Top 4 recruitment factoring companies for UK small businesses

With so many costs to consider (everything from office space to invoice factoring to marketing expenses), cash flow is a huge headache for recruitment businesses. Recruitment factoring can really help, but it’s not always easy to work out which company is the right fit for your recruitment business.

Luckily, help is at hand, we’ve harnessed our 20 years of small business experience and taken an in-depth look at the recruitment factoring companies operating in the UK.

Here’s the cream of the crop:

• Sonovate – This slick, flexible and transparent provider is a perfect partner for recruitment SMEs, and includes bad debt protection as standard.
• Bibby Financial Services – Bibby has decades of experience and a hard-earned reputation for great customer service, making them a great fit for any recruitment business with big ambitions.
• Calverton Finance – This lender has been funding recruitment businesses since 2006, and has an experienced team that is used to working with small businesses.
• Hitachi Capital UK – One of the UK’s largest invoice finance companies, Hitachi Capital offers a six-month no obligation trial period, as well as a relationship management team that will visit your business in person.

For some expert assistance in finding your perfect recruitment factoring partner, simply tell us a bit about your business to receive bespoke quotes from some of the UK’s leading recruitment factoring companies.

Or, continue reading to get loads more insight into the companies listed above, plus advice on how to choose a recruitment factoring company, how the factoring process works, and how much it costs.

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).

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.

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.

Final thoughts

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.

Good luck!