Recruitment finance is a type of funding specifically for recruitment agencies which helps to be able to pay temporary or contract workers, while providing support with the back-office administration around this. It is different to traditional invoice finance / factoring and has some specific benefits which are as follows;
Advance rate – in most cases recruitment financiers are able to advance against each invoice at a higher amount which is normally 100%. The financier will pay the contractor in full and then pay the agency all of their margin / profit minus the financier’s fee. With this, the agency get access to all of the margin each week or month and do not have to wait until the client pays.
Flexible – recruitment finance tends to be more flexible than other invoice finance solutions. There are normally no set-up costs, minimum fees (only pay when you have contractors working), funding limits or concentration limits.
Fast – a recruitment finance facility can normally be setup in a few days, which suits the fast nature of a recruitment business.
Back-office support – usually recruitment financiers will help with elements of the administration around paying workers, such as; timesheets, invoicing, payroll, credit control and contract submission. The recruitment directors can then just focus on picking up roles, filling jobs and growing their business, without getting distracted by the non-fee generating activity.
Bad-debt protection – normally recruitment financiers will include bad-debt protection in the facility, rather than it being an additional cost. This is insurance against the agencies end client which provide protection if the client were to become insolvent before paying. This is particularly important when running contractors as can be large sums of money (in unpaid invoices) outstanding at any point.
Industry knowledge and technology – some recruitment financiers have been set-up by ex-recruiters so they know the industry in and out, and can provide support and guidance. They also have technology platforms that are specifically for recruitment and not just a finance system. These platforms can include features such as; e-timesheets, mobile app, consultant billings, etc.