The UK’s best recruitment factoring companies
Recruitment factoring can really help you balance the books if you’re running a recruitment agency. Discover how it works, and our pick of the UK’s best recruitment factoring companies.
Office space, insurance, salaries, marketing expenses, and of course, paying your contractors – anyone who’s ever run a recruitment business knows that the costs quickly mount up. At the same time, you may be waiting months to actually be paid by the clients who have hired your services. Cashflow is a problem for any business in this sector, and it’s a colossal headache for recruitment startups.
Luckily, recruitment factoring (or recruitment finance) can really help. This specialised form of invoice finance lets you unlock the value of unpaid invoices or timesheets, and many recruitment factoring companies also offer other services, such as payroll and contract generation – leaving you more time to find clients and evaluate candidates.
Later, we’ll break down how recruitment factoring works, give you an idea of recruitment factoring costs, and explain the important difference between recruitment factoring and recruitment discounting.
But first, let us present our pick of the UK’s best recruitment factoring companies:
- Bibby Financial Services
- Calverton Finance
- Hitachi Capital
Each of these four are strong contenders, but make sure you check out our detailed provider breakdowns below for more information on who they are, what they offer, and whether they suit your business needs.
However, to get the most accurate idea of how recruitment factoring could help you, simply tell us a bit about your business to receive bespoke quotes from some of the UK’s leading recruitment factoring companies, all tailored to your specific business needs.
The UK’s best recruitment factoring companies
There are lots of options out there when it comes to recruitment factoring, but our pick of the top four UK recruitment finance firms includes Sonovat, Bibby Financial Services, Calverton Finance and Hitachi Capital.
All have strong track records, and a well-developed recruitment finance offering (including recruitment factoring and recruitment discounting).
- Exclusively dedicated to recruitment finance
- 30-day rolling contracts
- Comprehensive cloud-based recruitment solution
Sononvate has grown rapidly since it was founded in 2012. By 2015, it had claimed the ninth spot in that year’s Startups 100, and it has only continued to expand, surpassing the £1bn mark in terms of invoice value funded.
Why? Well, in an industry that can be plagued by financial jargon and unclear terms, Sonovate prides itself on flexibility and transparency. You’ll only pay one fee (a percentage of your turnover), bad debt protection is included as standard, and you’re free to get invoice finance on as many or as few clients as you wish. Once you’re signed up, you’ll be paid 100% of invoice profit the same week a timesheet is approved.
Moreover, Sonovate’s slick cloud-based solution takes care of almost everything, including credit control, online timesheets, invoicing, and contractor payroll, leaving you more time to get on with actual recruitment. It’s also committed to helping recruitment businesses of all sizes, making it a perfect partner for recruitment SMEs.
Bibby Financial Services
- Over 35 years of experience funding SMEs
- One-fee structure
- Access to cash within 24 hours
Bibby Financial Services is one of the UK’s largest invoice finance companies (and one of our favourite invoice factoring companies), and has decades of business funding experience.
Its recruitment finance offering is also well established – Bibby has been working with RSM Employer Services (the UK’s largest bill and pay provider) for 10 years, and therefore provides both recruitment finance and back-office support.
Like Sonovate, Bibby has a one-fee structure and one-month rolling contracts, as well as an online platform that lets you check your funding 24/7. Once your recruitment finance facility is up and running, you’ll get access to up to 100% of invoice value within 24 hours of approval, as well as optional bad debt protection.
Beyond this though, Bibby distinguishes itself with a relationship-based approach that takes advantage of its 19 UK offices, and its experienced employees (many of whom have previously worked in recruitment agencies). This commitment to customer service is reflected in Bibby’s excellent Trustpilot score of 4.5 from just under 400 reviews (note that this is for the overall company, and not recruitment finance specific).
- Over 20 years of business funding experience
- Offers recruitment factoring and recruitment invoice discounting
- One-fee structure
Milton Keynes-based Calverton Finance has been funding both SMEs and recruitment businesses for a long time – the company was founded in 1998 and launched PayFactory, its comprehensive recruitment finance and back office solution, in 2006.
As well as PayFactory, which combines payroll, invoicing, collections, and finance, Calverton offers standalone recruitment factoring and discounting – perfect if you already have solid processes in place, and just need to unlock the value of your unpaid invoices.
In terms of finance, Calverton promises to advance up to 90% of invoice value on the day an invoice is raised, and the company charges a single fee that is a set percentage of the value of the invoices being factored/discounted.
It is open to recruitment businesses of any size, and has an experienced team in place to help young recruitment SMEs.
Hitachi Capital UK
- 6-month trial period
- Integration with Sage Payroll
- Over 35 years of experience
Hitachi Capital has been funding recruitment businesses for decades, and is one of the UK’s largest invoice finance companies.
Like Calverton, it offers both standalone recruitment factoring/discounting, and a full-service option that has full integration with Sage Payroll and takes care of payroll, invoicing, and collections, as well as finance.
Hitachi pays up to 100% of net or 90% of gross invoice value, while a CHOCCS (Client Handles Own Credit Control) option is available for recruitment businesses that want to continue to chase payments themselves and maintain their existing relationships. Bad debt protection is optional.
Where Hitachi really stands out is the fact that it offers a unique six-month trial period, so you can see if recruitment finance is the right choice for your business. This has no obligation, so you’re free to walk away at any point. This is followed by a six-month rolling contract.
The other thing that characterises Hitachi is a personal and supportive approach – including a relationship management team that will visit you in person and share the benefits of their experience. It’s therefore no surprise that Hitachi boasts an excellent 4.8 rating on Trustpilot from 447 reviews (again, this is for the company as a whole, and not recruitment finance specific).
Choosing a recruitment factoring company
If you’re considering recruitment factoring or recruitment discounting, always remember that what you’re really looking for is a long-term partner for your company – one who understands how you work and can help you succeed.
Make sure you carefully compare different companies, and always bear in mind just which services you actually need. Are you just looking for finance, or do you want a comprehensive solution that takes care of the admin and lets you focus on recruiting?
Simply going with the cheapest provider rarely pays off – you should ask about their previous experience and, if you operate within a particular sector, whether they have previously worked with recruitment businesses operating in that sector.
Make sure you go through the terms and conditions with a fine-tooth comb. You never know what extra charges and fees might be lurking, so make sure you understand what you’re signing up to. If there’s anything that puzzles you, make sure to ask – a good recruitment factoring company will take the time to explain any financial jargon.
It’s also really important to find a recruitment finance company that suits the way you work. As Caroline Plumb, a recruitment industry veteran and CEO of cashflow management software company Fluidly, explains:
“You normally have to confirm timesheets with the lender. Sometimes they will then confirm it with clients. If not, they may want you to raise timesheets on their systems. Or, if you’re lucky, they might do it on trust, so long as they know you have a process in place for managing timesheets.
“If a structured process to timesheeting or an existing relationship with a payroll company is not how you operate at the moment, it can be a pain.”
So, make sure you check how that process would work with different recruitment finance companies.
Finally, Caroline advises: “Another thing to bear in mind is that invoice finance companies in recruitment prefer to fund contracts rather than permanent roles.” So, again, check that your recruitment finance company is happy with your business model and any future expansion plans.
This extra diligence will pay off later, as the last thing you want is to be stuck in a funding agreement that doesn’t work for your business.
To start comparing providers, tell us a bit about your circumstances to receive bespoke quotes from a selection of the UK’s leading recruitment factoring companies, all tailored to your specific needs, so you can see which one might be the right fit for your business.
How does recruitment factoring work?
As mentioned above, recruitment factoring (also known as recruitment finance) is a specialised form of invoice factoring (or invoice finance).
Essentially, you pay a fee to the recruitment factoring company and, in return, the factoring company pays you the vast majority of the invoice value shortly after it’s sent to them. Your client then pays their fee to the factoring company.
This infographic breaks down the basic process:
The major difference for recruitment companies is that invoices aren’t the only things that recruitment factoring companies can pay out in advance on. They can also pay on approved timesheets – ideal for recruitment companies that specialise in hiring temporary workers.
Having this funding in place can make a real difference to your business, as Dan Benson, from recruitment finance specialist Easypay, explains:
“It’s well known that the majority of recruitment agencies – temporary and permanent alike – will experience significant delays between paying candidates or bills and receiving client payment on invoices. Up to 60 days is standard, but in some cases, it can be significantly higher.
“For businesses looking to grow or recruiters wanting to break out on their own, the ebbs and flows of cashflow and the resulting unpredictability can be problematic. Unfortunately, banks and general finance companies fail to appreciate this reality, and penalise their clients with escalating charges and fees. An alternative approach to cashflow injection that holds much less risk than traditional methods of funding is necessary. That’s where invoice finance comes in.
With a 100% recruitment funding solution, there is a reliable cash flow injection, so that business accounts can maintain a consistently healthy bank balance.”
So, while using recruitment factoring does cost a little more than relying on delayed payments from clients, the peace of mind and financial security offered by a steady flow of cash coming into the business is invaluable.
Regardless of whether you choose recruitment factoring or recruitment discounting, recruitment finance has three huge benefits over conventional business finance (unsecured business loans etc.)
✅ Funding that grows with your business – Recruitment invoice finance is always tied to the value of your invoices/timesheets, so the funding you have available is always dependent on how your business is doing. This means you don’t have to contend with the burden of fixed interest rates, and that your cashflow will keep pace with the expansion of your company.
✅ Back office support – The best recruitment factoring/recruitment discounting companies offer services that go beyond merely providing funding – their comprehensive solutions include taking care of things like payroll and contract generation, meaning you get to run your business while they take care of the admin.
✅ A finance partner that understands the recruitment business – Recruitment finance companies get how your business works – most of the people you’ll be dealing with have either worked in recruitment, or worked with recruitment companies for so long that they know exactly how they operate. This means you’ll get funding that works with your business, and takes into account the often seasonal nature of recruitment. Moreover, many recruitment finance companies offer guidance and support that goes beyond funding – they are a real partner for your business.
If you want to see how recruitment factoring could help you achieve your ambitions, just tell us a little about your business needs to receive bespoke quotes from some of the UK’s top recruitment factoring companies, all tailored to your specific circumstances.
How much does recruitment factoring cost?
Unfortunately, there’s no easy answer to how much recruitment factoring costs, our detailed piece on invoice factoring costs gives more information on this.
Arrangements are always specific to the recruitment company being financed, and the total cost varies according to the levels of service being given in terms of back office support etc.
The two key factors that determine how much recruitment factoring will cost for your business are the financial strength of your business and the reliability of your clients.
A well-established business with strong clients is much less of a risk for the recruitment factoring company, and so will be offered recruitment finance at a lower cost than a higher-risk company (one with less of a track record, or smaller, less financially secure clients).
One common structure is to pay both a service fee (a set fee that covers the cost of the services being provided) and a borrowing fee (essentially the interest you pay on the funding being advanced to you), but an increasing number of providers are also offering a one-fee structure.
To get a good idea of how much recruitment factoring is likely to cost for you, simply tell us a bit about your recruitment business to receive bespoke quotes from some of the UK’s top recruitment finance companies, all tailored to your specific needs.
If you find the right solution for your recruitment business, then recruitment factoring and recruitment discounting can really help you take it to the next level.
The benefits are clear – it’s a flexible source of funding that grows with your business, and you get a finance partner that understands the recruitment business. However, there are some key things you need to think about before you dive straight in.
Do you want the extra support offered by recruitment factoring, or do you want the inbuilt confidentiality of recruitment discounting? Likewise, are you just looking to unlock the value of your invoices, or are you looking for a full back office solution that also takes care of payroll, invoicing, and credit control? And finally, do you want to invest in bad debt protection that guards against the risk of your clients running into financial difficulties?
Knowing exactly what you want in a recruitment finance company will make it much easier to know which is the right one for you. Always remember, you want a company that suits the way you do business now and your future ambitions, so make sure you’re both on the same page before you sign up.
It’s a big decision that requires some serious research, but finding the right fit for your business could pay massive dividends in the long run.