When you’re starting a staffing agency, a bank is often the first place that comes to mind when you’re looking for payroll funding. However, just because banks are the traditional means of finance doesn’t mean they are the right option for your business.
There are several downsides to bank payroll funding.
- It takes time. Banks will verify all of your information before issuing any financing. The application process is long, and you’ll need to provide a great deal of information. There are also many prerequisites that businesses need to qualify for a loan, such as a good credit history and proof of a stable income source.
- You risk losing your collateral. Because your commodity is people, you do not have traditional collateral. As a result, to obtain payroll funding from a bank, you’ll need to put up your personal property, such as your home or car title, as collateral. In the event that your business fails and you cannot pay back the loan, you may lose this property to the bank.
- You may not receive the amount requested. Banks may only give you a portion of the money you’ve requested. This means you’ll either need another source for additional funding or you’ll have to decrease your budget. And if you use all of your loan amount or line of credit and need additional funds in a pinch, the bank may not give them to you.
- Interest rates and fees are typically higher. This often slows the growth of your business because not only do you have to pay the amount back, but you also have to pay interest. In addition, if you receive a loan but don’t use all the money, you’re still paying interest on the full amount, and there may be hidden fees attached to the loan.
For information on how TemPay can provide payroll funding for staffing companies, contact www.tempay.com or (866) 683-6729.