Complete Guide to Getting a New Jersey Commercial Lending License

If you’re looking to start a non-mortgage credit startup in New Jersey, obtaining a Consumer Finance Company License should be your focus. To obtain this license, your business must meet several eligibility requirements and go through a thorough application process. 

The process for obtaining a lending license in New Jersey breaks down into six distinct parts: 

1. Decide on the license type
2. Obtain surety bond
3. Secure liability insurance
4. Complete the application
5. Submit the required documents
6. Pay the fees
7. Complete the licensing process

In this post, we’ll take a closer look at each step, from figuring out which license your startup needs to go through the licensing process and how to maintain your license. Read on to learn more!

1. Decide on the License Type

In New Jersey, there are different types of commercial lending licenses that you can apply for depending on the nature of your business. These include: 

• mortgage banker
• mortgage broker
• mortgage lender
• consumer finance company licenses

For non-mortgage credit startups, the last item in the above list is where you need to focus your attention. 

Eligibility Requirements for an NJ Consumer Finance Company License

There are a number of eligibility requirements founders need to familiarize themselves with and meet to qualify for a Consumer Finance Company License in New Jersey. To start, there are four baseline criteria a startup needs to meet before it can worry about the additional requirements. 

Firstly, your startup must be a registered business entity with the New Jersey Division of Revenue and Enterprise Services.

Secondly, your startup must have a minimum net worth of $50,000 or more, as determined by the Commissioner of Banking and Insurance.

Thirdly, your startup must have a registered agent in New Jersey who can receive legal notices and other official documents on your behalf.

Finally, you and your team must have at least three years of experience in the financial services industry, focusing on lending and credit.

If your company meets these four criteria, you can worry about things like background checks, applications, fees, surety bonds, and compliance – all of which will be discussed in detail below. 

Note: It is important to note that these eligibility requirements are subject to change, and additional requirements may apply depending on the specific circumstances of your business. Therefore, it is recommended that you consult with a qualified professional or DOBI for the most up-to-date information to ensure that you meet all the necessary requirements to obtain a Consumer Finance Company License in New Jersey.

2. Obtain a Surety Bond

Before the application process can be started, the first two steps for credit startups are to secure a surety bond and obtain liability insurance. 

What is a Surety Bond?

A surety bond is a type of insurance that guarantees that a credit startup will comply with all applicable laws and regulations related to commercial lending. It provides financial protection to customers and the state in the event that the credit startup fails to fulfill its obligations. If a credit startup violates any laws or regulations, the surety bond will provide compensation to those who are affected.

How to Get a Surety Bond in NJ

To get a surety bond for a commercial lending license in New Jersey, credit startups have to jump through a few hoops. 

In New Jersey, the minimum surety bond required for a consumer lending license is $25,000. However, if the total amount of loans made or outstanding exceeds $2.5 million, the surety bond amount required is calculated at 1% of the total amount of loans made or outstanding, whichever is greater. 

The first step is to choose a surety bond provider. There are a number of providers startups can work with, including, but not limited to:

• Colonial Surety Company
• Surety One
• BondPro
• The Warnock Agency
• National Surety Services

Founders should research the different surety bond providers and choose one that is a reputable provider that has experience in providing surety bonds for commercial lending licenses.

The next step is to apply for the bond. To apply for a surety bond, founders must complete an application form provided by the chosen surety bond provider. The application will require information about the startup, its owners, and financial information.

The third step is to pay the bond premium. The premium amount will depend on the bond amount required and the creditworthiness of the credit startup and its owners. Typically, surety bond premiums range from 1% to 15% of the bond amount. For example, if the required surety bond amount is $25,000, the premium could range from $250 to $3,750 and is determined based on the credit startup’s financial history, credit score, and other factors. 

Once founders have completed the application process and paid the premium, they will receive the surety bond from the provider. The bond must be submitted to DOBI as part of the application process for a commercial lending license.

3. Secure Liability Insurance Coverage

For credit startup founders, obtaining liability insurance is an important step in protecting their businesses from financial losses that may result from legal claims or lawsuits. Liability insurance provides coverage for various risks associated with lending activities, including general liability, professional liability, cyber liability, and employment practices liability. Each of these coverage options provides protection against specific risks that credit startups may face.

When obtaining liability insurance, startup founders should research insurance providers that specialize in providing liability insurance for commercial lenders in New Jersey. Here are a few providers:

• Hiscox Insurance
• Travelers Insurance
• CNA Insurance
• Chubb Insurance
• The Hartford

To mitigate financial risk, founders should obtain quotes from multiple providers, review policy terms and conditions carefully, and ensure that the policy provides the appropriate coverage for their specific lending activities.

Once you’ve got a surety bond and liability insurance, you can start the application process, during which you will need to provide documentation of your surety bond and liability insurance.

4. Complete the Application

The next step for credit startups is to complete the NJ Consumer Finance Company License applications, submit supporting documents, and pay the associated fees. 

NJ Consumer Finance Company License Application

To complete the Commercial Lending License Application with the New Jersey Department of Banking and Insurance (DOBI), follow the steps below. 

• The first step is to obtain the Commercial Lending License Application form from the DOBI website. Make sure that you download the correct application form for the specific type of commercial lending license you are applying for.

• Next, read the instructions on the application form carefully to understand the information that is required and how to fill it out correctly.

• Finally, complete the application form accurately and provide all the necessary information required. This may include details about your business and its owners, such as their names, addresses, and contact information. You will also need to provide financial statements, a business plan, and other supporting documents, as specified in the instructions.

One thing to keep in mind, though, is that the application process may take a while (weeks or even months) to complete, depending on the complexity of your business. With that in mind, you’ll want to start the application process as early as possible. 

5. Submit Required Documents

As an applicant, you will need to provide financial statements, business plans, and personal and business background checks as part of your application. These documents help DOBI assess the financial health and integrity of your business, as well as your ability to comply with applicable laws and regulations. Here’s a list of the required documents:

• Application form
• Business plan
• Certificate of incorporation/formation
• Financial statements
• Surety bond
• Liability insurance
• Background check(s)

Founders should gather all the required documents and ensure that they are accurate and complete before submitting their application.

6. Pay Applicable Fees

The last step in the application process for an NJ lending license is to pay the application fee. The non-refundable application fee for a Consumer Lender or a Sales Finance is $700. 

There are two ways to pay the application fee for a Consumer Finance Company License in New Jersey – by mail or online. Applicants can mail a company check or money order made payable to “Treasurer, State of New Jersey” to the following address:

New Jersey Department of Banking and Insurance

Licensing Services Bureau

P.O. Box 473

Trenton, NJ 08625

Applicants can pay the application fee online using a credit card or debit card. To do this, you will need to create an account on the New Jersey Department of Banking and Insurance website and then submit your application online.

After you’ve paid the fee, DOBI will review your application and supporting documents and may contact you for additional information or clarification. Make sure to respond promptly and provide any requested information.

7. Complete The Licensing Process

After the founders have submitted their applications, there are just a few more steps in the process: the review, the hearing (if required), and the approval. 

First, the application will undergo a review process by DOBI. Once founders have submitted their application and all required documents, DOBI will review the application and conduct a background investigation of the credit startup’s owners and officers. This review process may take several weeks to several months, depending on the complexity of the application and the completeness of the information provided.

Second, founders may be asked to attend a licensing hearing. If DOBI has any concerns or questions about the credit startup’s application, they may schedule a licensing hearing to review the application in more detail. Founders will have the opportunity to present their cases and address any concerns raised by DOBI.

Finally, if the credit startup’s application is approved, DOBI will issue a Commercial Lending License. The license will specify the types of loans that the credit startup is authorized to make and the maximum amount of loans that can be outstanding at any time. The license will also specify any conditions or restrictions that apply to the credit startup’s lending activities. Credit startup founders should carefully review the license and ensure that they comply with all applicable laws and regulations related to commercial lending.

NMLS As an Alternative

As an alternative, credit startups can apply for a lending license in NJ through NMLS (Nationwide Multistate Licensing System & Registry), by following these steps:

1. Create an NMLS account and complete the MU1 form for the company and MU2 form for individual control persons.
2. Complete the MU4 form for each control person.
3. Submit fingerprints for all control persons.
4. Complete the relevant state-specific application questions.
5. Submit required documentation and pay all applicable fees.
6. Wait for the application to be reviewed by the state and for any necessary follow-up information to be provided.
7. Upon approval, complete the licensing process by satisfying any additional requirements, such as obtaining a surety bond and liability insurance.

Final Thoughts

Obtaining a Consumer Finance Company License in New Jersey requires careful attention to the eligibility requirements and a thorough understanding of the application process. Credit startup founders must meet baseline criteria, secure a surety bond, obtain liability insurance coverage, complete the application, submit required documents, and pay the associated fees. It’s important to note that eligibility requirements and additional requirements are subject to change, so founders should consult with a qualified professional or DOBI for the most up-to-date information. By following these steps and ensuring that all required documents are accurate and complete, credit startups can increase their chances of obtaining a lending license in New Jersey and operating their business legally and compliantly.

NJ Consumer Lending License FAQ

Below, you’ll find some frequently asked questions about NJ Consumer Lending Licenses along with their answers:

What is an NJ Consumer Lending License?

An NJ Consumer Lending License is a license issued by the New Jersey Department of Banking and Insurance (DOBI) to businesses that engage in lending activities. This license is required for non-mortgage credit startups that provide consumer loans, installment loans, or any other type of lending activity that does not involve mortgages.

What are the eligibility requirements for a NJ Consumer Lending License?

To obtain an NJ Consumer Lending License, businesses must meet several eligibility requirements. These requirements include: being a registered business entity with the New Jersey Division of Revenue and Enterprise Services, having a minimum net worth of $50,000 or more, having a registered agent in New Jersey, and having at least three years of experience in the financial services industry, focusing on lending and credit.

What is a surety bond, and why is it required for an NJ Consumer Lending License?

A surety bond is a type of insurance that guarantees that a credit startup will comply with all applicable laws and regulations related to commercial lending. It provides financial protection to customers and the state in the event that the credit startup fails to fulfill its obligations. A surety bond is required for an NJ Consumer Lending License to ensure that the credit startup is financially stable and trustworthy.

What is liability insurance, and why is it required for an NJ Consumer Lending License?

Liability insurance provides coverage for various risks associated with lending activities, including general liability, professional liability, cyber liability, and employment practices liability. Liability insurance is required for an NJ Consumer Lending License to protect the credit startup from financial losses that may result from legal claims or lawsuits.

How long does it take to obtain an NJ Consumer Lending License?

The time it takes to obtain an NJ Consumer Lending License can vary depending on the complexity of the business and the completeness of the application. Generally, the process can take several weeks or even months to complete. It is recommended that businesses start the application process as early as possible to ensure timely approval of their license.

Frank Gogol

A seasoned SEO expert, Frank has a long history of working with and for startups. Starting in mid-2018, Frank served as the SEO Strategist for Stilt, a fintech startup that provided fair loans for immigrants in the US and other underserved markets. While with the company, he scaled site traffic from zero to more than 1.5 million unique visits per month, driving the bulk of the company’s lead generation until it was acquired by J.G. Wentworth in December 2022. As employee #5 at Stilt, Frank was witness to, and part of, the successful building and sale of a fintech company, uniquely positioning him to create content for founders about all things startups.

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