Best Recruitment Insurance

New Year/New Business?

Start Ups and Working Capital

You have been working in an agency for a while, thinking “I can do this!” You’ve not been put off by the stats that so many companies fail in the first three years. You decide to take the plunge and start your own business.

First, congratulations, you have far more courage than me. Second comes the tidal wave of having to put in place everything that comes along with setting up a new enterprise. Offices, insurances, phones, computer systems, payroll, invoicing, staff, candidates and customers, the list goes on!

Once all that is sorted you are up and running. However, now comes one of the key parts and typically the last people get around to, you need working capital. Typically you will need to pay your people and candidates before you get paid. You may have funds yourself to do this, most of us are not that fortunate. As a solution, most new start recruitment companies consider Invoice Finance.

With Invoice Finance, you send your invoices electronically for funding, then you will receive a % (usually 85% minimum) of the total value of the invoice, which you can use to pay your staff.

This covers your labour cost, with your margin to be paid once the customer pays the Invoice Finance company (minus their charges). The beauty of an Invoice Finance facility is that it can grow with your business, and as a start-up you will typically be asked to provide a Personal Guarantee but charges on property and other security are not normally required. This gives you a way to finance and grow your business.

Given that your focus needs to be on growing and running your business, you may also ask your Invoice Finance company to provide a service called factoring. This means that they undertake credit control on your behalf. This includes sending monthly statements, chasing letters and making the phone calls. In effect they become an extension of your business.

This is vital, as until the cash is in the bank, the sale is not complete. You can also look to insure your debtor book. Yes, this will be an additional cost, but what would be the effect on your business if a customer did not pay you or ceased to trade?

There are lots of providers in the Invoice Finance market, so I have to be honest, you will be spoilt for choice! I would recommend reviewing the market to see which provider suits your business needs the best. The devil is in the detail and not all packages provided are the same, there can be different charging structures, administrative requirements, etc.

I wish you every success in your new venture.
Alan Horton, Santander, Alan.Horton@santander.co.uk

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One comment

  1. This is vital, as until the cash is in the bank, the sale is not complete. You can also look to insure your debtor book. Yes, this will be an additional cost, but what would be the effect on your business if a customer did not pay you or ceased to trade?

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