What is it?
100% recruitment finance, also referred to as 100% funding, is specifically designed for the recruitment industry. It involves the outsourcing of all invoicing and worker payment activities with the finance provider paying your agency margin upfront.
 
How it works:
For contractors/temps, the provider pays your contractor wages or Umbrella company, and pays your contract margin to keep you enabled with instant cash. The funder usually provides all the back office administration too, managing invoices, PAYE deductions and payments and collecting the funds. For perms, on raising your perm invoice, you are advanced 80% of the fee minus charges and the remaining 20% is paid when the invoice is paid.
 
Best suited to:
All contract and perm-focussed recruitment businesses which need access to instant margin.
 
Advantages:
Instant margins and the compliant and on time payment of workers as well as the invoicing and credit control of invoices. Solves cashflow headaches and alleviates administrative burden.
 
Disadvantages:
Looks more expensive because it includes the many elements of the back office - depends on where you are in your cycle, recommended for turnover of £4m and below.
 
We see this option used effectively by both small and established recruitment businesses. By outsourcing invoicing and worker payments, there’s no need to spend your own time or have internal staff, systems and processes for managing invoices, payments and cashflow.
 

What is it?
The same as recruitment funding except that you only use the funding service when you need it.
 
How it works:
Contractors/temps: Access funding to pay workers on an ‘as and when’ basis. In addition, the provider manages the temp worker payment, tax submissions to HMRC and VAT deductions where appropriate.
 
Best suited to:
Perm recruitment business with the occasional contractor or temp to perm
 
Advantages:
Quick and easy to set up with very little KYC and contractual burden, not conract period terms.
 
Disadvantages:
Usually more expensive than other options such as factoring.
 
We see this option used effectively by businesses that intend to remain perm-focused but which occasionally need to process a contractor/temp worker. The benefits of outsourcing the payment and invoicing usually outweigh the higher service charges whilst still ensuring you make a profitable placement.
 

What is it?
A factoring company will advance money to your business based on the value of outstanding invoices.

How it works:
Factoring enables you to draw down money based on the value of invoices on your sales ledger. You can use the money received via factoring to meet any of your ongoing running costs. A factoring service will usually include credit control but does not always include other back office services, so you may be responsible for organising the correct and timely payment of workers.

Best suited to:
Contract-focused businesses with a back office solution. Perm focussed recruitment businesses with a growing contract/temp desk(s).

Advantages:
A straight-forward way to access cash quickly to cover any type of overhead. The provider does not stipulate how the funding can be used. You draw down what you need when you need it.

Disadvantages:
No support for administering the payment of workers. You would need internal systems and processes for managing this effectively otherwise you could find yourself with a significant administrative burden and financial risk. Disclosed to your clients.

We see this option used effectively by businesses that need a truly flexible funding solution.
 

What is it?
Invoice discounting is usually provided by a bank which lends money based on the value of your total outstanding ledger.

How it works:
You upload the total value of your invoicing each week. You are able to drawdown money to meet your worker payments and business running costs as and when you need it.

Best suited to:
Established to mature recruitment businesses.

Advantages:
Drawdown a percentage of your invoice value when you need it. Immediate access to cash to meet worker payments and overheads of running your business. Undisclosed to your clients.

Disadvantages:
Does not include back office and admin support to pay your workers, invoice your clients or manage credit control so you are burdened by the additional costs of managing pay and bill, credit control, accounts and insurance.

We see this option used effectively when you have an established recruitment business with significant turnover and good internal or external support to run your back office.
 

What is it?
Equity investments provide an immediate and sometimes ongoing injection of cash in exchange for ownership of a part of your business.

How it works:
You sell/gift a chunk of your business in exchange for access to cash.

Best suited to:
Suits all sizes from start-up recruitment businesses, growing recruitment companies or owners who wish to divest and realise wealth.

Advantages:
A straight-forward way to work which gives you immediate and often ongoing access to cash to meet day-to-day running costs and fuels growth.

Disadvantages:
You give up some value in your business to a third-party investor or recruitment group, which may or may not want an element of control over how the business is run.

We see this option used effectively when companies want to scale at pace or divest. It’s well suited to those with ambitious growth plans where the founders can still achieve their income goals whilst allowing a third party to have a share.