The need for adequate funding for start-up recruitment agencies as well as more established firms is obvious to anyone who has ever run such a company. After all, for a contract placement to take place, the agency often needs to pay the candidate before the client makes a payment.
Invoice finance is one solution that many agencies have long considered for filling this gap. However, not all of the received wisdom that you might have heard about invoice finance is true – here are just some of the facts about it, for instance, that often don’t receive great publicity.
Recruitment agencies make widespread use of it
Invoice finance isn’t something that only a tiny number of recruitment firms rely on. Indeed, there has been research to suggest that over a sixth of recruiters are drawing upon some kind of finance against their sales invoices – that’s a 20 times higher rate than the national average for UK businesses. Furthermore, companies like TBOS exist that can assist you in setting up invoice finance.
It’s not as expensive as you might imagine
Even if you use invoice finance against all of your recruitment company’s invoices for a year, you could be paying as little as £2,000 for this. In any case, you may prefer to simply select and pay for whatever individual invoices you wish to have funded from time to time. Depending on the invoice finance deal you have, you aren’t necessarily obliged to fund any additional invoices beyond that.
Personal guarantees aren’t always needed, either
It’s common for invoice finance specialists to request personal guarantees, but this isn’t always the case. Certain providers may restrict the value of personal guarantees, while others may settle for a fraud warranty. Opting for the latter will ensure you are only liable if you commit fraud.
It’s used by both large and small agencies
Invoice finance has often had a reputation as the kind of solution that a bigger and more established recruitment agency would call upon, but there’s also no minimum size requirement for any companies that wish to use it. That makes it a viable source of funding for start-up recruitment agencies as well as those that have been around for decades.
Some invoice finance specialists enable you to raise finance against invoices worth merely a few hundred pounds. You might therefore decide to start getting accustomed to it early as a means of powering forward your young agency’s growth.
Funding can be obtained even in the case of a bad credit history
Eligibility for invoice finance is determined on the basis of how strong the recruitment agency’s sales debts are. An invoice finance specialist is therefore likely to spend less time contemplating a poor credit history, and more time assessing whether your agency raises simple, straightforward credit invoices to customers – just as long as there is some kind of payment guarantee, such as a signed timesheet.
In fact, invoice finance providers are often quite receptive to recruitment agencies, given the good quality receivables that they typically produce. There is simplicity to the underlying transactions, and a clear audit trail – such as signed timesheets – is also usually present.
While we don’t provide agencies with finance ourselves here at TBOS, it is as part of our TBOS Complete package that we can set up requirements for invoice finance for you, so that your agency can make the most of this form of funding for start-up recruitment agencies and longer-lived companies alike. Simply call our office now, on 0345 504 6333, to learn more.
