You want to bootstrap your staffing firm to success. As such, you avoid funding as much as possible. But this strategy could lose you money in the long run.
Look, we get the instinct. You were done with training wheels by the time you were three. In college, you always studied alone. Changing a tire? You’ll handle that on your own.
Along the same lines, you don’t want funding assistance with your business. You’ll fund expansion with incoming cash. No debt. No partners. No third-party obligations to hold you back.
However, that isn’t always possible. Plus, correctly constituted, funding adds to your flexibility rather than limits your options. You get added security and improved peace of mind.
Still skeptical? Here are three common ways staffing firms lose money when working without funding:
Three Common Ways Staffing Firms Lose Money When Working Without Funding
Running into a Cash Crunch
When times are good, you feel flush with cash. Payrolls come and go without a flutter of worry. You have plenty of money to keep up with your expenses, while still plotting expansion and upgrades.
But what happens when a bad time hits?
If we’ve learned anything from 2020, it’s that you can’t predict when an industry-altering event can happen. Meanwhile, your staffing firm can suffer from surprise problems closer to home. An accident, a lawsuit, a major client departure — you can drive yourself to depression listing all the possible disasters that could drain your cash position.
Not only do you lose money without a financing safety net. You could lose your staffing firm entirely. Having funding options protects you against these situations.
Not Grabbing Opportunities When They Present Themselves
There are bad surprises and there are good surprises. We’ve already seen how funding can protect you against the worst effects of the former. But what about the latter?
What happens if you run into a surprise opportunity?
Imagine that a heated rival suddenly wants to sell you their business — but only if you can get the deal closed quickly. If not, they will turn to one of your other competitors.
That’s obviously a dramatic example. But these kinds of unexpected windfalls appear every so often. However, you need the right resources to capture them.
Having funding in place gives you the leeway you need. You’ll have spare cash at the right moment to grasp all the small victories that often add up to long-term success.
Get Tied to Long-Term Financing Deals
Working without funding isn’t the only danger staffing firms face. Many lose money because they operate under the wrong type of funding strategy.
Loans can take a long time to pay off. You don’t need an accountant to tell you that. Ask anyone with a mortgage or a college loan that they struggle to keep up with — a bad financing decision represent a life-changing decision.
This is true outside the world of personal finance as well. Businesses often turn to loans for their funding needs. Even in today’s low-rate environment, a bad borrowing deal can weigh down your business.
For one thing, loans come with added expenses. Sure, rates are low. But that doesn’t mean borrowed cash comes free. You’re still on the hook for those interest payments.
Meanwhile, a high debt load can hamstring your options in an emergency. For instance, during the pandemic, about nine out of 10 businesses (91%) attempted to get emergency financing. If your balance sheet is already stuffed with debt, you might not have the ability to get the short-term cash injection you need at a critical moment.
Need the Right Funding Option for Your Staffing Firm? Frontline Funding Can Help!
Having a relationship with the right type of funding company can make all the difference. You’ll have the funding you need without weighing down your staffing firm with debt. Frontline Funding can offer the perfect support to keep your business safe and growing.
Contact Frontline Funding today to learn more.