6 Ways Staffing Agencies Get Funding

You have a great new business idea; you want to start a staffing agency! Staffing agencies are widely in-demand as larger companies want a cheap and stress-free way to source employees. You’re excited to get started, but there’s one problem. You need to spend money to make money, and you don’t know where to get the money to start your business! Thankfully, we have six ways that staffing agencies get funding available for you.

The six main ways you can get funding for your staffing agency are using your personal funds, taking out a loan, opening a line of credit, hiring a back-office contractor, using a funding company, or taking on a private investor. None of these methods let you get off scot-free; they all have their own benefits and drawbacks that can make them a good or bad fit for your business.

Everybody likes money, but sometimes, you might not know where to get it. Thankfully, it’s not as hard as you might think! Read on to learn everything that you need to know about the six ways staffing agencies get funding. Your staffing agency will be open in no time!

Using Your Pocket Change

6 Ways Staffing Agencies Get Funding

If you have some spare change laying around, you can use your own funds to set up your staffing agency. Self-funding is an easy way to fund any business venture as it does not set you up for any penalties, fees, or debt, preventing strenuous mental effort later on.

Additionally, you don’t need any financial paperwork if you use your own money. You’re saving yourself a headache right off the bat!

However, starting a staffing agency with your own pocket change might be a bit more costly. Not only do you have typical business startup costs, but you may have to hire more employees than most companies. On top of any necessary office employees, you need to hire employees for other businesses. After all, what’s a staff leasing company without any staff to lease?

When it comes to self-funding your business, budgeting is more vital than ever. When your money runs out, you don’t have a major financial institution to back it up! You could always use self-funding in any combination with other funding methods, but you still must budget your own funds effectively. When budgeting your funds, remember to consider the sizable payroll costs that staffing agencies incur.

When all is said and done, self-funding is only an option for people with a cushy financial base. If you’re looking at this article, that might not be you- but, once your staffing agency gets situated, it might be!

We know that self-funding may not be realistic and you may need other options. Thankfully, we have four more here for you!

Taking Out A Loan

Business loans are a tried and true method of obtaining funding for any startup, and staffing agencies are no exception. Hundreds of banks nationwide offer small business loans, and each bank may have a number of smaller, or more customizable, loans to help you find the best fit for your business and your projected financials.

On the upside, loans from larger financial institutions may offer you far more money than you would truly need for your business. With a loan and proper budgeting, you can operate in safe perimetres for the duration of your loan before attempting expansion- at which point, you can take out another loan to help with your corporate infrastructure!

However, small business loans are not free money. Banks may keep you waiting for anywhere from days to weeks, and all the paperwork could give you a headache. However, these are not the only downsides.

These loans have two major downsides which are particularly dangerous towards late payments; collateral and interest.

Interest means you have to pay an extra fee on top of your loan; ultimately, you will pay the bank back more than you initially borrowed.

Collateral is something of monetary value, such as a car or a house, which you put up as an assurance that you will pay your debt. If you fail to pay back your loan, the bank may seize whatever you put up as collateral.

Trademarks, Patents and Copyrights for Your Business

Opening A Line Of Credit

6 Ways Staffing Agencies Get Funding

If a loan is too much commitment for you and you’d like more options in the future, opening a line of credit with your preferred financial institution is a great option. You may be familiar with credit lines via use of a credit card. These business credit lines are largely the same concept; the business fronts you some money and you pay it back within an agreed-upon amount of time.

A credit line has some aspects that make it something of a tradeoff for loans. The price cap of a credit line may be significantly lower than the balance of a loan, and interest charges are only on the balance you have compounded on your credit line. Certain institutions may charge you a monthly or annual fee to use your credit line, but this will vary depending on your bank.

Some banks may request collateral to open a credit line, but this also varies from bank to bank. Make sure you check all of the requirements before opening a credit line!

Credit lines can be useful for staffing agencies in particular, as you can take a balance out on your credit line to fund payroll costs in advance and pay it off when your client pays you back.

Hire A Back-Office Contractor

Don’t worry! A “back-office contractor” isn’t as shady as it sounds. A staffing back-office is a third-party company that will help with your payroll funding and more. Many staffing back-offices will offer administrative and management services.

Some back-office contractors will take over the administrative aspects of most parts of your business, leaving you to recruit new customers and make placements for your employees.

However, these back-office contractors come with some things that you may think are downsides. First off, the back-office contractor is the legal employer of your employees; for all intents and purposes, you are a placement officer who is making more money per employee hour worked.

Additionally, back-office contractors may have their own fees, which vary wildly from company to company. If you are uncomfortable with paying extra fees, whether a flat monthly fee or per employee, then a back-office contractor may not be the right move for your company. Alternatively, if you want convenience over anything else, then a back-office contractor may be your best bet!

How Do You Make Money Renting Office Spaces?

Use A Funding Company
6 Ways Staffing Agencies Get Funding

Another type of third-party company you could utilize is a payroll funding company. Payroll funding companies operate off of a business model known as ‘factoring,’ or asset financing. Factoring is when the payroll funding company outright buys your client invoice in two payments; one right off the bat, and the other when your client pays.

Funding companies can be useful for startup staffing agencies, but you have to ensure that your client actually pays their invoices. Additionally, much like back-office contractors, you may lose a portion of your profit to fees; many payroll funding companies operate off of percentage-based factoring fees.

Different funding companies will feature their own operating procedures, but typically, you must wait a period to be approved for partnership. Funding companies will usually consider your client’s credit score, so if they have poor credit, your factoring company may refuse to do business with you.

Take On A Private Investor

The final option we have is also one of the most versatile, albeit volatile. Taking on a private investor is much like using your pocket change. Aside from your initial investment agreement, a private investor will not command any extraneous paperwork or interest.

However, a private investor’s requirements may vary wildly depending on the person or organization. A private investor may request a proportionately higher return than their initial investment. Additionally, you will have to share a (potentially significant) portion of your profits with your investor for the foreseeable future.

However, if your investor is somebody you have a pre-existing relationship with, you might get away with better investment terms and ultimately end up with a business partner who you are comfortable and happy doing work with.

How Do I Write a Business Plan for an Online Tutoring Business?

In Conclusion

Ultimately, there are hundreds of different smaller ways and combinations that you could choose to fund your staffing agency. There’s no one right way to go about it. As much as it would be nice to have somebody guide your hand to the right choice, you’re the only one who can make such a major decision for your company.

However, you now know your options. Armed with this knowledge, you should be able to pick the right option with ease. Whatever you’re more comfortable with and whatever works best!

Now, there’s only one thing left to do. Whether it’s digging into your wallet or spending a few days filing paperwork at the bank, all you can do is secure that funding. Get your money and enjoy your journey in starting a staffing agency!

To learn more on how to plan your own staffing agency business click here!

Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.