Recruitment finance that pays your temps on time

Recruitment finance usually means invoice finance set up around the weekly temp cycle. The agency raises an invoice once timesheets are approved, the funder advances an agreed share of it straight away, and that cash pays the workers while the client pays on its normal terms.

1. The worker completes the week and the client approves the timesheet.
2. The agency invoices the client and uploads the invoice and timesheet to the funder.
3. The funder advances an agreed percentage of the invoice, often within a day or so.
4. The agency runs payroll and pays PAYE, National Insurance and pension contributions.
5. The client pays the invoice, and the funder releases the balance less its charges.

Some providers combine this with payroll processing and back-office services, sometimes called payroll funding. Check exactly which services are included and how each is charged.

Illustrative example only: actual costs depend on the lender and your circumstances. An agency invoices a client £25,000 for a week of temp work, and its payroll for that week, including employer costs, is £20,000. With an 85% advance, the funder releases £21,250, enough to cover payroll. When the client pays, the remaining £3,750 is released, less the funder's charges.

• Agencies wanting the funder to chase payments: invoice factoring includes credit control, which can help a growing agency without its own team.
• Agencies with established credit control: invoice discounting is usually confidential, so clients keep paying the agency directly.
• Comparing the two: our guide to factoring vs invoice discounting sets out the differences.
• HMRC payments falling at a bad time: tax bill loans can spread a VAT or corporation tax bill.
• Opening a new office or desk: working capital finance can cover hiring and set-up costs before fees come in.

Permanent placement invoices are treated differently. Some funders will advance against them at a lower percentage, often after any rebate period, while others exclude them.

Funders focus on how reliably your clients pay and how clean your paperwork is. Points they often review include:

• The credit quality of your clients and how much depends on the largest few
• Client contract terms, including payment terms and any rights to withhold payment
• How timesheets are approved and whether invoices are ever disputed
• Your supply chain, including any umbrella companies, and your compliance checks
• Whether PAYE, VAT and pension payments are up to date

• Credit check new clients before placing temps, as funders may set limits on each client.
• Get timesheets approved quickly, since delays hold up invoices and therefore funding.
• Read the facility terms on minimum contract length, notice periods and minimum fees before signing.
• Expect directors to be asked for personal guarantees, sometimes linked to warranties about the invoices.

Welcome Finance is a commercial finance broker, not a lender. We work with recruitment businesses run as limited companies, LLPs or partnerships of four or more partners.

A dedicated relationship manager works with you by phone, email and chat from first enquiry until the funder pays out. We check eligibility in about 60 seconds without affecting your credit score, and lenders on our panel run their own checks only if you choose to apply.

We charge you no fee. The lender pays us a commission when the finance completes. You can ask how much it is, and it can differ between lenders. See how we are paid.

Does the facility grow as we add contractors?

Usually, yes. Because the funding is linked to your invoices, the amount available tends to rise as your temp book grows, within an overall limit the funder can review.

Will our clients know we use invoice finance?

With factoring, clients usually pay the funder, so they will know. Invoice discounting is often confidential, although this depends on the provider and your circumstances.

Is recruitment finance regulated?

Invoice finance for limited companies, LLPs and partnerships of four or more partners is generally unregulated, and Consumer Credit Act protections generally do not apply. Read the agreement carefully and take advice if unsure.

Can an agency with mainly permanent placements use invoice finance?

It can be harder, as perm fees are less predictable. Some funders will consider it, while others prefer agencies with a temp or contract book.