When a new recruitment agency launches, its directors may initially look at making permanent placements to build up some cashflow as they do not believe they would be eligible for funding on contract placements. They may also look at Pay-And-Bill solutions as a way of funding their contractors without understanding that this can be an expensive proposition for contract placements. However, invoice finance can easily be arranged for new start-up recruitment agencies if they have the relevant documents and processes in place to demonstrate to credit that they deserve a facility.
Below is a list of the requirements for a new start-up recruitment agency to secure its first invoice finance arrangement: –
REALISTIC 12 MONTH PROJECTIONS
Providing a realistic projection of turnover, cost of sales and profit for the following 12 months to the invoice finance provider is the most important document required. These projections will dictate the invoice finance charges and the level of funding required. Also, once the agency receives the indicative terms from the invoice finance company, they should be able to see what the charges will be based on the projected numbers.
CURRENT AND PROSPECTIVE CLIENT LIST
Providing a list of the current and prospective clients that will be invoiced will allow the invoice finance company to perform credit checks to see whether they are credit worthy and check the age and size of the companies the agency will be engaging. This will influence the service charge cost and ascertain whether there is a requirement for credit protection. In addition, if any of the business is overseas it is advisable to let the invoice finance companies know if there are any currency requirements so they can ensure this can be provided to avoid any currency losses.
RECENT MANAGEMENT ACCOUNTS
Management accounts are often an ongoing requirement for an invoice finance facility so many will require a set of management accounts to provide credit to when looking to set up a facility.
EXPLANATION OF INVOICING AND BACK-OFFICE PROCESSES
As the funding of an invoice finance facility is based on the invoicing produced, the invoice finance company will want to know how this will be done once the agreement commences. This may include which software will be used, who will be completing invoicing and what internal processes will be followed to maintain the facility.
PROOF OF UP-TO-DATE HMRC LIABILITIES
Keeping up to date with HMRC liabilities is often built into many arrangements so they may require the agency to provide screenshots from their government gateway to demonstrate that the agency is up to date with VAT, PAYE and CT payments.
IN SUMMARY
The above list should provide a sufficient portfolio of evidence for an invoice finance provider to secure a funding arrangement as long as their credit team deem this to be a viable proposition.
MAYACHI Ltd has helped set up many invoice finance arrangements for new start-up recruitment agencies over the years with a variety of lenders. We ensure the facility meets the future demands of the business and is at the best possible cost. We can also help arrange outsourced back-office services for recruitment agencies who do not have the internal capabilities to look after these parts of the process. The first step is to book your free consultation call right here.
