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• 08 Feb

  Factoring For A New Startup From Winding Down A Recruitment Agency

  Circumstances changes and business partners sometimes decide to go their own ways. In this case we needed to arrange a replacement factoring facility when two directors decided to wind down their company.

  Winding Down A Recruitment Company

  This happened in the case of a recruitment company that one of our partners was funding via recourse factoring, which provides users with both funding against sales invoices and a debt collection service to outsource your credit control activity. One of directors had lost interest in the business and had decided he didn't want to continue, but the other wanted to launch a new business, hiring temps to the healthcare sector. Therefore they were looking at winding down the existing recruitment company.

  Financing The New Startup

  The director that wanted to set up the new startup business needed funding in order to make it viable. Our funding partner was able to offer the startup the same terms as the old company had enjoyed, and the original business was able to be wound down, so that both parties could go their separate ways.

  Raising Money To Buy Out A Director - Shareholder

  Buying out the exisiting director was not a requirement in this case, but we have facilitated other deals, like this example in the contruction sector, where money needed to be raised in order to buy out a fellow director and shareholder. Factoring, or invoice discounting, can be an easy way of raising funds to facilitate this kind of transaction, providing the business has outstanding invoices, to business customers, on credit terms.

  How You Can Raise The Money

  You may be wondering how you can raise the money required. This is how invoice financing works in simplistic terms.

  If the oustanding sales ledger is say £100,000 a funder may be able to release £70,000, or more depending upon the sector, against those invoices. This could be used for any purpose, including buying out a shareholder or director. Funding levels tend to vary according to the sector within which you operate. A construction sector business is likely to be limited to c. 70% but a recruitment company could be funded to a much higher percentage e.g. 85-90%.

  Need Help?

  If you need help please either request we call you back or ring Sean on: 03330 113622, for a discussion about the options in complete confidence.

  By Glenn Blackman