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How banks could adversely affect the future of your recruitment business

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    How banks could adversely affect the future of your recruitment business


    It’s been a gruelling few years for both the economy and the recruitment industry. Now, as the UK economy seems to be picking up, Simplicity and the IOR have released some interesting (and very telling) findings from their 2012-13 survey of recruitment business owners.

    The study, which acknowledged the worries and concerns of those at the heart of the industry, investigated how easy or difficult it was to access funds during the recession; funds that in 2014 are still imperative, should you wish to grow your recruitment business.

    The findings give an exact reflection of some of the more damning headlines of the time – bank losses, job cuts and lost faith. Of those who opted for external funding through providers such as the banks, 28.7% of respondents found that their credit and funding limits were restricting the business from growing. With 55.2% experiencing stunted growth due to lack of funds, there was a huge gap in terms of confidence and investment – and the blame seemed to be aimed directly towards the banks.

    Even customers who had a 15 year loyalty with a bank and a faultless history found that they were not able to access any type of bank financing. Additionally, the majority of banks who offered and promoted an overdraft facility couldn’t follow through with their sentiment. Without money available, who pays your staff? Who pays your contractors and how can you grow?

    Well if you chose to borrow from banks in 2012-13, simply put, you probably won’t have experienced any growth at all; 30.9% of respondents found that their provider at the time made it difficult to increase funding levels when more was required. Respondents reported that lenders were “becoming more and more restrictive” and banks were “increasingly reluctant and unhelpful to even to those customers who with an AAA* credit rating”.

    Meanwhile, 25.4% of respondents described their financial facility as “expensive” whilst 6.6% believed it to be “very expensive”. One respondent went so far as to say, “I have tried invoice financing [with a well-known high street bank], which almost bankrupt me and my business. I cannot access any other finance and as a result, growth will be slow over the long term.”

    Another respondent commented, “We did apply to extend our overdraft facility with our bank but they insisted that we had to sign a personal guarantee, which the Directors did not want to do.”

    This lack of confidence is reiterated by the fact that 73% of respondents did not try to secure finance in alternative ways. Of those that did, bank charges were deemed too pricy or too difficult to secure. When asked about the potential growth of their business over the next 12 months, one respondent said, “There’s no movement in the market – companies are not hiring and expanding. There’s a lack of funding available, which is strangling any potential growth. Margins are being driven down by competitors undercutting.”

    On the flip-side, if recruitment businesses had been able to secure funding, they could pursue new markets, hire talented staff and improve their back office systems. There’s even scope to assess and increase your margins – the respondents just needed to look in the right place. Whilst the obvious place to look for finance is a bank, the sensible choice is an independent and innovative recruitment finance specialist like Simplicity – we work to ensure recruiters succeed in their growth plans by delivering solutions that combine 100% funding, outsourced payroll and credit control, debt protection and a fully comprehensive online system for temp/ contractor agencies.

    For us to correctly assess the accessibility of funding in the recruitment industry, we need to know your experiences, successes and failures when it comes to lending. Following on from last year’s survey success; this year’s survey will seek to find how recruitment businesses are reacting to the strengthening economy and evaluate exactly where the industry is in terms of growth. If you’d like to find out more about the survey, or the solutions we provide at Simplicity, do get in touch.