This is a question MAYACHI has heard many times over the years. It’s not uncommon for recruitment consultants to face financial issues, such as unpaid creditors or loan defaults, that lead to County Court Judgments (CCJs) and poor credit ratings.
While having a bad credit score doesn’t prevent someone from setting up their own recruitment agency, it can make certain aspects of running the business more challenging.
These include:
DIFFICULTY OPENING A BUSINESS BANK ACCOUNT
Some business bank account providers carry out credit checks on directors before approving an account, even if no lending (such as an overdraft or credit card) is involved. A poor credit rating can result in the application being declined. However, some online or challenger banks are more flexible in these situations than traditional high street banks.
LIMITED OPTIONS FOR FUNDING CONTRACT/TEMPORARY WORKERS
Although invoice finance providers primarily assess the creditworthiness of your clients, they also want to ensure that the funds advanced will be used responsibly, especially to pay contractors. As a result, these providers will run credit checks on directors. If adverse credit is found and not disclosed upfront, facilities may be refused. An alternative is to use a pay-and-bill solution, though this can become increasingly expensive as the agency grows.
WHAT TO DO IF YOU HAVE BAD CREDIT
If you’re planning to start a recruitment agency and have a poor credit history, it’s advisable to address these issues before forming the company. This could mean settling any outstanding CCJs and having them removed from your credit file, or arranging a formal repayment plan that can be documented.
It’s also important to disclose any bad credit to banks or lenders early in the process. Discovering it later can raise concerns and reduce trust, with lenders potentially wondering what other financial “skeletons” may be hidden. Until historic credit issues are resolved, they may present ongoing obstacles for your business, especially when seeking additional funding for growth.
MAYACHI has supported many prospective recruitment agency owners with bad credit to help them overcome these barriers. We work with a network of banks and alternative lenders who can provide business bank accounts and funding solutions, even for directors with poor credit histories. However, it’s important to note that these facilities may come at a higher cost compared to standard arrangements.