Invoice Discounting for Permanent Recruitment Businesses
For permanent recruitment companies invoice discounting can be an ideal solution. At Funding Solutions we understand how businesses like yours operate and importantly which lenders are happy to assist. This is not always easy because some invoice discounting providers do not like the ’perm’ recruitment sector. We are committed to helping businesses like your structure the best facility at the best price.
The benefits of invoice discounting for a ‘perm’ recruitment business
If you run a perm recruitment business or simply have a perm book while it may not have the same cash flow pressures as a contractors book an invoice discounting facility can be of benefit. The benefits of invoice discounting for such a business are as follows:
- It can release valuable working capital for expansion or simply to smooth cash flow.
- Depending on how you are structured it can smooth cash flow to ensure that your staff and rent can be paid in a timely manner without having to worry about when your invoices are settled.
- Invoice discounting is typically the most cost effective of all the invoice finance solutions as it normally just provides finance and no additional services.
- It can be confidential. If your client base is sensitive or high profile it may be advantageous to have a confidential facility so that your clients are unaware of your financial arrangements.
Why do some lenders not like funding a permanent recruitment business?
Historically many invoice finance providers avoided permanent recruitment altogether. This was mainly due to the rebates offered if a candidate did not start their position or left within a certain period of time. As a better understanding of the permanent recruitment sector was developed, lenders started providing facilities albeit at a low prepayment. We are glad to say that this prepayment has now increased and good cash flow solutions are available.
So why did lenders avoid the perm’ sector? Well as already mentioned the potential rebates payable meant that it was hard to establish what would actually be paid. As this was hard to predict lenders were not comfortable to lend against the invoices. Any invoice discounting provider wants to know that in a failed situation the invoices they are funding will be paid in full. With the rebates under certain circumstances this comfort was not available.
How does the facility operate?
Invoice discounting is essentially like an overdraft with bulk notification. You simply notify the value of the invoices to the lender and they will make you an advance as agreed. You do not have to send in copies of invoices and the lender will not chase the debts. They simply provide finance against the invoices with no additional services.
With some facilities you will to do a month end reconciliation of your aged debtors showing new invoices issued, cash collected and the new month end balance of your sales ledger. However, some more advanced facilities do this automatically.
How can Funding Solutions help?
Some lenders will still not entertain invoice discounting for perm’ recruitment businesses. Other will provide a facility but only on a very low prepayment. At Funding Solutions we understand which invoice finance companies will provide invoice discounting to permanent recruitment businesses.
Importantly we will ensure you get the best structured facility at the lowest possible cost.