Understanding Loan Terms

Understanding Loan Terms

Are Loans A Good Option For Funding Your Staff Agency As It Expands?

by Gregory Hall

A staffing agency that has tons of people applying and lots of businesses as clients needs to have the capacity to handle all of the communication and paperwork. Obviously, that means expanding office space and hiring more workers to interview potential temp workers and recruit more businesses as clients. But if the agency doesn't charge a lot in terms of fees for each placement—which is one way to keep those clients—it may not have a lot of spare money to use for acquiring new space or staff. To expand the agency without increasing fees, the agency will need some sort of funding. A loan is the most obvious option, but whether it's the right option will depend on a few things.

What Happens if Your Company Has to Close?

The issue with a loan is that, if your company has to close, you'll still have to pay off the loan if it's a secured loan. If you have an unsecured loan, you could file for bankruptcy to discharge your debts, but that process can be time-consuming and emotionally difficult, even if it's for the business only and not you personally. If your business looks stable enough for the future, a loan could be the easiest way to fund the expansion of your staffing agency. And the good news is that there will always be a need for temp employees and staffing placements.

Do You Have Collateral?

Traditional business loans often require collateral so the lender can collect something if you can't pay the loan. If you don't have collateral, you may not be able to get a traditional business loan. Now, good lenders will have ways to work with borrowers who may not be able to make a payment, so you're not always at high risk of losing collateral. Also, there are unsecured loans that may have higher interest rates. So you don't have to sign up for a huge loan with horrible terms that take your business if you can't make a payment. But do be careful when getting one of these loans and read all the paperwork. You want to be sure that you're getting a decent interest rate and that, if you put down collateral, there are ways to handle late payments without losing the collateral.

Fees vs. Interest Rate

A traditional loan will have interest, but there are working capital loans that use one-time fees instead. If you've never had one of these, they're loans that do not have traditional interest rates but that do charge a fee upfront, so you pay back the loan amount plus the fee. The fees, on one hand, can be rather steep when you look at the equivalent interest rate. On the other hand, the fees can be less anxiety-inducing, and if you have to miss or postpone a payment, you don't have interest compounding and making you pay more over the life of the loan. In that last case, even if the fee is fairly high, you'll still avoid seeing the amount you pay overall go up.

Contact a professional to learn more about staff agency business funding


About Me

Understanding Loan Terms

When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.