UK economic growth may have seen the brakes applied to it in recent months, but that isn’t being translated into a slowdown in the number of new recruitment businesses expected to open their doors in 2016. Quite the opposite in fact.
Indeed, the entrepreneurial spirit that is sweeping across the recruitment sector has been gaining momentum ever since the much-predicted green shoots of recovery finally went into full bloom in three years ago.
Yet many more recruitment business could be starting up than actually do – a sense among many would-be entrepreneurs that a lack of finance will stop their new business from ever getting off the ground. But they are wrong. In fact there are more funding options available to new business owners today than ever before.
If you’re hoping to become a new recruitment business owner this year don’t let a lack of finance scupper your ambitions. Here are some of the options you have available to you.
Get a bank loan
Despite the headlines banks are lending again. Over the last 12 months the number of business overdrafts and loan applications approved is at its highest levels since the recession, yet fewer start-ups are choosing this route.
Banks will lend you the finance you need based on a good credit record, sound business plan and clear financial projections. They can certainly support your short-term costs but they’ve become a less attractive option for many start-ups as they can be expensive over the long term and they may ask for a personal guarantee before agreeing to an application.
Grants and loans
The government’s Start Up Loans Company, originally purposed for young entrepreneurs, has now been expanded to all ages with loans of up to £25,000 on offer that is repaid over five years, with interest payable at 6% per year.
You may also be eligible for the Seed Enterprise Investment Scheme – again it’s a government initiative that aims to help early-stage start-ups raise equity finance by offering a generous tax relief incentive of up to £100,000 for investors.
2016 is set to see the amount of investment raised from crowdfunding surpass that from venture capitalists. But crowdfunding is only a real option if your recruitment is exceptionally different to what is already out there. So unless you are a true game-changer that has the potential to disrupt the market, seek an alternative source of finance.
Cash in on your own equity
A quick injection of cash can be found by borrowing against the equity value tied up in your personal property. This could see you through those first critical months until your new clients pay your first invoices.
However, this option should only be considered if you are certain that you will be able to meet the monthly repayments, otherwise you may find you lose not just your business but your home too!
Partner with a specialist finance provider
Obtaining any form of finance can be a tricky proposition, especially when you have no trading history to speak of – a factor that most finance providers will use to restrict the amount of credit you have access to.
That’s why a growing number of recruitment start-ups partner with a finance provider who specialises in and understands the recruitment sector – one that won’t penalise or restrict them. Take the case of Logical Recruitment Partners as an example.
Knowing that immediate access to the cash they needed was critical to start and support their business as it grew, the team at Logical Recruitment Partners initially approached their bank for support. But after careful consideration they rejected an offer of a £100k loan.
With a clearly defined and ambitious growth plan, they realised that having a fixed sum was too restrictive and served as little more than a barrier to growth – something that would limit the rate of growth they expected during their first year in business.
Instead they opted to partner with a specialist recruitment finance provider who would provide a non-restrictive funding solution that supports their long-term growth, whilst providing access to 100% recruitment funding.
Starting a recruitment business can sometimes feel like a scary proposition, especially when it comes to securing the finance that you need to get you up and running. But it needn’t be, there are a number of options available to you as shown above – all you have to do is determine which suits your needs best.