Have you always wanted to start a staffing agency but just need some information on how you can get started? Have you been working hard for someone else and your drive and determination are telling you that this is the right time to make great things happen for yourself? Have you started taking a thorough inventory of your financial situation; including listing all of your assets, debts and how much funding you’ll be able to provide? Do you have some savings but know that you will still need some additional capital in order to start your staffing business? These are the top 5 places where you can find funding so that your staffing agency startup dreams can come true.
1. Conventional Lenders
The biggest pluses with conventional bank loans are that they carry low-interest rates and the approval process is usually quite fast. It’s important to have all your documentation in order, however, because the lender will need to review at least three years of financials and will want to take a look at your tax returns. Strong credit scores (680+) also greatly increase your chances of getting a loan and you are typically required to provide some collateral; even with good personal credit. This can include anything from equity in your home or another large personal asset. Places to start gathering information are at your local and regional banks and also at your credit unions.
2. Small Business Administration (SBA)
The SBA will guarantee a significant portion of your loan, typically up to 80 percent. You have to meet certain eligibility requirements and this is similar to the way the FHA guarantees home loans. Here are 2 types of loans that can help jump-start your business:
- 7(a) Loan Program: This is the SBA’s primary lending program and the most basic, common and flexible type of loan. You can use this for working capital, to purchase real estate and also for buying equipment, furniture and fixtures. This loan has a maximum amount of $5 million and you can apply through a participating lender.
- Microloan program: This program offers very small loans to new or growing businesses and you can use this money for working capital or, for purchasing inventory, supplies, furniture, fixtures and equipment. The thing about this program is that you can’t use these loans to pay off any existing debts nor can you use them for any real estate purchases. You can get loans up to $50,000 and the average loan amount is around $13,000.
3. Rollover Your 401(k)
Another way to gain funding is by rolling over your 401(k), IRA or other eligible retirement funds and investing these dollars into your business. One of the biggest advantages of investing your own money is that this eliminates or minimizes your need for debt financing. This means that you will have more capital when you start out and you can use this money for things such as advertising, equipment and hiring expenses! The company stock becomes an asset of the retirement plan which keeps your retirement dollars tax-deferred and penalty free.
4. Peer-to-Peer Lending
The peer-to-peer lending marketplace, popularly known by the acronym P2P lending marketplace, works through a simple online platform, which connects borrowers and lenders, thereby cutting out the traditional banking protocols. The P2P platforms do not lend their own funds but act as facilitators to both the loan-seeker and the loan-giver.
The P2P lending system has added much ease to the practice of borrowing and loaning money. Now, with just a click of the mouse you can easily avail loans online without the tedium of going to banks in person or waiting for approvals, and all that too within a matter of a few hours. Most of these offer loans up to $35,000 with 3-5 year terms. Funding Circle does offer loans up to $500,000.
Some of the most popular websites for business loans are:
5. FF&F. (Friends, Family & Fools)
After using savings and retirement, friends and family are probably you’re best source of start-up capital. The saying goes, “if your friends and family don’t believe in you – why should we.” These are the people that typically lend or invest in you – not necessarily the business. Be careful not to short-cut these people, by being unprepared. You should be just as prepared with them as you would be with a banker.
As you can see, there are several options available that will allow you to find the capital you need to start your staffing agency. Using this funding along with a compelling business model, like a staffing franchise, will allow you to set yourself apart from the competition and become the established staffing business owner you’ve always wanted to be. Many staffing franchises – in addition to the expertise, technology, back office support, marketing and business development resources – also have pre-established lenders that understand their model. If you would like to see if the Nextaff staffing franchise could be a fit, check out our short video overview.