Factoring for recruitment companies

We seem to be receiving an unusually high number of enquiries from recruitment companies who have been using the services of one particular high profile payroll and back office company complaining that they aren’t getting the expected levels of funding due to problems with credit limits.

This is understandable in a non recourse situation if the customers aren’t creditworthy but in the case of the latest one his customers are local authorities with the largest customer representing less than 20% of the total ledger.

Call me cynical but this is a classic symptom of a payroll company running out of money and squeezing it’s clients as a result and is one reason why I never recommend taking debtor funding from anyone other than a specialist factoring company.

One of the potential problems in dealing with many of these quasi factoring companies is that they obtain their own funding by “re-factoring” their clients’ invoices with their own factoring company and problems can and do happen when the factoring company restricts the funding due to matters that are nothing to do with their client but are possibly down to problems caused by another of their clients.

Anyone contemplating a payroll funding facility with one of these companies should do a company search with someone like Duedil and check to see if they have a debenture secured on their assets granted to a factoring company.

There are many factoring companies who offer factoring for recruitment companies including payroll and back office but again a word of caution is advised as many outsource the payroll function to a third party, normally without the knowledge of the client and whilst we have relationships with many factors we tend to only introduce our clients to one of the two or three factoring companies that actually handle the payroll themselves in house.

Any recruitment company looking for factoring with or without payroll should contact Factoring Solutions who are one of the longest established specialist brokers in the UK and only deal with those factoring companies that actually perform

 

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