Moving from permanent recruitment into temporary or contract recruitment can be a significant growth opportunity for an agency.
A permanent placement typically generates revenue at the point of a successful hire. For a temp desk you may need to pay your temporary workers every week, while your clients might operate on 30, 60 or even 90-day payment terms. That creates a cash flow gap.
For recruitment business owners, this can raise an important question:
How do you finance the transition to a temporary desk without putting your personal assets on the line?
The good news is that you don’t necessarily need to rely on traditional borrowing or sign a Personal Guarantee (PG) to fund your growth.
Specialist recruitment finance can provide a way to fund your temporary workforce with less risk.
Why does moving to temporary recruitment create a cash flow challenge?
Temporary recruitment can provide agencies with something permanent recruitment often can’t…recurring revenue.
Once a temporary worker is placed, the agency can generate revenue every week for as long as that assignment continues.
However, there is a timing issue.
Your temporary workers need to be paid regularly, but your client may not pay your invoice for several weeks. As your temporary desk grows, the amount of working capital required to bridge this gap grows too.
For example, imagine you secure a new client requiring 20 temporary workers. Your agency could suddenly have a substantial weekly payroll commitment before you’ve received your first client payment.
Without suitable funding in place, the cost of supporting payroll can limit how quickly you can grow.
Do you need a Personal Guarantee to finance a temp desk?
Not necessarily.
Traditional business finance and some invoice factoring arrangements can require directors to provide a Personal Guarantee. This means that, depending on the terms of the agreement, the individual may become personally liable if the business can’t meet its obligations.
For recruitment business owners, this can be an uncomfortable proposition.
You’ve built your agency and taken the commercial risk of starting and growing a business. The last thing you may want is to put your personal assets behind the temporary recruitment desk as well.
That’s why it’s worth looking specifically for a recruitment finance provider that doesn’t require Personal Guarantees.
At New Millennia, funding is designed specifically around recruitment businesses and their invoices, rather than requiring directors to provide a Personal Guarantee or debenture.
How can recruitment finance fund a temporary desk?
Recruitment finance is designed to solve the fundamental cash flow problem created by temporary recruitment.
The process is relatively straightforward:
- You place temporary workers with your client.
- Your workers complete their shifts and provide signed timesheets.
- Your agency raises an invoice to the client.
- The funding provider releases the agreed funding against that invoice.
- Your temporary workers can be paid on time.
- Your client pays the invoice according to their agreed payment terms.
This means you don’t necessarily have to wait 30, 60 or 90 days for your client to pay before you have the cash required to operate your temporary desk.
New Millennia provides a 100% funding facility, meaning the funding isn’t restricted to a traditional percentage drawdown against the invoice. We also handle back-office functions including payroll, invoicing and credit control, helping agencies manage the operational side of temporary recruitment.
What are the alternatives to Personal Guarantee-based funding?
When looking at how to finance a temp desk, it’s important to understand that not all funding solutions work in the same way.
Traditional invoice factoring, for example, can involve Personal Guarantees, debentures, minimum fees and fluctuating drawdown percentages.
A specialist recruitment funding model can be structured differently.
New Millennia’s recruitment funding solution is designed without Personal Guarantees or debentures. It also doesn’t use minimum fees or a fluctuating drawdown percentage, instead offering a fixed-cost, pay-as-you-go approach.
For an agency owner transitioning into temporary recruitment, this can provide greater clarity over the cost and risk associated with funding the desk.
Why 100% funding can make a difference
When you’re growing a temporary desk, every percentage of available working capital matters.
If a funding provider only advances a proportion of your invoice, you may still need to find additional cash to cover the difference between paying your workers and receiving payment from your client.
A 100% funding facility can remove that additional pressure.
Our recruitment funding facility releases 100% of the invoice value, including your agency’s profit, helping recruiters access the money generated by their temporary workforce without waiting for the client payment cycle to complete.
This can be particularly useful when taking on a large new contract.
Instead of asking whether you have enough cash in the bank to support the additional payroll, you can focus on whether the contract makes commercial sense and whether the client meets the necessary funding criteria.
Don’t overlook the back-office workload
Finance isn’t the only challenge when moving into temporary recruitment.
A successful temp desk also requires:
- Weekly payroll processing
- Timesheet management
- Client invoicing
- Credit control
- Candidate documentation
- Right to Work processes
- Holiday pay administration
- Pension and payroll compliance
- Ongoing management of temporary workers
Trying to manage all of this internally can quickly become a drain on your recruiters’ time.
How New Millennia Helps Recruitment Agencies
From payroll and invoicing to credit control and recruitment funding, our services are designed to reduce admin pressures, improve cash flow and support sustainable growth.
We’d love to chat about the services we provide, so if you think we can support you then get in touch.
