Have you considered Invoice Finance? According to Close Brothers Business Barometer research, almost two thirds (62%) of recruitment business leaders say that late payments cause problems for their business, with a third saying that they spend valuable time chasing payments.
It’s a real problem in the recruitment industry, often down to the need to pay sub-contractors and temps before the customer has paid for the service itself. As a result, recruitment agencies are looking for alternative funding solutions that help them to overcome these challenges – and that’s where Invoice Finance comes in. Here’s everything you need to know about IF as a lending option and how it could help to transform you recruitment business.
What is Invoice Finance (IF)?
Invoice Finance (IF) is a general term used for a product that allows lenders to finance slow-paying accounts receivable. IF can help you to press ‘play’ again on your recruitment business and free-up cash flow as and when you need it for alternative expenditure like growing your business and securing new customers. It provides an alternative to traditional funding methods such as overdrafts and loans with the advantage of not requiring high-value financial assets.
All that’s required is the verification of unpaid invoices by lenders prior to payment to ensure there are no issues that could prevent payment.
Why is it so well-suited to recruitment agencies?
Agencies often must agree to 30, 60 or even 90-day payment terms which can be crippling for the business financially, particularly when you have contractors, sub-contractors and temporary staff that need paying on differing payment schedules.
Invoice Finance for agencies is a perfect fit.
- You supply permanent or temp employment services to your customers.
- You send your customer a request for payment and send a copy to the finance company.
- The lender will advance up to 90% of the outstanding amount.
- Your customer settles the amount in full.
- The payment clears and we give you the remaining 10% balance minus the finance fee.
What are the other benefits of Invoice Finance?
Invoice Finance is designed to allow companies to operate at their full cash flow potential, rather than being stunted by outstanding invoices that may be unpaid or overdue. The 4 key benefits of IF to recruiters are:
- Extends cashflow to pay contractors or temporary workers on shorter payment schedules
- Frees up cashflow to invest in revenue-generating areas of the business
- Allows access to up to 90% of an invoice value, often within 24 hours
- Reduces time spent chasing invoices in order to keep cash flow moving
There are two ways to finance invoices with Moorgate
Asset-based Lending (ABL)
ABL provides a revolving line of credit that a business owner can access as needed. The credit limit is based on the value of the sales ledger which is used as collateral for the lend.
You’re not ‘selling’ your invoices, instead you are ‘borrowing’ against them based on the total asset value.
Invoice Factoring
Factoring is essentially a cash advance on the Sales Ledger. When a business raises an invoice, the factoring company will pay a % upfront – often up to 90% . Once the company receives payment of the full invoice amount, the factoring company will issue the remaining % less a service fee (often 1-3% of the invoice value).
Factoring is based on the quality of a business’s customer’s credit, not their own. Therefore, the borrowing amount can vary depending on the invoices and customer base.
With access to the whole market, we identify lenders with the right appetite for your Invoice Finance needs. Take your recruitment business further and contact us now to discuss your requirements or call 1908 92 62 62.