Your Own Money
Obviously, if you have enough of your own money then this will be the most efficient and cheapest way to fund your new recruitment agency. The benefits of using your own money rather than other financial options are:
- No Interest: Using your own money won’t incur the extra costs that other forms of finance do;
- Less Commitments: No-one but your will be expecting their money back, so you have less commitments to manage;
- Immediate Access: There are no discussions to make and no paperwork to fill out to access your money.
On the other hand, there are a few disadvantages to using your own money:
- Hard to Raise: It’s not easy to raise your own capital if you don’t already have it;
- Opportunity Cost: Even if you do have your own money, you will have more limits than other forms of borrowing, meaning you’ll miss out on other opportunities.
If you don’t have access to your own money, then there are plenty of other financial options you can choose from.
Bank loans are one way for you to quickly access money with which to start your new recruitment agency, though not necessarily an easy one. If you have assets to secure a loan against, then you will be able to access more money than if you request an unsecured loan. Creating a good business plan could also allow you access to a business loan, though banks are less likely these days to offer unsecured funding in any form.
If you do choose to take a bank loan, you should also be sure that you’ll be able to meet repayments. Recruitment agencies are a lucrative business, but if you struggle to get yours off the ground you will be left with a large debt and difficulty repaying it. Be careful when opting for bank loans for this reason.
You may be able to find angel investment from an outside source, which can offer you a large cash injection to get your recruitment agency off the ground, and may also offer you business advice to ensure your success. On the other hand, investors will require a stake in your company, which will end up costing you more than you gain from the start-up funds.
If you think losing some of your money later is worth the money you get now then an investor is a good way to start your recruitment agency, if you can find one. Currently, however, many investors are looking elsewhere, and are reluctant to fund recruitment agencies.
Pay-and-Bill providers are one of three common forms of funding for recruitment agencies, one we recently discussed in our article here. Pay-and-Bill providers are well known to recruitment agencies as secure forms of funding, especially for low value and temporary placements.
On the other hand, Pay-and-Bill providers are less useful for high value contracts, and also comes at the cost of direct interaction with your clients. As a start-up agency, the ability to network with clients and candidates is of vital importance, and is one of the biggest disadvantages of using a Pay-and-Bill provider.
Glenn Blackman recently told us that Invoice Financing was the “secret gem” of business funding, and indeed invoice financing is a common way for recruiters to fund their contractors. In particular, invoice discounting is a great option for funding your contractors before you have been paid yourself.
The downside of invoice financing as a start-up agency is that you will not have immediate access to the best options. Until you have built up trust and reputation, you would be relying on invoice factoring to manage your payments, and much like pay-and-bill providers, this option loses you personalisation.
To learn more about invoice financing, visit this article which will offer you more advice and help you understand your options.
Fund My Contractor
At Fund My Contractor we offer a service that allows you to keep the ‘personalisation’ of your agency while also having incredibly easy access to funds. We are especially good for start-up companies, understanding your needs thanks to our experience with a number of agencies both new and old. We not only offer you funding, but can also offer you advice.
The Fund My Contractor model works on a case by case funding basis, which means you aren’t tied into long term arrangements which could turn out to be less beneficial for you down the line. We offer a quick turnaround for funding applications, potentially completing them in as little as 3 hours. Most importantly, any fees incurred are payable after the contract, not before, so as long as you can win the placement, we can begin the application process straight away.
To find out more about the Fund My Contractor model and how it works for start-up recruitment agencies, see our How it Works page, read our FAQ or phone us now on 0845 8811 112. New or old, permanent or temporary, single or group placement, we can find a funding solution for you.