Revolving Credit for Recruitment Agencies

Recruitment's cash flow problem is built into the model. You pay temps weekly, contractors fortnightly, and your clients pay you in 30 to 60 days. That gap does not close on its own. A revolving credit facility (RCF) is a committed credit line you draw on when the payroll run lands and repay when the client invoice clears. Draw it down, repay it, draw again. You only pay interest on the balance outstanding, so if you clear it in 10 days you pay 10 days' interest, not a month's.

The lender who says yes to this is usually a specialist or challenger bank, not your clearing bank's relationship manager. High-street banks will offer RCFs, but they move slowly, they want two to three years of strong accounts, and they pull the facility the moment covenants wobble. Alternative lenders are more realistic about the perm-versus-temp revenue mix and the debtor-book concentration you often see in a growing agency.

The number that decides the size of your facility is the advance rate. Lenders look at your debtors and agree to release a percentage, typically 70 to 85%, as your available limit. A £500k debtor book at 80% gives you a £400k facility. That limit moves as your book grows, which is why an RCF suits an agency on an upward trajectory better than a static term loan does.

We are a broker, not a lender, so we cannot promise you a rate or an approval. What we can tell you is where the pricing usually lands. Arrangement fees run at 0.5 to 1% of the facility, interest on drawn amounts sits in the 6 to 12% per annum range, and there is usually a commitment fee of 0.5 to 1% on the undrawn portion. That undrawn cost is the one to size carefully if you hold a large facility but only ever draw a fraction of it.