Reasons why recruitment agencies take out business loans
The success of your recruitment agency depends on being able to tap into a wide pool of quality candidates, and to convince clients you have the reach to find them the right people to fill their vacancies.
To achieve this in today’s digital recruitment market, you need to have a top-quality website and high-visibility on all the platforms and recruitment sites your target candidates use.
A business loan can give you the funds you need to build your crucial online presence and credibility, through traditional and social media advertising, AdWords, and content marketing.
It could also finance the fit out or upgrade of your offices, and enable you to purchase the equipment and tools you need to run your recruitment agency successfully, such as a robust CRM system to help you manage your relationships with clients and candidates.
A business loan could also help you manage your cash flow, especially if you place contract candidates and have to pay them weekly, but have a gap or several weeks before clients pay your invoices. It could give your working capital the boost you need to pay regular expenses such as wages, insurance premiums and legal fees, even when your income fluctuates.
What are the requirements for getting a business loan?
Getting a business loan can be easier than you think.
You can still expect to be rejected by the big banks unless you have a long and solid trading history, a top-rate credit rating and collateral to offer.
But there are plenty of alternative lenders out there willing to offer business loans to recruitment agencies.
Each lender will have their own criteria when it comes to things like credit rating, how long you’ve been in business, and how high your turnover is.
If you’re higher risk (e.g. if your credit score is low) you may still be able to get a business loan, although you can expect to pay a higher rate of interest to compensate for that risk.
The most important factor ALL lenders will look at is your capacity.
Lenders need to know that you will have enough cash – after all your expenses – to cover your loan repayments.
How to apply for a business loan
If you are applying to an alternative lender for a business loan, the process is usually quick and easy:
1Create a business case to check how much you can afford to borrow.
2Prepare your supporting documents – expect to be asked for:
3Choose your lender and loan product – be sure to shop around, because costs, terms and conditions vary. Be sure to find out about hidden fees and compare all the costs of each product, not just the interest or factor rate.
4Complete a simple online application form and upload your supporting documents. Most lenders will respond within days or even hours. Some will even give an on-the-spot decision.
Grow your recruitment agency businessSee if you qualify
What options are available to recruiters?
There are several types of small business loans you could consider, to support or grow your recruitment business.
Unsecured small business loan
A short-term option, unsecured business loans are usually for between 3 months and 2 years.
You can use the funds for any purpose. Many lenders will let you set a repayment schedule to suit your trading patterns.
There are several types of business car finance you can use to buy your work vehicles, including car loans, hire purchasing and leasing.
While your work vehicles are under finance you will not be able to sell or upgrade them.
Business line of credit
A business line of credit is similar to an overdraft facility, giving you access to cash up to an agreed limit, often with the right to draw, repay and redraw funds as you need them.
You only pay interest on what you borrow, but there are often set up and admin fees.
Business credit card
Business credit cards are great for covering day-to-day expenses and making purchases, but unless you clear the balance each month the cost can be extremely high.
Before entering in to any business loan agreement, be sure to seek professional advice. It’s also important to ensure you understand all of the costs (including all fees). You can get a head start by using our business loan calculator.