How to use a Small Business Loan to Hire Employees
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Are you ready to take your small business to the next level? Hiring new employees can be a great way to expand your business and grow your customer base, but you might feel hesitant due to the associated costs. Fortunately, there is an answer - taking advantage of a small business loan! In this guide, we will outline exactly how a business loan can enable you to hire new employees for your growing company.
From choosing the right lender and analyzing potential impacts on cash flow, we’ll provide all of the information you need to make informed decisions when it comes time to invest in additional staff members. Keep reading if you want more details about how utilizing a small business loan can get those extra hands (and minds!) working on behalf of your small business.
Can You Use a Business Loan to Hire Employees for Your Small Business?
Yes, you can use a business loan to help offset the cost of hiring employees for your small business. Many businesses seek funding when purchasing new equipment to run their businesses; employees are just as important! With the help of a business loan, you grow your team in a feasible and efficient manner. A business loan can give you the financial boost necessary to hire talented new people that are needed to keep up with demand and the growth of your business.
It can also support other expenses, such as training materials, or help offset the initial costs of benefits that attract new applicants. Whether hiring full-time staff or outsourcing short-term jobs, utilizing a business loan gives you financial freedom and ample opportunities for growth and progress for your business.
Related Reading: 11 Types of Funding to Support Your Business Growth
What are the Costs Associated With Hiring Employees for a Small Business?
For any business, hiring employees can be a great investment. When it comes to running a small business, there are many expenses to consider – and one of the most important is the price associated with hiring employees. Let's take a look at a few of the common costs associated with growing your team that a small business loan can help offset the cost for.
One of the biggest costs associated with hiring employees is wages. Depending on the type of business you have and the location, wages can vary greatly but are usually the number one driver to obtaining top talent.
Another cost associated with hiring employees is benefits. Benefits can include health insurance, dental insurance, vision insurance, and retirement plans. The cost of benefits will vary depending on the type and number of employees you have, as well as the type of benefits you offer. However, the benefits you offer can help reduce employee turnover and are worth investing in to attract top talent.
Fundid Tip: Offer your employees benefits they will appreciate, like a 401(k) retirement account. We are partnering with Penelope, the leading retirement platform for small business owners.
With their subscription-based plans starting at just $8 per active employee per month, they make it affordable to offer a retirement plan to your employees. Attract and retain your employees with benefits they'll appreciate. Get started with Penelope today and save up to $875.
Depending on the position you are hiring for and the industry your business is in, training can be a significant expense. For example, if you are hiring a new salesperson, you will likely need to spend time and money on training them on your product or service and getting them up to speed on the software your business uses. Or, if you run a salon, for example, you will want to make sure your employees keep up to date on their licenses.
Another cost that is often associated with hiring employees is recruiting. Recruiting can include advertising for open positions, conducting interviews, and background checks. The cost of recruiting will vary depending on how many positions you are looking to fill and how many candidates you interview.
5. Employee Tools
Depending on the type of business you run, you might not need to invest much in the tools your future employees. Some businesses might need to purchase laptops, name tags, additional uniforms, etc., when they bring new team members on.
6. Payroll Software
If this is your first employee, you made need to invest in payroll software if you don't have one currently! Whether your employees are hourly or salary, payroll software like Gusto makes processing payroll a breeze.
What Types of Business Loans Can you Use to Hire Employees?
Choosing the right loan to fund your employee hires is an important decision. With careful consideration and research, you can select a loan option that not only meets your needs but also fits within your budget. If you are searching for a business loan, some of the factors to consider include repayment terms, interest rates, fees, and other costs associated with the loan. Let's look at some of the loans you can use to help offset the costs of hiring employees for your small business.
1. Working Capital Loan
A working capital loan can be used to hire new employees and provide the extra funds you need to find the best candidates for your business. By providing financial support upfront, you can focus on identifying employees who fit with your business culture and have the skills necessary to meet your business's goals.
Fundid Recommendation: We're partnering with Accion Opportunity Fund (AOF), a non-profit financial support system that provides business owners – predominantly entrepreneurs of color, immigrants, and women - with access to capital, networks, and coaching.
AOF working capital loans are ideal for small businesses and sole proprietors that meet the following criteria:
- Annual revenue of at least $50,000
- Located in all U.S. states except Montana, Vermont, Tennessee, North Dakota, South Dakota, and the District of Columbia
- 570+ FICO credit score
Find out if a working capital loan from AOF is the right growth solution for your business.
2. Business Term Loan
With a business term loan, companies can borrow for longer periods of time at fixed interest rates. Business term loans provide flexibility and control, so companies can access the funds they need when they need it most.
Fundid Recommendation: Apply for a term loan with Funding Circle! Through one simple online application, apply in minutes for multiple funding solutions, and receive a decision in as few as 24 hours to get the funding you need, when you need it
Funding Circle Requirements:
- 660+ FICO credit score
- 2+ years time in business
- Strong business revenue
See if Funding Circle is right for your business. Apply today.
3. SBA 7(a) Loan
The Small Business Administration (SBA) 7(a) loan program is the most popular type of SBA loan. This loan can be used for a variety of purposes, including hiring new employees.
4. Business Line of Credit
Lines of credit can provide extra cash and support for your business when you're looking to hire additional staff members without straining your current budget too much.
Growing a small business often requires taking certain financial risks. While this can put an unexpected strain on a business's budget and cash flow, there are funding options you can utilize to offset the cost of your new hires.
Explore all of Your Funding Options
All in all, hiring new employees can be the perfect way to provide fresh perspectives and create an environment where innovation and creativity thrive. Not only that, but it could very well be the best investment you make for your business.
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