One of my pet hates is factoring companies or in this case recruitment company funders who engage in knocking the opposition especially where in this case the rubbish spouted by Simplicity just isn’t true.
A couple of years ago Simplicity published an article on their website entitled “Beware the hidden costs of recruitment finance” which should have been filed under the heading Fairy Tales as it mainly fiction and I took them to task on the Factoring Blog back in 2016
They’ve done it again last month by republishing a similar article this time entitled “Is your funder restricting your growth?” which again contains much grade one garbage.
Many factoring providers will attempt to seduce you with headline rates, but this is likely to be a false economy for several reasons.
Firstly, you will pay interest on the amount advanced to you and there will be an additional amount to cover the finance provider’s administration costs (i.e. service fee).
The truth is that the factoring companies that offer a dedicated recruitment finance facility mainly do so with just a single charge with no additional charge for interest.
Secondly, the longer it takes your client to pay the more expensive your factoring facility becomes, with interest continually accrued over time.
As stated most factoring companies don’t charge interest on their recruitment finance facilities.
Thirdly, perhaps most important of all, factoring by default imposes a concentration limit – the maximum amount the provider will cover for a single client. If you work for a large client, that accounts for as much as 20% of your total monthly billings and the concentration limits in place restrict you from gaining access to those funds, your business is going to run into some major problems
That was true 20 years ago but that hasn’t been the case for a number of years with many factoring companies happy to fund single customers as long as the customer is creditworthy and the paper trail good.
Suppose your factoring provider offers you a limit of £75k or even £150k – at the outset that may seem attractive. However, what happens once you hit that cap?
Quite simply you won’t get any money paid to you that week, which means you cannot pay your workers or other essential expenses either. All of which could see the recruitment business you have worked so hard to build and grow fall by the wayside within a matter of days. Can you really afford to take that risk?
Again that is a load of rubbish. It’s not in the factoring company’s interests to restrict their clients funding as the higher the client’s turnover the more commission the factor earns.
Facility limits tend to be reporting limits and once that limit is approached the factoring company’s relationship manager will write an internal review and invariably the facility will be increased in line with their client’s sales projections.
To prove just how untrue most of the above is I would suggest that any recruiter looking for funding and back office should obtain a quote from Simplicity if they so wish then feel free to contact us and we will introduce you to a traditional factoring company that has a specific recruitment finance offering that will offer a bundled fee with no separate interest charge, no long term commitment but one month rolling contract only, no minimum fees and who will fund all of your debtors no matter what proportion of the total your largest customer is (subject to creditworthiness) with the icing on the cake being that in most cases they will also be cheaper than Simplicity.
Contact Factoring Solutions on 01827 707680 to see what our small panel of expert recruitment finance factoring companies can offer.