Using a Working Capital Loan to Hire Seasonal Staff

Many small businesses are seasonal in nature and operating like usual just won’t do when the busy time rolls around. The holidays are generally a busy time for all and, after a year like 2020, sales couldn’t come too soon. Increasing your staff count is one way to handle the load. Hiring more talent, however, isn’t cheap. It could cut into day-to-day cash flow that could otherwise be used towards keeping the shelves stocked or purchasing a new piece of needed equipment. 

Short-term financing like working capital loans can help you get through the busy season without falling behind. The funds can be directed toward things like hiring temporary staff, offering more holiday overtime pay to your current employees or improving working conditions. Given the short-term nature of the loan, the debt won’t follow you around for years on end. 

Working capital overview

By definition, working capital is the result of an equation: current assets (such as cash or accounts receivables) – current liabilities (such as accounts payable or debt) = a small business’ working capital. However, if you ask any business owner, working capital means much more than that. It’s what is available to run the day-to-day operations. 

Working capital is also a reflection of the health of the business. It could play into the financing opportunities that are available to a business owner when it matters. For example, like when it’s time to hire seasonal staff. When calculating working capital, keep in mind that a positive result usually means that the business can cover its short-term liabilities. A negative sum suggests that the business may have trouble meeting some short term expenses.

Types of working capital financing

Even though seasonal sales spurts are common for small businesses, they could leave a business owner scrambling to meet the increased demand. Having enough staff to handle the load is certainly part of it. This is a common use case for working capital small business loans. 

• Installment loans can be short or long-term in nature. For the purposes of a working capital loan, the short-term product is likely the most relevant. This will likely provide you with the fastest access to capital. This could be valuable when you’re looking for the best seasonal staff. The repayment period generally falls between three and eighteen months. Repayment terms will depend on the lender but you can typically expect payments on a weekly or monthly basis over the term of the loan, but it could also be daily.

• A line of credit will provide you with access to a specified amount of capital through a lender. The line amount you can access will be based on factors such as cash flow and business credit. A line of credit is similar to a credit card in that you are only responsible for repaying the amount that you draw upon, and you are only charged interest for the amount that you use.
• Through Funding Circle’s network of partner lenders, you can apply for a short-term working capital loan. This loan can be used towards almost any business purpose, such as hiring seasonal staff. Through Funding Circle’s easy-to-use application, you can apply in as few as six minutes, get a decision in as little as 24 hours, and get funds as soon as the next day.¹

• An SBA 7a loan also falls under the working capital loan umbrella. Of these options, an SBA loan will likely take the longest to obtain, as the process could unfold for a month or longer. As a result, it is best for business owners with business adaptability who can predict their busy season so they can get the process started early. The SBA’s 7a loan is popular among small business startups looking for short-term financing and can be accessed via a lender.  The repayment period could be between five and seven years, which is short compared to the long-term loan with a 20-year term. 

Once you’ve decided on the type of financing that works for you, it will help to also come up with a plan about what you are looking for from your seasonal staff. Decide ahead of time if you could use more people helping with scheduling appointments or if you need someone who is more trained to run the shop while you manage everything else. 

Considering that e-commerce is becoming increasingly common, you might look to hire a web developer to create or update your business’s website. They could also make sure that it can handle any increased traffic from the busy season. Make it clear to the new staff by putting it in writing that the work is seasonal in nature so that there are no misunderstandings afterward. 

If you are gearing up for a busy holiday season, the sooner you get started hiring more staff the better as the competition is likely to be taking a similar approach! Consider using a working capital loan to help and get started today!

¹ Funding Circle may partner with other lenders to provide a full range of loan options to qualified borrowers. Approval and funding times may vary between lending partners.

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