How to Expand Your Staff with Business Loans
If you’re having a hard time figuring out the cash flow issues involved with hiring new staff so you can expand your company’s productive capacity, you’re not alone. Working capital for hiring can be hard to find because you often need employees weeks or even months ahead of being paid for the orders you hire them to handle. As a result, there’s a lag between having the need for new people and having the cash flow to support their wages. Business loans can help you bridge that gap, but not all business loans are made to suit the same purpose. If you want to get approved for a loan you can use as flexible working capital, you need to know how they are different from other types of loans.
Working Capital Loans 101
Traditional business loans for equipment and real estate purchases tend to be secured with the asset in question. A down payment is made to ensure there’s some equity in the asset at the start of the loan, and repossession of the asset is the recourse for default. This limits the use of the capital gained through the loan to that purchase. Since these are the most common loans, at least as far as public perception goes, many small business owners don’t realize there are other kinds of term loan.
Working capital loans are not secured to an asset, but they may be secured by collateral. When this happens, an asset you already have is used, and the equity in it is financed. These loans tend to be short-term instruments, so the payments are fewer and larger in general. There are a lot of options for these business loans, though, and a few hard rules. Loans that use collateral as security tend to have more affordable financing costs, and repayment can be structured over months or up to three years, with both amortizing and interest-only payment options depending on your lender.
Invest in the Talent You Need
Even if you don’t have assets like equipment or real estate, it’s still possible to get a working capital loan from the right provider. Some will offer unsecured loans that require no collateral at all but cost more in fees and interest. Other providers have options that use your business assets, so you can access business loans as long as you have inventory, invoices, or purchase orders in hand. This provides small companies with a wide range of options when they need to access capital, so keep searching until you find exactly the right combination of features for funding the next round of hiring at your company.