Your desk
- Contract, temp or permanent split of your billing
- Number of contractors currently out
- Weekly or monthly payroll value
- Client payment terms
- Which sectors you place into
Recruitment finance
Pay your contractors weekly while your clients pay on 30 or 60 day terms. Funding that grows with the desk instead of capping it.
- Pay contractors weekly while clients pay on 30 to 60 day terms
- Funding grows with your placements, not capped at a fixed limit
- Also called payroll finance, temp funding or recruitment factoring
- Independent commercial finance broker
Last updated: August 2026
What is recruitment finance?
Recruitment finance lets an agency pay contractors and temps before its clients have settled the corresponding invoices. The lender advances a large proportion of an invoice raised against approved timesheets, usually within a day, so payroll runs on time. When the client pays, you receive the balance less the agreed fees.
You will also see it called payroll finance, payroll funding, temp funding, contractor funding or recruitment factoring. It is a sector-specific form of invoice finance, shaped around weekly billing cycles and timesheet-driven invoicing.
For example, an agency with 20 contractors out has payroll going out every Friday, while clients pay 45 days after invoice. That is roughly six weeks of wages funded from the agency's own pocket before the first payment arrives. Recruitment finance closes that gap, and keeps it closed as more contractors go out.
The counterintuitive part: for a contract desk, growth is what causes the cash flow problem. Every new placement consumes cash for weeks before it generates any, so winning a big contract can put more strain on an agency than losing one.
How recruitment finance works
Five steps from approved timesheet to funded payroll.
- 01
Place contractors and collect timesheets
You run your desk as normal. Timesheets are approved by the client at the end of each week or month.
- 02
Raise the invoice
Approved timesheets are invoiced to the client on their usual payment terms, typically 30 to 60 days.
- 03
Draw against the invoice
The lender advances a large proportion of the invoice value, usually within a day of it being raised, so the money is there before payroll runs.
- 04
Pay your contractors
Weekly or monthly payroll goes out on time, funded by the advance rather than by your own reserves.
- 05
Client pays, balance released
When the client settles, you receive the remaining balance less the agreed fees. The facility recycles as new timesheets come in.
What you'll need
The shape of your contract book matters more than your balance sheet here.
Your agency
- Companies House number and trading name
- Date of incorporation and length of trading
- Annual turnover
- Last 6 months of business bank statements
- Most recent year-end accounts, or management accounts if newer
- A recent aged debtor report if available
Ledger and existing arrangements
- Whether turnover is concentrated with one or two clients
- Any existing invoice finance or funding in place
- How you currently handle payroll and timesheet processing
- Any bad debt history over the last 12 months
We do not run a credit search at the enquiry stage. A formal search may happen when you progress to underwriting with a lender.
When recruitment agencies need funding
Four situations, all versions of the same underlying timing problem.
- The weekly pay, monthly invoice gap
- The defining problem of contract recruitment. Contractors expect paying weekly. Clients pay on 30 or 60 day terms. Every placement widens the gap before it closes it.
- Growth that outpaces cash
- Winning a large contract can be more dangerous than losing one. Ten new contractors means ten weekly payrolls funded months before the first invoice settles.
- Moving from permanent into contract
- Permanent recruitment bills on placement. Contract recruitment funds payroll continuously. Agencies making the switch often underestimate the working capital that requires.
- Seasonal or project-driven surges
- Sectors with sharp peaks need funding that expands and contracts with the desk rather than a fixed limit set months earlier.
Recruitment finance vs a business loan vs an overdraft
The difference that matters for a contract desk is whether the funding scales when you win work.
| Feature | Recruitment finance | Business loan | Business overdraft |
|---|---|---|---|
| Funding limit | Grows with your contract book | Fixed at drawdown | Fixed until reviewed |
| Secured against | Your unpaid invoices | Assets or a guarantee | Usually a guarantee |
| Suits weekly payroll | Yes, designed for it | Poorly, a lump sum runs out | Only up to the limit |
| Scales when you win a contract | Yes, automatically | No, requires a new application | No, requires a review |
| Cost basis | Service fee plus discount charge | Interest on the full balance | Interest on what you use |
| Can be withdrawn at short notice | No, subject to the agreement | No | Yes, repayable on demand |
| Best for | Contract and temp desks | A defined one-off need | A small buffer |
Indicative. For a contract desk the scaling point is usually decisive: fixed-limit products constrain growth precisely when it arrives.
What FundingLinks does, and what we do not
Worth being clear about, because this corner of the market mixes two quite different things together.
Several providers in recruitment finance bundle the funding with a full back office: payroll processing, timesheet management, invoicing and credit control. For an agency that would rather not build those functions in-house, that can be a sensible package.
FundingLinks is a broker, not a back office. What we do is compare funding across the lender market and get you the right facility on the right terms. We do not process your payroll, run your timesheets or chase your invoices, and we are not going to pretend otherwise.
Where a lender on our panel does offer bundled back-office services, we will set out exactly what is included and what it costs, so you can weigh it against a funding-only facility alongside your existing processes. Some agencies want the bundle. Others already have a payroll system that works and simply need the cash flow solved.
If a full outsourced back office is what you are after, say so at the outset. We will point you towards the providers who genuinely offer it rather than take you through a comparison that misses the point.
Is recruitment finance right for your agency?
Built for contract and temp desks invoicing business clients.
-
You are a limited company
FundingLinks arranges recruitment finance for UK limited companies, LLPs and PLCs.
-
You invoice business clients
The funding works against a business-to-business sales ledger. Approved timesheets billed to commercial clients are the ideal profile.
-
You place contract or temp workers
The product exists to bridge payroll against client payment terms. A purely permanent desk billing on placement has a different, usually smaller, funding need.
-
Your clients pay reliably
Lenders assess your clients as much as your agency, because they are the source of repayment. A ledger of strong commercial clients funds well.
-
Your ledger is reasonably spread
Heavy concentration with one client can limit how much is advanced. It is workable, but flag it early so we approach the right lenders.
Pros and cons of recruitment finance
It removes the constraint on a growing contract desk, at a cost worth understanding properly.
Pros
- Payroll is funded before clients pay, which removes the core constraint on a contract desk
- The funding line grows with your placements rather than capping them
- Lets an agency take on large contracts it could not otherwise cash flow
- Advance is usually available within a day of invoicing
- Frees cash that would otherwise sit as a payroll reserve
Cons
- Costs more than a straightforward term loan on a like-for-like basis
- Client concentration can reduce how much is actually advanced
- Some facilities carry minimum terms or minimum fee commitments
- Not designed for permanent-only desks
- Your clients may be aware of the facility, depending on the structure
How much does recruitment finance cost?
Two charges, the same structure as invoice finance. What varies is the advance rate, which is often more important than either.
Service fee
0.5% to 3%
Quoted as a percentage of turnover, covering facility administration and ledger management. Sits at the lower end where you retain credit control, and higher where the lender collects on your behalf.
Discount charge
1.75% to 3.5%
Works like interest on the money advanced, charged as a margin above Bank of England base rate for the period the funds are outstanding. The same basis as any other invoice finance facility.
Advance rate: Typically 80% to 90% of the invoice value, released within a day of invoicing, and up to 100% on some full-service facilities.
The advance rate matters more than the fee. A facility a couple of points cheaper is no use if the advance does not cover Friday's payroll. Work out what you actually need released each week, then compare facilities against that.
Minimum turnover varies widely across the market. Some funders start from around £50,000 of annual turnover, others want £750,000 or more, and confidential facilities usually sit at the higher end. Agency size is rarely the barrier people expect it to be.
Check the minimum commitments. Some facilities carry minimum terms or minimum monthly fees, which bite hardest in a quiet period when the desk is smaller than forecast.
Exact pricing depends on your turnover, client spread, sector, payment history and whether you want a disclosed or confidential facility. Our invoice finance calculator gives an indicative feel, and we confirm the real numbers before you commit.
Indicative only. The ranges above are drawn from a review of UK market data in August 2026. They are not a quote and no lender is bound by them.
How FundingLinks arranges recruitment finance
Getting to funders who understand timesheet-driven billing, rather than to everyone.
- 01
Tell us about the desk
Contract or permanent split, payroll cycle, client payment terms and how quickly you are growing.
- 02
We approach recruitment specialists
This is a sector with genuinely specialist funders. Getting to the ones that understand timesheet-driven billing matters more than volume of applications.
- 03
Compare on advance rate and total cost
The advance rate decides whether payroll is comfortably covered. We set it out alongside the service fee and discount charge so you can see the whole picture.
- 04
Fund the payroll
The facility goes in place and you draw against invoices as timesheets are approved.
Why businesses choose FundingLinks
Specialist support for UK recruitment agencies funding contract desks.
- 100+
- UK lenders compared
- 500+
- SMEs funded
- 35+ years
- Combined commercial finance experience
Whole-of-market panel
100+ UK lenders, including high-street banks, challenger banks, specialist lenders and alternative finance providers. We are an independent broker, not tied to any single lender.
Specialist, founder-led support
Founded by Sam Wells and Chris Findlow, with 35+ years' combined experience in commercial finance. You speak to specialists, not a call centre.
Clear process, secure portal
Track your enquiry, review lender offers and exchange documents in one secure portal. No email chains, no spreadsheets, full visibility from enquiry to drawdown.
Free to compare, success-based fees
No upfront charge to use FundingLinks. Fees apply only if you proceed with a facility, and they are agreed in writing before you commit.
Recruitment finance FAQs
Direct answers to what agency owners ask about funding payroll.
What is recruitment finance?
Recruitment finance is funding that lets an agency pay contractors and temps before its clients have settled the corresponding invoices. The lender advances a large proportion of an invoice raised against approved timesheets, usually within a day, so payroll can run on time. When the client pays, you receive the balance less the agreed fees. It is a sector-specific application of invoice finance and is also called payroll finance, temp funding or recruitment factoring.
How is recruitment finance different from invoice finance?
It is invoice finance shaped around how recruitment actually works. The underlying mechanism is the same: cash advanced against unpaid invoices. What differs is the fit, because lenders in this space are set up for weekly invoicing cycles, timesheet-driven billing and the pattern of a contract book growing quickly. If you run a contract desk, that specialisation usually means better terms than a generic facility.
Why do recruitment agencies need funding at all?
Because the money goes out before it comes in, every single week. Contractors expect paying weekly or fortnightly. Clients pay on 30 or 60 day terms. Every new placement therefore consumes cash before it generates any, which means the faster an agency grows the tighter its cash position gets. It is the defining financial characteristic of contract recruitment.
Can a new recruitment agency get funding?
Often yes, and this is a genuine strength of the product. Because lenders look closely at the creditworthiness of the clients being invoiced, a young agency placing contractors with established commercial clients can access funding that a conventional loan assessment would refuse. You will still need to show the agency is properly run, but limited trading history is less of an obstacle here than elsewhere.
Does recruitment finance include payroll processing?
Some lenders in this market bundle funding with back-office services such as payroll processing, timesheet management and credit control. Others provide funding alone. FundingLinks is a broker: we arrange the funding and compare lenders on it. Where a bundled back-office service is part of a lender's offering we will tell you what is included, but the service itself comes from the lender, not from us.
How much of each invoice is advanced?
Typically 80% to 90% of the invoice value, released within a day of invoicing, with the balance following once your client pays. Some full-service facilities go to 100%. The exact advance rate depends on your client base, your sector, how spread the ledger is and your payment history. These are indicative market ranges as at August 2026, not a quote. We set out what each lender will actually advance before you commit.
Will my clients know I am using it?
It depends on the structure. Disclosed facilities involve the lender in collections, so clients are aware. Confidential facilities keep the arrangement private and you continue to manage client relationships and collections yourself. Confidential facilities usually require a more established agency with proven credit control. Tell us which matters to you and we will factor it into the lenders we approach.
What happens if a client does not pay?
That depends on whether your facility is recourse or non-recourse. Under a recourse facility the advance is recovered from you if the client fails to pay. Non-recourse facilities, or facilities with bad debt protection added, shift some of that risk to the lender for an additional fee. Given that a single client failure can take out an agency's margin for months, this is worth deciding deliberately rather than by default.
Does it work for permanent recruitment?
Less well. Permanent placement fees are invoiced on placement rather than on a recurring payroll cycle, so the working capital pressure is much smaller. A permanent desk with occasional cash flow needs is often better served by a revolving credit facility. Agencies running both usually fund the contract side and leave the permanent side alone.
Which agencies can FundingLinks arrange finance for?
UK limited companies, LLPs and PLCs running contract, temp or mixed desks and invoicing business clients.
Is recruitment finance regulated?
Commercial invoice-based funding provided to limited companies for business purposes is typically unregulated. FundingLinks works only on unregulated commercial finance for UK businesses.
Can I switch from my existing funder?
Yes, and it is common. Agencies frequently outgrow their first facility or find the advance rate no longer supports the desk. Switching involves settling the existing arrangement and moving the ledger across, which lenders handle regularly. The main things to check are notice periods and any minimum term commitments in your current agreement.
Related products
Other funding that works alongside, or instead of, recruitment finance.
Common questions
- What is recruitment finance?Recruitment finance lets an agency pay contractors and temps before its clients have settled the corresponding invoices. The lender advances a large proportion of an invoice raised against approved timesheets, usually within a day, so payroll runs on time.
- Which industries is invoice finance best for?It suits business-to-business companies that invoice on credit terms and then wait to get paid. Across the deals we arrange, the sectors that lean hardest on invoice finance are food and drink, healthcare, wholesale, manufacturing and recruitment. Card-based and consumer businesses such as hospitality and retail rarely fit.
- What is the difference between factoring and invoice discounting?With factoring, the lender takes over collecting payment from your customers, so they know a funder is involved. With invoice discounting, you keep running your own credit control and, in a confidential facility, customers need not know. Factoring suits businesses that want to hand off chasing; discounting suits those that want to keep control.
- How much does invoice finance cost?Invoice finance usually carries two charges. A service fee for running the facility, typically 0.1% to 3% of turnover, and a discount margin on the cash you draw, commonly 1.75% to 3.5% above Bank of England base rate. Confidential invoice discounting sits at the lower end of the service fee range because you keep credit control; factoring sits higher because the lender collects for you. What you pay depends on your turnover, sector, customers and how much of the facility you use.
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Written by
Chris Findlow
Director, FundingLinks
Chris Findlow co-founded FundingLinks after more than 15 years across commercial lending, invoice finance and fintech partnerships, including senior leadership roles at Kriya. He brings deep lender-side experience across sales, partnerships and account management to help SMEs access the right funding.
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