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MARKET 02/2016
Funding Recruitment GrowthConrad Ford
Agenda
A strong market, but uncertain year ahead
The general state of UK business lending
Alternative funding options for recruiters
The UK now seeing record employment
2008 credit
crunch
Today
UK employment, millions
Sources: ONS, Adzuna
Annual salary growth, 2015
But huge uncertainty in the year ahead
“Bellwether for the global economy
has crashed to its lowest level ever”
“Ships are being scrapped at
double the 1986 record rate”
Deja Vu? Across the pond Closer to home
Bank lending to firms collapsed over the last few years; it’s now finally stabilising
fall in lending to UK firms
£10 billion
Unfortunately, faster-growing sectors like yours are worst hit
Traditional sectors High-growth sectors
YOU
The hidden story is that overdrafts are still collapsing; this won’t change
“A report from Funding Options, the online business finance supermarket, has said the overdraft cull shows no signs of abating”
“Twice as many SMEs in the North of England have had their overdraft facilities axed.. says business financial comparison site Funding Options”
This is a huge issue, because working capital drives most SME finance needs
The business need
Source: BIS
“Giving a small business an overdraft is like handing a child a loaded gun” said a leading business banker”
The bank view(!)
So why don’t firms just go elsewhere?
usage levels of alternative finance
10%~20%
30%~40%firms using personal
credit cards
Dozens of finance products, hundreds of finance providers
“56% of SMEs unfamiliar with any forms of alternative finance”
Sources: Cambridge University, AXA, FT
Alternatives to overdrafts
• Good if you can get them
• Unattractive for banks
Invoice finance
• Factoring or discounting
• Unregulated market
Non-bank overdrafts
• New types of overdrafts
• Proactive monitoring
Business credit cards
• Tough qualifying criteria
• Limited scale of funds
Invoice finance a staple for recruitment firms;
key considerations are cost versus flexibility
Emergency or top-up funding
Short-term loans
• Terms of a few months
• Up to a month’s revenue
Sell an invoice
• Single large invoices
• Even purchase orders
Dozens of short-term lenders, with diverse criteria; challenge is
knowing where to look
Revenue advances
• Pay as a % of revenue
• Fixed cost of finance
Longer-term growth facilities
Term loans
• Typically 2-4 year terms
• Traditional underwriting
Structured bank loans
• Drawdown on milestones
• Focused on growth firms
Biggest challenge for recruitment firms is they lack physical security, in
a cyclical industry.
Structured direct loans
• Bespoke & low volume
• Warrants popular
Thinking outside the box: some recent high-growth recruitment case studies
Replaced bank with flexible invoice finance.
Unlocked personal pension for growth.
Executive search, doubling turnover
Replaced bank with flexible invoice finance.
Fast short-term loan over Xmas.
Midlands regional, £2m-£3m turnover
Nationwide £5m+ high-growth turnover
Kept existing bank invoice finance.
Took unsecured ~£200k term loan.
Need finance? Have a go: fundingoptions.com
“Professional, straightforward, fast, friendly”
“Helpful, speedy and respectful”
Closing thoughts, the uncertain year ahead
CUSTOMERSEXPERTS
“Helpful, speedy and respectful”
“Help SMEs to get the finance
they need”
PRESS“The online
business finance supermarket”
GOVERNMENT“Hundreds of jobs
either saved or created”
