How Recruitment Factoring Works

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How it works?

Here at Simply Factoring Brokers we come across companies from all walks of life such as haulage, construction and recruitment to mention a few. It can’t be denied that when a recruitment business experiences growth, the usual problem that goes with this, is the lack of funds to pay staff on time. Normally a recruitment business costs are very high as their business model is dependent on labour and labour just means more money. Any business that is looking to implement a new strategy to cope with the ever increasing difficulties of business let alone a finance product is always an uneasy time, in this factoring blog we fully intend to break down the barrier of the unknown.

Recruitment factoring isn’t much different from normal factoring. The difference between the two is normal factoring only gets you the money whereas recruitment factoring also builds in a payroll service, so the difficult task of paying staff will become a distant memory. It can be an overwhelming task for any recruitment company to pay numerous employees on time, while waiting for your invoices to be paid. This is where recruitment Factoring comes in. Recruitment Factoring is suitable for companies of all sizes and for both temporary and permanent recruitment companies. It is particularly suited to new start growing businesses and those with insufficient security to attract more traditional lending.

The way it works is simple; when you issue an invoice to a customer, up to 90% of the invoice is paid to you virtually straight away by a factoring company. This company is then responsible for collecting the invoice from your customer and once the invoice is paid they will pay the remaining 10% back to yourselves minus a small fee which can range from 0.25% – 2%.

All parties of the deal are happy at the end of the process, the customer is happy as factoring takes out the awkward conversation of asking for payment. The factoring company has their money and you are free to carry on running your business smoothly. There are a number of factoring businesses in the marketplace and it can be challenging to work out which would be best suited to your recruitment business.

Recruitment factoring all in all is very attractive to a recruitment company otherwise its useless, to get paid by the funder before your customer pays you for supplying them with staff is very helpful, means you can pay for any overheads, fixed rates and most importantly pay your staff on time.

We hope this blog has helped you make an informed decision and by all means if you need to chat about your options we are more than happy to help so please don’t hesitate to get in touch.

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