Factoring companies have historically not been keen to offer factoring for recruitment companies and agencies whose sole income was derived from permanent placements, although they have looked more favourably on recruiters whose business was predominantly contractors or temporary workers with the occasional permanent placement thrown in for good measure. As with most things in the world of commercial finance however, times have changed.
The main obstacle has always been the fact that most recruiters have written into their terms and conditions rebates that may come into play if the candidate that has been introduced leaves before a certain period as they claim that they do not get good title to the debt that they are funding if the debt can be written off simply by the candidate leaving.
The factoring companies have justified their stance in the past by stating that factoring has traditionally provided working capital to allow their client to fund the cost of producing the goods for sale but in the case of permanent placements there is no cost of sale and the funding would be paying for overheads. Whether that justification is accurate or not is a moot point as many would argue that the cost of advertising to find or place the candidates is a cost of production and not an overhead but that argument is now irrelevant as fortunately many factoring companies have changed their attitudes in recent times.
Many factoring companies have now realised that the number of candidates that start in their new roles and leave shortly thereafter is relatively small so although the risk still remains in legal terms it is perhaps more important to look at the history of the recruiter and make a commercial judgement based on their previous activity and this is now being done in more and more cases.
Traditional factoring companies will never provide the levels of funding to recruitment companies operating solely in the permanent placement market but some will now go as high as 75% funding against invoiced values including vat (with the balance becoming payable when the customer has paid the account)
To see exactly what factoring solutions for the recruitment industry are available why not contact us on 01827 707680 for an informal chat on which factoring companies can offer what service to recruitment consultants involved solely in permanent placements or the recruitment industry generally. Our services are free of charge and come with no obligation at all.