Loans To Hire Employees
Whether you are a sole proprietorship looking to hire your first employee or an established business looking to bring on more employees for your growing business, there are so many different aspects that come into play when hiring an employee – many of which can be incredibly time consuming and expensive. Sometimes, small and large business owners hesitate when hiring new employees due to financial restrictions and the intensive work that is associated with searching and interviewing new hires. For every small, medium, and large sized business out there, remembering that there are plenty of finance options to help facilitate this incredibly important business venture is essential; studies have shown that for some businesses, the costs of finding, hiring, and training a new employee can cost as much as $4,000! Another major way that businesses can utilize funding for hiring new employees is by allocating time and money towards social media platforms. The Small Business Administration has shown that 94 percent of employee recruiters use social media for finding potential candidates, 73 percent of Millennials found their last job through social media, and that employers who have used this tactic have found a 49 percent improvement in employees over employees they have found through other recruiting methods. By reviewing the important information below to help hire the best employee possible, hopefully your business can avoid a bad hire; according to the Department of Labor, bad hires and employee turnover can cost a company 30 percent of its yearly earnings!
Business Hiring Needs
The first step in any hiring process is to evaluate the type of employee you need, whether that is a full time, part time, contract, seasonal, or freelance worker, and why you feel your business would benefit from adding another employee into your business. Many times, business owners that are seeing increased capital from positive sales seek new employees to help expand their business. Other times, a business owner might consider hiring a new employee because their peak season is just around the corner, and having extra help on hand will only help increase sales during that time. Whatever the reason is for wanting to bring a new employee on board, having a laid out plan in place of the type of employee you are looking to hire, the essential skill sets you want in that employee, and an agreeable compensation wage decided are all important to establish before recruiting for new employees.
Legal Aspect of Hiring Employees:
When interviewing a potential new hire, every business owner must remember the legal ramifications that are involved with interviewing. It is illegal to ask and judge potential employees on their age, sexual orientation, marital status, religious affiliation, or race. Before meeting for an interview with a potential new candidate, especially if you are a sole proprietorship looking to hire your first employee, reviewing these important four legislative acts can be essential in keeping the interview completely legal:
- Title VII of the Civil Rights Act of 1964
- The Age Discrimination in Employment Act of 1967
- The Americans with Disabilities Act of 1990
- The Family Medical Leave Act of 1993
After reviewing these essential laws to avoid any legal ramifications when interviewing a new candidate, there are a few other major legal requirements that must be handled in order to successfully hire that new employee.
- Obtain an Employer Identification Number (EIN): An Employer Identification Number is a nine digit number assigned to a business owner by the Internal Revenue Service. This number identifies you as a business entity, legally allowing you to hire new employees. Setting up an Employer Identification Number is also necessary when reporting taxes and other documentation to the IRS and when reporting other information to your state agencies about employees. Luckily, the IRS has made it pretty easy to set this up online through their website.
- Verify Employee Work Eligibility: Federal law requires that an employer must verify a future employee’s eligibility to work in the United States within three days of hire. In order to do this, the employer must complete the Form I-9 (i.e. the employment eligibility verification form); basically, this form ensures that every employer examines documentation to prove an employee’s citizenship in order to work in the United States. This form does not need to be sent to the federal government but is required to be kept on file in case there is ever a legal dispute.
- State and Federal Tax Requirements: There are three major types of withholding taxes that all business owners should be aware of before hiring a new employee:
- Federal Income Tax Withholding: Every new employee must provide you with a signed Form W-4 on (or before) the date of hire, and once signed, you must submit this form to the IRS.
- Federal Wage and Tax Statement: These tax withholdings encompass all the wages paid and taxes withheld for each employee that you have. This is done through filling out and filing a Form W-2 (wage and tax statement form), which is then submitted to the IRS every year.
- State Taxes: These taxes vary from state to state, so making sure to review the specific tax procedures relevant to your state for new and current employees is critical when determining how much money, if any, gets withheld from an employees paycheck.
- Other Miscellaneous Tax Forms: Depending on the type of business you run and they type of employee you are looking to hire, there may be other tax forms involved in the hiring process. For example, if you are looking to hire a freelancer or independent contractor (if paying over $600 a year), you must fill out a Form 1099-MISC. Making sure to review the needed forms for your particular situation with an accountant or other financial consultant can be vital in making sure to comply with all regulations and requirements.
- Reporting New Hires to Your State: Within 20 days of hiring a new employee, you must register with your state’s new hire reporting program. Once again, this general requirement is mandatory for all states, but any other specific requirements will vary state by state, so communicating with your state’s new hire office in advance to make sure you cover all requirements is essential.
- Workers’ Compensation Insurance: Obtaining workers’ compensation insurance is incredibly important in case there is an on-site accident. Business owners have the option to go through a commercial carrier, a self-insured basis, or through your state’s Workers’ Compensation Insurance program.
There are many vital aspects to searching, recruiting, interviewing, and officially hiring a new employee for your successful business, but remembering the multitude of financing options available to your business to help facilitate this important business venture can help!
Types of Loans To Hire Employees
|Bank||6-10%||3-7 years||14-30 days|
|SBA||6-10%||3-7 years||10-30 days|
|Line of Credit||5-15%||1 – 3 years||7-30 days|
|Alternative||6-25%||1-5 years||5-7 days|
|Cash Advance||1.16-1.55||3-24 months||1-3 days|
|Invoice Finance||1-2% weekly||1 – 90 days||1-3 days|
Bank Loans To Hire Employees
When it comes time to obtain financing to hire new employees, the best choice is to apply for a conventional bank loan or line of credit. A traditional bank loan for employee hiring offers the lowest rates and terms of all financing options, allowing you to avoid high-interest debt. However, your business must have great credit and sufficient documentation.
- Rates: 5-10%
- Terms: 1-25 years
SBA Loans To Hire Employees
Another great form of funding for small businesses looking to hire new employees are SBA loans.In fact, creating and sustaining jobs is a part of the goal of the SBA loan program — even requiring job creation to get approved. SBAs are essentially bank loans with a guarantee by the government to cover a potion of lender’s losses should the borrower fail to repay. SBA programs available to help with hiring employees include the SBA Express loan and line of credit program, and well as the general SBA 7(a) program.
- Rates: 6-8%
- Terms: 3-25 years
Alternative Hiring Loans
Alternative loans offer fast and flexible financing to growing companies in need of hiring employees and expanding payroll without having to jump through all the hoops that a bank, credit union or community bank will require. When it comes to hiring employees and handling staff payroll, a company can’t wait weeks and months. An alternative loan can provide such companies with financing within days.
- Rates: 9-25%
- Terms: 1-5 years
Cash Advances For Hiring Employees
Cash advances are the sale of future company earnings to a lender (at a discount) in return for immediate short term cash. If you’re company has bad credit and weren’t able to obtain traditional financing, this may be the best choice — especially if you need financing immediately. A cash advance can fund within days, or even the same day and uses either the business credit card processing account for funding and repayment, and the other is an ACH alternative using the business bank accounts.
- Factor Rates: 1.16-1.50%
- Terms: 4 months – 2 years