It can be difficult for start-up recruitment businesses to get finance from the bank. Not only do they not have a trading history to prove income and turnover, they also have cash flow issues that are unique to the recruitment sector.
Many recruitment companies place staff into temporary jobs, to cover maternity leave for example or because a company is experiencing a high volume of work for a short time period. Staff are often paid weekly rather than monthly, but the company may only pay the recruiter every month, or even every 60 or 90 days. If the recruiter is responsible for paying the employee, this can lead to a disparity in cash flow that may be difficult to bridge.
Touch Financial work with many of the UK’s leading lenders to offer factoring services to recruitment companies.
Factoring can help recruitment companies by releasing the cash tied up in invoices. As soon as the invoice is issues, a factoring company can advance up to 90% of the amount, with the rest payable once the invoice is paid in full. This means that recruiters could get paid as soon as they place staff and not months later. Depending on the type of agreement, the factor may even handle collection of payments, allowing a new company to concentrate on building up contacts instead of chasing payments.