It takes money to make money. Nowhere is that principle more apparent than when it comes to building (and retaining) your team. You need employees to make money, but it takes money to hire employees. How do you hire the best-of-the-best talent without restricting or completely eliminating your cash flow?
This is where a business loan comes in handy. Small business loans can help boost your working capital, free up your cash flow, and ultimately hire a top-notch group of teammates.
Below, we’ll explain why you should consider taking out a business loan to hire and retain employees. Then, we’ll show the three best, most affordable loans to make it happen.
Why Hire Employees With a Business Loan?
It can be expensive to find, hire, onboard, train, pay, and retain employees. Payroll is usually a business’s top expense, and it can account for as much as 70% of your total business costs.
Fortunately, a business loan can take the pressure off your finances and give you breathing room to hire the right employees. You get what you pay for, so you don’t want to settle when it comes to building your team.
Here are the top benefits of hiring employees with a loan:
1. Boost Your Bottom Line
Employees cost money, but they also make money—and they sometimes do it better than you. Hiring an employee usually requires a considerable upfront expense to find, hire, and onboard, but it can pay dividends in the long run.
If you don’t have the money now, hiring an employee can be worth a slight dip into debt. Over time, the employees will pay for themselves with the output they produce.
2. Free Up Valuable Time
Time is money. When you expand your team, you’ll open up additional opportunities to delegate and free up your valuable time. Think about it—if your time is worth $100/hr, then save those precious hours by hiring employees to handle those less-expensive tasks. Administrative tasks, bookkeeping, and even marketing can all be done for a lot less than $100/hr—delegate and use your time on high-priority items.
Use a business loan to hire employees and save time in the long run. The sooner you hire additional help, the sooner you’ll preserve your time to spend on high-level tasks. You can always get more money—you can never get more time.
3. Provide Additional Services
New employees can bring additional talents to the team that empowers you to offer new services. Your new hire can essentially be an investment in a service, which could be just as important as your real estate, product, or marketing investments.
Bringing on a new employee can help you expand to new revenue channels, but if cash flow is tight, you’ll often need capital to make the hire happen. That’s where a business loan comes in handy.
4. Protect Your Cash Flow
If your capital is all tied up in payroll, you won’t have any budget left over for rent, marketing, investments, and other essential expenses. Use a business loan to protect your cash flow and spread out your expenses.
Hiring an employee shouldn’t leave your budget debilitated for the rest of the month. With a business loan, you can add that new hire or retain those top-performing employees with low monthly payments.
3 Best Loans for Hiring and Retaining Employees
You can use various loans for hiring and retaining employees, but a few do it better than others. Here are our favorite financing tools for funding payroll-related expenses:
- Business Line of Credit: A business line of credit expands your working capital by giving you an additional stash of cash to tap into. You could use your line of credit to hire an employee or even cover the business’s payroll for a month. You only pay interest on the funds you use, and you get access to the cash again as soon as you repay the borrowed portion.
- Term Loan: Term loans are a great financing option when you’re building a team from the ground up. They give you a lump sum of cash that you’ll pay back (with interest) over a fixed period with regular, predictable payments. If you’re starting a brand new business or building out a new team, a term loan provides the bigger kind of financing you’ll need.
- SBA Loans: A merchant cash advance lets you trade tomorrow’s earnings for cash today. You’ll receive a lump sum of money that you’ll pay back with a small percentage of your daily sales. Merchant cash advances are perfect for financing a new hire since you’re essentially using their future output to pay off their initial hiring and onboarding costs.
Don’t let money (or lack thereof) slow your business down. Keep things heading smoothly in the right direction with a business loan. It can help you hire employees or cover ongoing payroll costs, and it won’t break the bank. It takes money to make money—use a business loan to start making that money.
