If you’re running a staffing agency, then it’s very likely that you’ll need extra funding sooner or later. Working capital is probably going to be your most probable problem, because you’ll need sufficient staffing agency funding to cover your payroll needs.
But then this leads to another problem: where exactly do you get staffing agency funding?
Here are some of the more common options:
- Banks. This needs to be at the top of the list, simply because it is the first option most business owners think of. But you’ll first need to choose the right bank. For a small staffing agency, the bigger banks may not be the best option unless you can truly demonstrate how low the risks are for your lender.
Smaller community banks are more viable options. In fact, by 2011 the volume of small business loans provided by small banks grew to $302 billion.
You may also want to consider an SBA-backed loan. This involves an inordinate amount of paperwork, but banks are more likely to help with your financing when the government guarantees the repayment of as much as 85% of the loan.
The main problem with a bank loan, however, is that the application process will take time, which isn’t really of much help to you when you have a payroll disaster on the horizon. Even getting a loan can be difficult, especially when you don’t have enough assets to offer as security. You may even have to offer the house you own as collateral.
- You can get the help of venture capitalists, or even angel investors. The essence of the deal is simple. You get the money you need immediately, but in return you give up a percentage of the business.
The main drawbacks of this approach are rather obvious. For one, you end up losing a part of the company and therefore part of the future profits that you could have kept to yourself. And there’s also a very good chance that you can no longer make your own decisions without consulting with your partners. After all, they now own part of your business.
- This method isn’t much help for startups, but it can be very useful for staffing agencies that are already established. Factoring addresses the peculiar inequity when it comes to payroll and customer payment schedules. So since you need to pay your workers at the end of the week, you also immediately get as much as 80% of the value of the invoices generated, instead of having to wait for two months until the customer company pays in full.
Factoring is comparatively much easier to secure, and the application process may only take a few days.
Most people use their own savings as well as loans from family and friends when they start a small business. That may not be enough for a staffing agency, but at least you still have other staffing agency funding sources to consider.