How to use invoice finance to facilitate recruitment

It’s a tale as old as time: you chase a client, get close to signing them, but it turns out they want more than you bargained for. If you could deliver on the contract, that would be great, it could even spell a new era for your business.

But the team you have today isn’t large enough to meet the deliverables, and the invoices you’ll send are traditionally sent at the end of the month with 30, 60, or even 90 day payment terms. That means you’d have to hire and pay for an entire team months before you see any cash from your new client.

What if you could raise that first invoice and gain access to the cash shortly after, enabling you to hire the team you need to meet your deliverables on time and take on the large contract?

Enter: invoice finance.

What is invoice finance?

Invoice finance is a way of unlocking cash tied up in outstanding invoices. This can come in handy considering 7% of businesses pay their invoices late and 2 in every 5 businesses consider the industry standard when setting their payment terms.

Essentially, with invoice finance, you raise an invoice, then either sell the invoice to a factoring company (this is called invoice factoring) or take out a loan against the invoice (see: invoice discounting) and the lender sends you around 80-90% of money upfront. Then, with factoring, the lender chases the client, and with discounting, you do. When the client pays, you receive the rest minus the lender’s fee. You could do this with your entire ledger, or, you could choose to get early access to the cash from a few invoices here and there with selective invoice financing. 

Please note that invoice finance is only as good as the strength of your debtors, customers will have to change the account they pay into, and it can be admin heavy.

How can invoice finance facilitate recruitment efforts?

Instead of waiting on client payments to onboard and hire talent, invoice finance could enable you to pay staff in advance. Here’s how that can help your recruitment efforts.

Hire the talent you want

Sometimes, the best talent costs a little extra, and when you’re facing several months of outgoings before the cash begins to flow in, it can be hard to justify that increased cost. However, the best talent can help you retain business. Invoice finance can make it more feasible to pay for the resources you want.

Improve employee morale

There’s nothing that gets employees down quite like having to delay their monthly paycheck. Invoice finance ensures you can pay employees for the work they’ve done before the client pays you.

Competitive hiring

Improved cash flow can take a lot of the stress out of hiring, making it easier to offer more competitive packages and benefits.

Employee development

Let’s say you don’t need invoice finance to onboard talent in those initial months. Invoice finance could instead be used to fund employee development programmes, the acquisition of new tools for your team to use, or even innovative benefits like team building trips abroad.

Find invoice finance with Funding Options by Tide

We match eligible borrowers to our network of 120+ lenders offering between £1,000 and £20M. Click the link below and submit your details to find out more.

Find invoice finance.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions