 months in a hotel (so they are over the 3 months probationary period) and
- They do not lend more money (principal) than what the monthly wage is

I know a guy who does that on high scale (millions of pesos) he runs around in Hummer. I know another guy who does that on small scale, and he already built a medium-sized house and has got a nice used big SUV. He started about 2 or 3 years ago with just 100.000 pesos.
 

el forastero

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Oct 25, 2009
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HAHHAHAAHHA! So now you want JD to be a banker as well as running a business?

For someone not of this country, you may look at interest paid on these types of loans as "usury". For someone who does business here, it's called "RISK". For most of these mooks, and their attitudes, 10% a month is TOO CHEAP for a loan!

And in business, a raise is usually justified by BEING more productive BEFORE the raise, and not the other way around.
 
Mar 1, 2009
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I was actually just mocking Adrianbye in a friendly way (I'm sorry Adrian), I've been a bad christian. I shouldn't have done that. Forgive me my brother.

Interesting analysis though JD, I'm being serious now, SERIOUSLY!!!!!!!