Since it can be costly to find and onboard new employees, you may wonder whether you should take out a business loan for hiring costs. The answer depends on your unique business, current financial situation, and long-term goals. Let’s take a closer look at the cost of hiring new workers as well as the pros and cons of doing so.
What Is The Cost of Hiring New Employees?There's no shortage of expenses that come with hiring new employees as a small business owner. To start, you’ll have to pay your internal HR team and invest in external HR resources if you need additional help. In addition, you may be on the hook for other expenses, such as
- Virtual hiring events
- In-personal career fair costs
- Job board fees
- Recruitment technology
- Marketing to ideal candidates
- Pre-hire assessments
What Are the Benefits of Taking Out a Loan for Hiring Employees?If you move forward with a small business loan for hiring costs, you can reap the following benefits:
1. Increase Your Bottom LineBy hiring talented employees to work for your business, you can earn more money and increase overall productivity. Depending on who you hire, they may sell more of your products or services, lock down loyal customers, or come up with innovative ideas for your company.
2. Free Up Your TimeThe reality is that you can’t do everything, which is why hiring competent team members is crucial. If you feel overwhelmed and prefer to focus on the big picture instead of mundane tasks, hiring new employees may be the way to go. It can free up your time and allow you to focus your effort on growing your business.
3. Avoid Overworking Other EmployeesIf your employees have too much on their plates, they’ll likely become overwhelmed. By hiring others to complete some of their tasks, you’ll enjoy happier, less stressed employees. This can create a better company culture and help with recruitment down the road.
4. Expand Your OfferingsThe right employees may bring new knowledge and innovation to your business. For example, if you own a salon, hiring an esthetician will give you the chance to add skincare services to your current menu.
What Are the Drawbacks of Seeking a Loan for Hiring Employees?Before you take out a business loan amount to cover hiring costs, consider these drawbacks:
1. No Guarantee That Employees Will Be a Good FitIf you use a business loan to hire employees, you should know they may not stay with your company long-term. You may believe a candidate will be an asset and later find out that their personality clashes with your culture or they don’t have the skills you thought they did.
2. It's Possible That You May Over-hireWhen it comes to hiring, quality is more important than quantity. By using your business loan for growth strategies, you may accidentally hire too many people. Over-hiring can lead to chaos and productivity issues.
3. You May Overlook Financial PrioritiesChances are that you have other expenses you want to cover aside from hiring. If you take out a business loan for hiring costs, you may not have the working capital to buy new equipment, move into a new building, or pay for other important expenses.
4. It May Lead to Significant DebtIf you’re unable to repay your term loan, your business may acquire significant debt. This can make it difficult to maintain your business's cash flow and take care of other financial needs.
How to Get a Business Loan for Hiring Employees:If you decide that you'd like to pursue a business loan for hiring costs, shop around and consider all your options. You can find these loans at banks, credit unions, and through online lenders. In addition, SBA loans are available to businesses that have exhausted other traditional financing options. In addition to a completed loan application, most financial institutions will ask that you provide documents such as:
- A business plan
- Tax forms
- Recent bank statements
- Business licenses