Your Roadmap to Opening a Check Cashing Business

Here are the most important aspects of starting a check cashing business:

1. Location — Find an easily accessible location and choose whether you want to have an office, kiosk, or self-service business. 
2. Licenses and permits — Many states have specific licenses for check-cashing businesses. This type of license is essential because check cashing is often heavily regulated due to concerns over fraud and financial security. Check-cashing businesses are subject to various financial regulations, including those enforced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). You may need to register as a Money Services Business (MSB), which involves developing a compliance program to prevent money laundering.
3. Security — Invest in dependable physical security features such as safes, cameras, alarms, and bulletproof glass. Don’t forget cybersecurity and use encrypted systems for storing and processing customer data to protect against data breaches.
4. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
5. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
6. Equipment and software — Specialized software that handles check verification, cashing processes, compliance with anti-money laundering regulations, customer management, and reporting. Examples include solutions like NCheck, CashFootprint, and TeraCash.

You May Also Wonder:

How profitable is a check cashing business?

A check cashing business can be very lucrative since you get a percentage of every check cashed. You just need a good location and a good marketing plan.

What are the risks of check cashing business?

The biggest risk is cashing checks that do not clear the bank. Checks may not clear due to insufficient funds or fraud. 

Who charges the cheapest to cash a check?

Banks do not charge for checks chased by their own customers. For non-customers, they may charge a small fee.

Can you start check cashing business on the side?

It would be very difficult to start a check cashing business on the side since check cashing stores need to have convenient hours. It’s best to run it as a full-time business.

Does the IRS track cashed checks?

The IRS does not track cashed checks in general. However, if you cash a check over $10,000, the bank is usually required to report it. 

Step 1: Decide if the Business Is Right for You

Pros and Cons

Starting a check cashing business has pros and cons to consider before deciding if it’s right for you.

Check Cashing Industry Trends

Industry Size and Growth

• Industry size and past growth — The US check cashing services industry was worth $21.4 billion in 2023 after expanding 2.0% annually in the previous five years.((https://www.ibisworld.com/industry-statistics/market-size/check-cashing-payday-loan-services-united-states/)) 
• Growth forecast — The US check cashing industry is projected to keep growing in the next five years.
• Number of businesses — There are almost 2,800 check cashing businesses operating in the US.
• Number of people employed — The US check cashing industry employs more than 75,900 people.((https://www.ibisworld.com/united-states/market-research-reports/check-cashing-payday-loan-services-industry/))

Trends and Challenges

Trends

• 6% of Americans are “unbanked,” meaning they have no checking or savings account. These people are the main customers of check cashing businesses.((https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-banking-credit.htm))
• Fees for check cashing are on the rise, with states like New York increasing their maximum allowed fees. 

Challenges

• The use of checks as a form of payment is declining, which means fewer transactions for check cashers. They need to rely on other forms of revenue, such as payday advances and loans.
• Walmart has become the largest check casher in the country, presenting a threat to small check cashing businesses. Established cash checking chains like Ace Cash Express and United Check Cashing are additional competitors.

How Much Does It Cost to Start a Check Cashing Business?

Costs to start a check cashing business range from $55,000 to $115,000. The bulk of the cost is capital that you need to cash checks or make loans. Other costs include a store space rental and preparation. 

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150–$200	$175
Business licenses and permits	$100–$300	$200
Insurance	$100–$300	$200
Business cards and brochures	$200–$300	$250
Website setup	$1,000–$3,000	$2,000
Space rental deposit	$2,000–$5,000	$3,500
Space preparation with cash registers, counters	$3,000–$5,000	$4,000
Capital for check cashing and loans	$50,000–$100,000	$75,000
Total	$56,550–$114,100	$85,325

How Much Can You Earn From a Check Cashing Business?

Maximum fees for check cashing vary by state, ranging from 1% to 12%. The average rate is around 3%. Your profit margin after rent, overhead, and labor should be about 30%.

In your first year or two, you could cash $80,000 in checks per week, bringing in nearly $125,000 in annual revenue. This would mean $37,000 in profit, assuming a 30% margin. As your business gains traction, you might cash $200,000 in checks per week. With an annual revenue of $312,000, you’d make a tidy profit of almost $94,000.

What Barriers to Entry Are There?

There are a few barriers to entry for a check cashing business. Your biggest challenges will be:

• The significant amount of capital you need to get started
• Keeping up with federal regulations

Step 2: Hone Your Idea

Now that you know what’s involved in starting a check cashing business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an Opportunity

Research check cashing businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a business that cashes personal checks of high-dollar amounts or a check cashing business that issues money orders or pre-paid cards.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine Your Services

You can provide check cashing services for cashing:

• Personal checks
• Payroll checks
• Tax refund checks

You can also provide other financial services like money order issuance, payday loans, car title loans, money transfers, and bill payments. 

How Much Should You Charge for Check Cashing Services?

Each state has a different maximum charge for check cashing services, so check with your state. Interest rates for payday loans also have maximums by state. Most check cashing rates are around 3%, while payday loans typically have an annual percentage rate of 400%. You should aim for a profit margin of about 30% after rent and overhead. 

Once you know your costs, you can use our profit margin calculator to determine your markup and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify Your Target Market

Your target market will be broad as it will consist of adults of any age, so you should spread out your marketing to include sites like TikTok, Instagram, and Facebook. 

Where? Choose Your Business Premises

You’ll need to rent out a storefront. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Check Cashing Business Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “check cashing” or “checks cashed,” boosts SEO
• Name should allow for expansion, for example, “Quick Cash Solutions” over “Government Check Cashing”
• A location-based name can help establish a strong connection with your local community and help with the SEO, but might hinder future expansion

Once you’ve got a list of potential names, visit the US Patent and Trademark Office website to make sure they are available for registration. Check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Check Cashing Business Plan

Here are the key components of a business plan:

• Executive summary — A concise summary outlining the check cashing business plan, highlighting key points and objectives
• Business overview — A brief introduction to the check cashing business, providing insight into its purpose, mission, and goals
• Product and services — Outline of the specific financial services offered by the check cashing business, such as check cashing, money orders, and related services
• Market analysis — Examination of the target market for the check cashing business, including demographics, trends, and potential growth opportunities
• Competitive analysis — Evaluation of competitors in the financial services industry, identifying strengths, weaknesses, opportunities, and threats
• Sales and marketing — Strategies for promoting the check cashing business, attracting customers, and building a strong market presence
• Management team — Introduction to the individuals responsible for leading and managing the check cashing business, highlighting their qualifications and roles
• Operations plan — Details on the day-to-day operations of the check cashing business, including location, technology, staffing, and processes
• Financial plan — Projection of the financial aspects of the check cashing business, including startup costs, revenue forecasts, and profit margins
• Appendix — Additional supporting documents and information, such as resumes of key team members, market research data, and any other relevant details

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose Where to Register Your Company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to check cashing business. 

If you’re willing to move, you could really maximize your business! Keep in mind that it’s relatively easy to transfer your business to another state. 

Choose Your Business Structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your check cashing business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole proprietorship — The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General partnership — Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) — Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corporation — Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corporation — This refers to the tax classification of the business but is not a business entity. Either a corporation or an LLC can elect to be an S Corp for tax status. Here, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number or EIN. You can file for your EIN online or by mail/fax. Visit the IRS website to learn more. If you’ve chosen to be a sole proprietorship, you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund Your Business

Securing financing is your next step, and there are plenty of ways to raise capital:

• Bank loans — This is the most common method, but getting approved requires a rock-solid business plan and a strong credit history.
• SBA-guaranteed loans — The Small Business Administration can act as a guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants — A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and family — Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding — Websites like Kickstarter and Indiegogo offer increasingly popular low-risk options in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal — Self-fund your business via your savings or the sale of property or other assets.

A check cashing business is probably best financed from personal funds or friends and family financing. Bank loans will be very hard to come by because check cashing is considered a high-risk business. The federal government also considers check cashing a “suspicious” business, hence the regulations that it has imposed. 

Step 8: Apply for Check Cashing Business Licenses and Permits

Starting a check cashing business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need to understand the federal rules regarding money services businesses and register with the IRS. State laws also apply to MSBs.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your check cashing business as a sole proprietorship. Opening a business bank account is quite simple and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked, yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability — The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business property — Provides coverage for your equipment and supplies.
• Equipment breakdown insurance — Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation — Provides compensation to employees injured on the job.
• Property — Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto — Protection for your company-owned vehicle.
• Professional liability — Protects against claims from clients who say they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP) — This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential Software and Tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as QuickCheck or SecureChech, to manage your check validation, check cashing, and loans. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, FreshBooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences of filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop Your Website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech savvy, you can hire a web designer or developer to create a custom website for your business.

However, people are unlikely to find your website unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Local SEO — Enhance your website to feature clear descriptions of your check cashing and financial services, optimizing it for relevant local search terms. Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Professional branding — Ensure your branding communicates efficiency, security, and accessibility, vital for attracting customers in need of financial services.
• Direct outreach — Network with local employers who have a high number of unbanked or underbanked employees, offering your services as a reliable financial solution.
• Social media engagement — Utilize Facebook and Twitter to update followers on services, share financial tips, and engage with the community.
• Financial education blog — Publish informative posts on personal finance, the advantages of your services, and effective money management strategies.
• Financial literacy workshops — Conduct seminars and workshops on budgeting and financial planning to educate the community and draw potential customers.
• Local business partnerships — Collaborate with local businesses to provide special services or promotions, enhancing their employees’ access to financial solutions.
• Targeted local advertising — Advertise in local media outlets and community boards to reach your target demographic effectively.
• Email personalization — Segment your email list to send tailored financial tips, service updates, and promotions, keeping your clientele informed and engaged.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Today’s customers are inundated with buying options, so you’ll have a real advantage if they can quickly grasp how your check cashing business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your check cashing business could be: 

• Lowest check cashing prices in town
• Get your paycheck early — payday advances as early as two weeks
• Own your car and need cash? Car title loans, get your cash the same day

Networking

You may not like to network or use personal connections for business gain, but your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a check cashing business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in check cashing for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in check cashing. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a check cashing business include:

• Check cashing clerks — cash checks, customer service
• General manager — scheduling, accounting
• Marketing lead — SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Check Cashing Business — Start Making Money!

Starting a check cashing business can be very lucrative, and you’ll be helping people get the cash they need. This industry is growing, so now is a good time to seize the opportunity. You’ll have to make a large investment to get started, but you can recover your money and start making a profit fairly quickly.

Now that you know what’s involved in starting the business, it’s time to cash in on the opportunity and get your check cashing business off the ground!