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A guide to financing for recruitment agencies

  Published: 5th September 2019

No matter what stage a recruitment agency is in, whether start-up or established, growing or stagnant, the right finance solution can provide significant benefits.

 

Identifying the ideal solution, however, can present a challenge. Many businesses fail to look any further than business loans or overdrafts; and whilst these can be very viable ways to provide sufficient working capital, there are further options that could provide a more relevant and cost-effective solution in the longer-term.

 

Our guide below will take you through the various options open to recruiters, and how agencies can pinpoint the ideal solution for their needs.

 

Financing for recruiters

 

Identifying your requirements

First and foremost, you must assess what you require finance for. The majority of recruiters will be looking for additional working finance to keep their cash flow running smoothly month in month out. This is particularly relevant to recruiters offering temporary placements, as often candidates will be paid on a weekly basis by the agency, but will only invoice the end client once a month. This means that the agency is waiting 30+ days without that vital working capital, even more if the client is a poor payer. In cases such as this, finance will reduce the strain on an agency’s cash flow.

 

Invoice finance & discounting

Whilst invoice financing or discounting provides value to businesses across many different industries, it is particularly relevant for those operating within the recruitment industry, as it allows an agency to release a percentage of cash tied up in an invoice as soon as it has been raised, rather than wait for the typical 30+ days for it to be paid. Whilst both options are similar, invoice finance will involve the finance provider chasing for payment of an invoice. In contrast, invoice discounting will see the responsibility of credit control remain with the agency, meaning that the said agency’s clients will be unaware that the business is using this type of finance.

 

Zodeq’s Principal Model

Ideal for those working within the recruitment industry, looking to take that big leap into establishing their own agency, the Principal model can be an effective financing option to help you get started. Zodeq pioneered this type of finance, which takes care of the legal and administrative aspects of running an agency, as well as providing the initial financing to get the business off the ground.

 

Choosing your finance provider

If you are still struggling to identify the best option for your business, don’t worry; a reliable and experienced finance provider will be able to carry out a full analysis of your business and make an informed recommendation as to which is the most suitable solution. For recruiters, choosing a provider (like Zodeq), who has a significant amount of experience in the recruitment industry, will ensure a much more relevant service. This is due to the fact that the provider will understand how the industry works, the challenges it faces and the best finance option out there.

 

Find out how Zodeq has helped fellow recruitment agencies with the ideal financing solutions on our case studies page.