Online Payday Loans: Wave of the Financial Future
By J.J. CameronPayday Loan Writer
This week's acquisition of CashNetUSA by Cash America International was symbolic across the payday loan industry.
As state legislatures and the federal government crack down on the field, such lenders are coming up with new, creative ways to extend their business. This deal represents the fact that the online payday loan sector is truly taking off.
Numerous payday lenders operate online, including PayDay OK, Sonic Cash, National Payday, and Payday Advance USA. Although their operation is similar to that of the bricks-and-mortar establishments, a benefit of the online presence is the face-saving anonymity of a faxless payday advance transaction.
Advantage of online payday loans: People who might dread walking into a Cash America storefront, for example, might not have the same hesitation to fire up the Net. Hence, why the company is paying $35 million for the online operation, which currently has $22 million in gross payday cash advances.
Right now, the firm estimates the acquisition will bring in an additional $0.04 to $0.05 per share for the current year, primarily in the fourth quarter, and it has raised full-year guidance to a range between $1.89 and $1.98 a share.
Cash America derives revenues from three sources: pawn loans, cash advances, and check cashing. All three have a similarly unsavory reputation, but they generate cash into which any investor would want to sink his teeth. The company's free cash flow (operating cash flow minus capital expenditures) has grown at a rate of 65% for the past four years, and net income has grown in excess of 30% annually.
Critics can - and do - say what they want about bad credit payday loans, but companies specializing in them certainly make a profit.
