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How to Secure Startup Funding for a Recruitment Agency

Fundamental skills, the tricks of the trade and can carry over their contacts to build a solid foundation for a new business. Sufficient funding, however, is essential for success

An entrepreneur and independent journalist

I am an entrepreneur and independent journalist. I spend my time writing articles, overviews, and analyses about entrepreneurship, business innovations, and technology. Occasionally, I also conduct workshops and provides consulting services for young, but promising startups.
I am an entrepreneur and independent journalist. I spend my time writing articles, overviews, and analyses about entrepreneurship, business innovations, and technology. Occasionally, I also conduct workshops and provides consulting services for young, but promising startups.

Anybody who ever tried to start his own business knows that funding is probably the most complicated problem a startup has to deal with, and mistakes at this stage are among the most common causes for startup failure (29 percent of failures are attributed to the lack of cash). This goes even for enterprises that seemingly don’t need a lot in terms of upfront investment and are mostly skill-based, such as recruitment agencies.

After spending some time in HR, many recruiters start thinking about starting a recruitment agency of their own – they believe that they’ve learned the fundamental skills, know the tricks of the trade and can carry over their contacts to build a solid foundation for a new business. Sufficient funding, however, is still essential for success. Luckily, today’s business landscape offers quite a number of options by which to achieve your funding goals.

1.Self-Financing

Just like in any other industry, there are few things that can compare with being the full owner of your business and not having to report to anybody. So if you can afford it, self-financing is certainly a very attractive option. However, even though the cost of entry in this industry is relatively low compared with many other venues, most recruiters are still unlikely to have enough personal savings to cover all the costs. There is, of course, always an option of selling your personal assets to create your startup capital, but it is probably better left for really desperate situations.

2.Government-Backed and Privately Funded Loans and Grants

Startups are good for the economy, so it is no wonder that both government institutions and private organizations offer a variety of loans and grants to new businesses. Moreover, some of them are specifically aimed at providing recruitment finance because this industry occupies a special position – after all, it is thanks to recruiters that people find jobs and companies find employees.

If you decide to try for one, however, you should be ready to face a number of difficulties. Firstly, the attractiveness of these loans and grants makes them quite competitive, so you have to be prepared to offer a better sales pitch than dozens of other candidates. Secondly, the bidding procedure is often extremely complicated, requires preparation and takes time. Thirdly, they are sometimes difficult to source.

3.Traditional Bank Loans

The most tried and true way is, of course, to try and get a loan out of a bank. However, it doesn’t mean that it is going to be surefire. To get a chance here you have to be experienced at your job, prepare a solid business plan accompanied with a viable financial forecast for the industry and have well thought-through contingency plans. In addition to that, you should make sure to present yourself to the bank in the most favorable light possible. If you have any debt, get rid of it before you even start thinking about making your propositions. Also, you will have to carry out a certain amount of research on the industry and what conditions currently exist in it to make your proposition better grounded in facts.

4.Invoice Finance

As traditional loans become more difficult to obtain with every passing year, it is hardly surprising that invoice finance is rapidly growing in popularity. Without getting too deep into the way it works, it means that you borrow against as of yet unpaid invoices. That is, if you settle an invoice finance arrangement with a professional agency, you won’t have to wait for the recruitment invoices to be settled by your clients. Rather, your financer will immediately release the cash tied up in them as they are issued. This benefits you and your business in two important ways: firstly, it makes the cash flow of your enterprise more manageable; secondly, it allows you to spend most of your time dealing with the core tasks of running your business, significantly increasing your flexibility.

As you can see, with recruitment agencies you have quite a number of options from which to choose. None of them is fundamentally better than the others, each having its own pros and cons. What is important is to choose the method that is best suited to your particular situation and utilize all its advantages to a maximum.

The astronomer Carl Sagan said, “It was easy to predict mass car ownership but hard to predict Walmart.”