The right licenses for a loan business

July 29, 2008: 3:34 PM ET

For a moonlighting techie, a second business necessitates more licenses.

Lacy Taylor, Charlotte, N.C.
I have a business license for PC repair. I have been making small loans to some of my customers and charging interest. Do I need another license for this in Mecklenburg County, North Carolina?

By Myrlande Davermann, Fortune Small Business contributor
Dear Lacy: While your clients may delight in both of your talents - who wouldn't love a computer doctor who doles out cash? - you're going to have to differentiate the endeavors in the eyes of the law.

According to Bob Edwards, an economic developer with the North Carolina Business License Information Office, you'll need to take several steps in order to operate your side business legally. Otherwise, he says, "You're going to get in trouble for charging for loans without a license."

First, inform the Mecklenburg County Register of Deeds that you have a second business operation in which you charge interest on loans. Obtain documentation from them if you're a sole proprietor. If you're running the loan business as a corporation or LLC, contact the Secretary of State instead.

Ha Nguyen, a public information officer for the North Carolina Office of the Commissioner of Banks, says you'll also need to procure a license with her organization if you charge over 16% interest. If you're making direct loans or cash advances and charging under 16% interest, you don't need an NCCOB license.

She notes that you have the option of choosing what type of license you want, depending on the size of the loans you're making and their interest rates. You should file for a 53-173 license if you intend to lend up to $3,000 at up to 36% interest; if you want to make loans of up to $10,000 with interest rates of up to 30%, you'll need a 53-176 license. Nguyen adds that you may need other documentation depending on the type of loans you're making, and she encourages you to read the North Carolina Consumer Finance Act and contact the NCCOB for more specific advice.

Nguyen also advises you to seek counsel from yet another government agency: the North Carolina Department of Revenue. Sounds like an excess of red tape? Just think of the legal tangles you'll avoid in the future - and the profits you'll ring up as a two-business entrepreneur.

This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.

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