6 Effective Methods of Funding Contract Placements

Due to the current turn in the economic climate there seems to be an increase in the number of contract placements available on the market. Recruitment agencies are being asked to provide short term contract staff as companies are reluctant at this stage to engage permanent staff until they are sure there is not a downturn. However when providing contract staff recruitment agencies have to consider the funding aspect as their contractors will expect payment before the client makes payment. Here are 6 effective methods that will provide funding for your contract recruitment placements:-

  1. Use your own money – Funding contract placements yourself is the cheapest method as there is no cost for using your own money. However you do need to ensure you have enough funds should your contract base grow and also remember your funds may be at risk should a client not pay on-time or if they go bust.
  2. Get an overdraft or loan from the bank – Banks in the current economic climate can be reluctant to offer overdrafts or loans unless you can secure these against assets. Also an overdraft or loan may only cover a certain size contract base and should your contract base grow you may struggle to get the required increase you need. If however you only need a small amount of funds to start the contract process then this can be an ideal short term solution.
  3. Set up an invoice finance arrangement – Invoice Finance is the most ideal way to fund your contract placements as the facility can grow as your contract base increases and most companies will offer insurance to give added protection to your debt. However invoice finance arrangements will often have monthly minimum fees that can be expensive in the first few months of the facility and the long term sign up period can put new contract recruiters off.
  4. Engage a Pay-And-Bill Company – There are many companies offering the facility to recruitment agencies where they will raise the invoices, pay the contractors and distribute the profit at the same time. These facilities are ideal for the lower level temp market due to their pricing structure. However these facilities can be expensive for the high level contract workers and have very little flexibility in their systems and processes.
  5. Find an Angel Investor – Using another person’s money to fund your company and your contract base can seem appealing especially in the early stages of a recruitment agency but often investors will ask for a stake in your company which once you have become successful may end up costing you more than the money that was invested. Also there are very few Angel investors on the market who would be willing to invest in recruitment agencies currently.
  6. Use Fund My Contractor – Fund My Contractor is a Short Term Funding Solution for contract placements. It allows you to get the funding your need on individual placements to pay the contractor and there are no charges taken until the client makes payment. This facility is not ideal for temp books or low end contract placements but is an ideal incubator for recruitment agencies to see if contract recruitment is for them. There is also no long term sign up and no minimum or set up fees.

Total Back Office Solutions Limited and Fund My Contractor can provide help and advice to anyone looking for funding and/or admin support for their contract recruitment placement needs and work with you to find the right method for your agency.