The Challenges of Securing a Staffing Company Loan

Staffing companies often need substantial amounts of cash to get started and also to fund day to day operations. By its very nature, staffing companies need to pay its workers on a weekly basis, but it’s not uncommon for its clients to take almost two months before they pay for the services they availed. This often leads to working capital shortage which explains the need for a staffing company loan.

The Special Needs of Staffing Companies

Like any business, a staffing company needs sizeable capital to set up their business. They have to pay the usual registration fees as well as set aside money for office rent, furniture, and utilities. But obviously they also need to hire (and pay) staffing personnel and these workers don’t just grow on trees.

They have to recruit workers and that means paying for advertising and even recruitment companies and headhunters. Then the workers must also be screened and oftentimes additional training is provided. Then there are also the insurance payments and the taxes to consider.

In short, running a staffing company can really drain the working capital cash.

Additional problems can exist too, especially when current economic situations are not so favorable. For example, your staffing company clientele may begin to hire workers full-time instead of relying on you to provide them with workers on a contract-basis. And workers may also leave your employ when they find permanent job positions in other companies.

And even if you can cover your current work requirements, new customers and demands for more workers mean that you need to hire more people to meet the increased demand, and that means you’ll need more funding.

Getting a Bank Loan

A bank loan is often the first option you think of when you need extra working capital. But securing a loan is not an easy proposition for a small business, and that’s especially true for a staffing company. You usually don’t have enough assets that you can use as collateral, and banks are always hesitant to grant loans to companies that have difficulty meeting their own staff’s payroll.

And even if you’re lucky and you do get the loan you need from your bank, the entire process will take a lot of time. For emergency funding to cover payroll, this delay makes bank loans very impractical.

So how are these problems overcome? Actually, more often than not these problems are virtually insurmountable. This is a fact that many staffing companies realize too late. A staffing company loan is extremely difficult to secure from banks and other traditional lenders.

And it’s for that reason why more creative financing possibilities must be explored if a staffing company wants to survive. Factoring is one of these possible solutions, and it has proven quite useful for many staffing companies.

Factoring is very easy to secure, and you get your funding much faster too. In addition, it’s not technically a staffing company loan at all, so your credit is largely unaffected by the transaction. With factoring, you can get the funding you need at the time you really need it, and this can help your company stay afloat during lean times and foster growth when the opportunities present themselves.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions.

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