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”

In/ConradFord@FinanceConradFundingOptions.com