Make the most informed decisions on your journey to business growth. Find out: How to prepare for success The pros and cons of every funding option The unique benefits of factoring and invoice discounting The power of corporate finance Tips to take it to the next level - including acquiring another business and selling your agency

1. The Outsauce view
The five step guide to...
Financing Recruitment
Business Growth

2. 0330 100 8686
ask@outsauce.net
Introduction
Buyers’ guide. Introduction 01
Despite the economy, there will always be opportunities
for promising businesses. Funding may be harder to come
by, but recruiters are in a great position to take advantage
of several sources to finance their growth.
This Buyers’ Guide will set out some of the considerations you
should make when expanding or seeking to expand your recruitment
business, including a breakdown of the various options available.
We’ll cover the all-important planning phase, in which goals and
strategies should be clarified before any funding decisions are made.
You’ll find a broad list of considerations for now and the future
designed to get you thinking about the bigger picture and exactly
where finance fits in.
Each of the main sources of funding will be analysed, with their
respective pros and cons. Payroll options like factoring and invoice
finance will receive special attention, appropriate to their significance
for recruiters.
When the options have been discussed, we’ll talk through the process
of choosing your provider – including the services and capabilities to
look out for and an argument in favour of specialists.
So dig in, and remember if you need to talk through any of the topics
raised with an expert – just get in touch.

3. Step 1:
Preparation
pg 03
The five steps to Financing
Recruitment Business Growth
✓
Step 4:
Who should
you choose?
pg 07
Step 2:
Choosing your
funding options
pg 04
Step 3:
Understanding factoring
and invoice discounting
pg 06
Step 5:
Taking it to
the next level
pg 08
£££
?? ?

4. Buyers’ guide. Preparation 03
Step 1: Preparation
Before you start
Is your business plan up to date?
Ideally, all your business activities should align with your long-term goals. The day-to-day
realities of running a business may sometimes interfere with your plans, but funding
decisions are best made with forethought. In order to make a funding choice that fits
with your strategy, you need to be sure what that strategy is.
And many of your lenders will be interested, too!
Consider where you want to take your business:
• Are you seeking to grow?
• If so, how quickly?
• Do you want to take on more temps/flexible workers?
• Do you need to invest in infrastructure?
• Is an acquisition on the cards?
Be clear on what you are trying to do, then ask yourself:
What will it take to achieve your goals?
Identify significant constraints or dependencies
Give consideration to your current circumstances before
casting an eye to the future. What obligations do you
have to existing staff, landlords... lenders? Is your current
income derived from a wide client base, or do you rely
on a few big payers? Can you depend upon your existing
clients for continuing business and payment? Or are you
chasing debtors?
Research overheads/future costs
When you’ve assessed your present situation, apply the
same thinking to your projections. Expansion typically
requires a lot of energy and of course, some funding,
before the cash comes in. For example, taking on more
staff will put a significant drain on your operational
expenditure that may not be immediately matched
by income.
This is easily rationalised if hiring to meet a surge in
demand, but requires well-informed justification if
speculating to generate new business. Put yourself
in a client frame of mind and consider hiring on fixed
term contracts!
Of course, there are ways to quickly scale your financing
requirements up and down with your flexible workers
which we’ll cover later [see page 06 Step 3: Understanding
factoring and invoice discounting].
Be pragmatic, don’t underestimate
We’re firm believers that the glass is half full.
But it’s better to be pragmatically pessimistic with your
projections, especially if you have other shareholders.
Seek efficiencies but don’t economise on your ability
to do the job properly. (If you’re just starting out,
raising six months’ upfront costs is a good rule of thumb.
And remember you need to pay yourself a living wage.)
Cash flow considerations
• Do you have enough working capital to run your
agency now and during a period of growth?
• How strong are your existing relationships with
your clients and are they good payers?
• If you’re just starting up, do you have any warm
prospects that could be quickly converted to
fee paying customers?
— Factor in delays around placements
and payments
Don’t forget...
Tax;
• Employers NI
• Employee NI
• Income tax
Employee benefits;
• Holiday pay
• Maternity pay
✓

5. Buyers’ guide. Choosing your funding options 04
Step 2: Choosing your funding options
Self-finance – balance risk
with responsibility
• Gives you more control, but
• Exposes you to greater personal risk
• Mortgage/re-mortgage puts pressure on
your household
• Likely you will need to generate funding
from other sources
With the groundwork done, now it’s time to choose where to get
your funding from. We’ve broken down the various options available
to recruiters, including the pros and cons for each. Use the list below
for a quick-reference and recap – and remember that the specifics
will vary depending on provider.
Types of funding:
Savings
Convenient and instant – but likely to be insufficient on
their own. Limit your risk using other sources as well…
Getting a mortgage
(or a second mortgage)
Always approach with caution, but a ready source of
capital nevertheless.
Selling possessions or assets
You could always buy them back again…
Overdrafts
Not great for lump sums, but useful to aid with cash-flow.
Bank loans
An obvious choice but not necessarily ideal for your
day-to-day business requirements – there are more
specialised forms of finance that are typically better
suited to recruiters.
Banks will need to be confident that your agency is a
sound business proposition – hence the importance of
an up-to-date business plan.
The financial crash has made it harder to secure finance
from banks, but if you can meet their conditions they
can still be a useful source of cash – mostly for capital
expenditure or moderate operational costs. The total sum
is unlikely to be sufficient to pay contractors each week in
advance of payment from the client.
Remember: paying interest on inflexible loans can eat
away at finances. And be wary of personal guarantees…
£££

6. Buyers’ guide. Choosing your funding options 05
Unsecured loan
Relatively easy to attain, as opposed to bank loans
which require personal guarantees, but difficult to get
a large sum. Definitely worth investigating and adding
into the mix.
Commercial lenders – such as insurance
companies and building societies
These lenders can offer lower interest rates and are less
restrictive, but are subject to fewer regulations than banks
and you might have to provide some security.
Credit cards
Depending on your credit rating, these can provide easily
accessible short-term cash. Great for smaller purchases
or limited operational expenditure (think phone bills)
but the interest will mount quickly, especially if you stack
different cards. Research the market for the best deals
– many providers will provide interest free or reduced
interest arrangements for limited periods.
Provided you don’t rely on them exclusively, credit cards
are a convenient tool in your arsenal.
Equity split with a partner
Half the cost, half the rewards – equity splits share both
the risk and the spoils. Depending on how much effort and
experience your partner can bring to the table, this could
help your business develop even further, as well as fund it.
Borrowing privately
Family and friends may be willing to stump up out of love,
sound business sense (or misguided devotion!) This brings
personal as well as financial ramifications, so you are the
best judge of what you’re getting in to.
Private investors like venture capitalists can provide
significant backing, but they will want to see a return.
Selling a share in your business could seem like a good
idea until that share becomes more valuable and you
wish you only had a single sum to pay off.
Corporate finance
Corporate finance can be a useful tool to assist with
short-term funding and investing in growth. Corporate
finance providers can also prove invaluable when it comes
to acquisitions and selling your company – where it’s really
best to seek specialist advice to manage the legal nuances
and maximise your return.
Personal guarantee
A personal guarantee is a common way to secure
a loan for start-up businesses without a credit
record. A director, who is also a shareholder of the
company, agrees to be liable for a certain amount
plus interest, including any costs and expenses.
Personal guarantees are quite easy to secure
but are difficult to get out of and should not be
entered into lightly. On the plus side, they allow
new companies to borrow money relatively easily
and are only enforced if payments stop. But should
the company default on its debt, the lender may
seek the money from the guarantor. If he/she is
unable to pay, the lender may seek a bankruptcy
order. Explore all your options before committing
to a personal guarantee – and always get your
liability in writing.
Outsauce Corporate
Finance
Sometimes it takes more than hard work to grow
a business. But we don’t believe everything has to
be difficult.
Corporate finance advice can unlock the potential
of your recruitment agency. We provide the key.
We offer a range of corporate financing
options to help you achieve your goals; from
short-term funding and investing in growth,
to supporting acquisitions and assistance with
selling your company.
If you have the confidence to take it to the next
level, it’s only right that you should have the same
confidence in your adviser. As specialist corporate
financiers in the recruitment sector we have the
experience and expertise to understand your
financial needs and to help you maximise the
return from the investment in your company.
Call or email us to find out more. All enquiries
will be treated with the utmost confidence.
0330 100 8686
corporatefinance@outsauce.net

7. Buyers’ guide. Understanding factoring and invoice discounting 06
Step 3: Understanding factoring
and invoice discounting
A flexible choice for growing recruiters
If you are an ambitious start-up or growing company, factoring and invoice finance help
you to expand with confidence – maintaining a healthy cash flow by unlocking money tied
up in your invoices. These solutions are ideal for recruitment agencies that often have to
pay their flexible workers upfront in advance of receiving money from the client.
So, how do they work?
In simple terms, factoring and other forms of invoice
finance allow recruitment agencies to get ‘paid’ earlier.
In factoring, a recruitment agency can sell its invoices to a
factoring company at a discount, before the end-customer
has paid. This means that for a relatively modest fee,
agencies can get a reliable cash flow and do not have to
worry about chasing invoices; that administration is taken
care of by the factoring company.
Invoice discounting is effectively borrowing against
unpaid invoices. The end results are similar to factoring
although invoice discounting is closer to ‘pure’ lending
as, unlike a factoring facility, you retain responsibility for
chasing payment and managing the sales ledger.
Factoring and invoice discounting have the facility to
grow automatically with your sales, providing a greater
degree of flexibility than many other forms of finance.
The converse applies to bank loans and overdrafts,
which are usually based on accounting information
and are always in arrears compared with your company’s
sales ledger.
For many temp agencies, factoring and other forms
of invoice financing are essential tools. The key is to
choose carefully.
Why factoring/invoice
financing are great for
temp agencies:
• Reliable cash flow in exchange for modest fee
• Don’t have to worry about chasing invoices
• A good financing provider will cover up to 100%
of your temp payroll
• Could also cover your perm billing and
• Invoice your clients on your behalf, meaning that
you get your money before your client pays
• The facility grows automatically with your sales,
unlike bank loans and overdrafts
?? ?

8. Buyers’ guide. Who should you choose? 07
Step 4: Who should you choose?
Benefits of applying for funding through a
reputable financing company
There are 1,000s of financing companies competing for your business, but not all can
claim to provide the same quality of service. You should take care to avoid exposure to
unnecessary risk, potentially unscrupulous activity or unfavourable terms.
That is why it is important to choose a reputable financing company with a proven
track record.
A respected provider will give you peace of mind, while offering a number of useful
services, such as:
• Applying for protection against bad debt on your behalf
• Ensuring rigorous credit control
• Chasing clients for payment of your invoices
• Making monthly returns required under the bad debt protection policy
• Paying your employees’ PAYE/NIC direct to HMRC
All of this means greater speed and convenience, and the maintenance of a healthy
cash flow.
Why choose a specialist?
In a crowded market, your challenge is to find a provider that really understands the
industry and has a proven ability to help businesses like yours manage the unique and
varied challenges of the recruitment sector.
A true specialist is a partner. They will understand your requirements and work with you
wherever you are in your business life cycle – from start-up and beyond. Ideally, they will
have first-hand experience of your challenges.
Specialists understand the fickle nature of the recruitment industry and are less wary
of financing phoenix businesses – they are sympathetic to the pressures on agencies
so you can approach with confidence the next time round.
Generalists have their place, but they are not ideal for recruitment agencies.
Many will lack the insight or inclination to handle the nuances of collecting temporary
or permanent placement invoices.
Navigating the compliance challenge
The government is stepping up its pressure on unscrupulous operators, so now more
than ever it’s essential to ensure compliance with the law in every area of your business.
Specialists should be well-versed in the shifting legal landscape and be able to help you
interpret the sometimes confusing guidance from HMRC and stay above board.

9. Buyers’ guide. Taking it to the next level 08
Step 5: Taking it to the next level
Outsourcing gives you the confidence to grow…
So, you’re expanding or seeking to expand your business? An exciting prospect, but
maybe also quite daunting – perhaps you’re concerned that you don’t have the necessary
resources to achieve growth and manage your business effectively post-transition?
You may be concerned that placing more flexible workers or hiring more staff will
increase pressure on payroll and finances – or whether the expected new business
will come on line and pay in time to meet your existing and future obligations.
Two key questions to pose yourself pre-growth:
• Could you fund the increase in staff payment?
• Can your financing facility scale up quickly in line with
your sales?
There is one potential answer to both of these questions...
Outsourcing to a specialist provider can take away many of
the headaches of business growth.
• Removes the administrative burden – all invoice
chasing/payments are handled by your provider
• Can manage your payment of Tax and NI contributions,
as well as employee benefits – freeing you up to focus
on day-to-day operations
• Gives you confidence on compliance – expert providers
can steer you through the potential pitfalls of
legislation
• Can assist you with securing funding – flexible finance,
with informed guidance; on-tap cash flow.
…And allows you to focus on
business development
Don’t forget the most important source of funding:
your clients! Securing finance is a very useful tool to
support your activities, but you’re not in business just
to borrow. One of the biggest advantages of outsourcing
your finance and admin is that it allows you to concentrate
on your speciality – running a recruitment agency and
selling your services.
When your back office-function is managed by a
trusted provider, you can dedicate more time to business
development – and if you have chosen wisely,
your provider will be able to scale up to accommodate
the new clients you bring in. Win win, basically.
Did you know?
With Outsauce, funding can be combined with
a full suite of financing services including credit
control and sales ledger administration.
With up to 100% funding for temporary invoices,
all your temps are paid on time and in full.
No need to worry about a shortfall. No need to
dip into your overdraft.
We also provide financing for perm invoices as part
of a combined offering or on a stand-alone basis.
Want to know more?
0330 100 8686
ask@outsauce.net

10. Buyers’ guide. Taking it to the next level 09
Funding the acquisition of another business
There’s growing organically and then there’s bringing a ready-made business on-board.
Lots of arguments for this tactic – for starters, you may be narrowing the competition.
Acquiring another business can help you expand your coverage quickly and break
into new sectors. Then of course, the target business should already have a lot of
infrastructure and a ready-made client roster in place, so you won’t be setting off
from a standing start.
One drawback is that you will typically need to invest a large amount up front. This will
include budgeting for professional fees – solicitors, accountants and surveyors will all
need to be involved in due diligence etc.
Fortunately, obtaining finance might be easier if the company has a proven track record.
In addition, provided a ‘whitewash’ certificate is provided by an accountant, the target
company’s invoices can be used to release the funds for acquisition (unless it already
factors or discounts those debts.)
Talk to your financing provider to manage the transition smoothly – you need to make
sure contractors and employees get paid without interruption.
Things to consider before you buy:
• Why is the owner selling?
• What is the company’s reputation and revenue?
• Value the assets – and the debts
• What existing contracts will need to be honoured/renegotiated?
• Is there any outstanding litigation on the company?
• Will you need to inject extra money to bring the business up to speed?
• Talk to existing customers (but exercise discretion)
• Assess the quality of employees – have you had any interactions with them before?
• Consider cash flow – set aside a few months of working capital to assist with any
extra cost
• Remember rebranding the new company will add to the bill.
Time to bring it in-house?
When your business gets big enough, it may be advantageous for you to bring your
financial support functions in-house.
Factoring is a great way to outsource admin and finance together, but when you become
a certain size, it may be more cost effective for you to employ someone (or a team) to
manage back-office processes. However, if you are employing large numbers of temps,
it may still be unfeasible to pay them in advance of receiving payment from end-clients.
This is why invoice discounting remains a very attractive choice to larger agencies.
A good invoice discounting service will cover your financial obligations to your flexible
workers, while allowing you to take care of the admin, including employee benefits
and entitlements, plus Tax and NI.
Banks are simply unable to offer the required level of flexibility and amount of finance,
making invoice discounting an invaluable service to recruiters.

11. Of course, the world of finance can be complex – so it’s always
best to consult with experts before making a big decision.
If you’d like to discuss any finance related question – or the
back-office requirements of running and growing a recruitment
agency – please contact our team. Our financial experts are well-
trained and collectively have many years’ direct experience in the
recruitment industry. We know the challenges and opportunities
first hand – and the best way to help you achieve your goals.
0330 100 8686
ask@outsauce.net
Conclusion
Buyers’ guide. Taking it to the next level 10
We hope this has been a useful introduction
to the various options available to you and your
growing agency.
Hopefully you should now have a better understanding of the
opportunities presented by different types of finance, and a clearer
idea of how you can use them to pursue your ambitions. All that
remains is to finalise your business plan and scour the market;
well prepared to identify the best, most reliable deals.
We’ll leave you with a checklist to ensure you get the most out of
your chosen provider:
Choosing carefully – Questions to ask your financing provider
• Can they adapt to your changing needs? Do they provide back office
support in addition to funding?
• As your business grows, how well placed are they to grow with you?
Can their services scale from pay and bill right through to invoice
discounting as you bring some of your financial support functions
in house?
• Do they have a corporate finance service to help manage acquisitions
and sell your company?
• What is their experience in the recruitment sector? Do they
understand the cash-flow characteristics of employment businesses?
• Can they scale up and down with you, according to the changes and
seasonality of business flowing through your agency?
• Do they understand the compliance issues within the recruitment
industry that can impact on your finances?