Money is money, right? Not quite. That’s like thinking a heavy-mayo tuna fish sandwich suits the same palate as high-end sushi. You need to pick the right funding option for your staffing firm.
Making the right decision can have long-term implications. The wrong funding choice can lead to higher costs and limit your flexibility when you need it most. You have to weigh your selections carefully and pick the best funding option for you.
Funding Options for Staffing Firms
Even in a world dominated by innovation and fintech disruption, bank loans remain one of the most common funding options. Vanilla and old-fashioned as it seems, this form of financing also has the benefit of being well-established and predictable.
Unfortunately, banks loans aren’t available to every business. Risky ventures and new entities will have trouble getting past the stringent requirements for most financial institutions. Your staffing firm might not pass the test.
At the same time, the process can be cumbersome and time-consuming. Big banks aren’t known as nimble entities.
If you have a clear, safe plan and a long timeline, a bank might represent a perfect option. However, for sudden emergencies or fast-developing opportunities, you might need to look elsewhere.
Line of Credit
In a loan, you receive a lump-sum amount, which you have to pay back. A line of credit works differently. Instead, it acts as a pool of cash you can tap into as needed.
In many ways, it resembles a credit card. You have a certain amount you can borrow. Once you tap into that credit, you have to pay back the amount you use, plus interest. But otherwise, it sits there waiting for you to dip into it.
Often, lines of credit have fees involved. You pay a certain amount to have the capability to access the funds.
Generally, lines of credit provide a good safety net. You have additional funding at the ready when you need it. But it takes foresight to take advantage. You need to have them set up before an emergency strikes. If you hit a cash-crunch situation without an LOC in place, you won’t have access to this option.
So far, we’ve looked at options that involve borrowing of one form or another. You can avoid debt entirely by turning to equity investors.
In this scenario, you sell a part of your business to a third party. You can then use the cash for business expenses, expansion, technological upgrades — whatever is part of the deal you ink with your investor.
However, there are downsides to this decision. Now you have a partner, so you no longer have complete control over your staffing agency. At the same time, you don’t receive the full rewards for success when it comes – you have to share profits with someone else.
Invoice factoring represents another option that will bring funds into your staffing firm, without taking on the liability represented by increasing your debt load. However, unlike an equity sale, this solution doesn’t alter the ownership structure of your business.
Instead, you accelerate payments you were due to receive anyway. Under invoice factoring, a funding company pays you for pending invoices. In effect, you bring forward the amount owed by your customers.
You pay a fee for the service, but invoice factoring doesn’t represent a long-term relationship like a bank loan or an equity sale.
Instead, you get a fast, easy way to bring in needed funds. The process is supported by your outstanding invoices, so you don’t suffer the risks that come with taking on debt.
Find Funding That Fits Your Needs! Frontline Funding Can Help!
Ready to find the perfect funding option for you? Expert advice can guide your toward the ideal choice. Frontline Funding can offer the experience and in-depth industry knowledge to maximize your financing decisions.
Contact Frontline Funding today to get started.