The best business investment option for your recruitment business
From business loans to small business grants, franchising to joint ventures, take a look at the best options for financial help for recruitment businesses. As we explain the differences, we hope this helps you find the best option for your business.
If your small recruitment business was hit hard during the pandemic, you may now be looking for investment and support to stay ahead of the competition as things start to get back to normal. Equally, you might feel that the time is right to launch your own recruitment business. Perhaps you need a hand getting your start-up idea off the ground.
Whatever your situation, you want to know the different investment options to help your recruitment business thrive into the future. So let’s take a look at the main ways to get funding in the UK.
Business investment option 1: Government Recovery Loan Scheme
Covid-19 has affected nearly every business. If you still have a viable business proposition now that we're coming out of the pandemic, you can apply for the government’s Recovery Loan Scheme.
This business loan scheme is currently open until the end of 2021, and gives access to loans to help companies recover after the pandemic. Up to £10m is available for you to use for any legitimate business purpose. This might include managing your cash flow, investment and growth.
Funding is available through lenders who are accredited by the business development bank, British Business Bank. Although the government guarantees 80% of the finance to the lender, you are 100% liable for the debt. Business loans are available through a network of accredited lenders, listed on the British Business Bank’s website.
Business investment option 2: Government Start Up Loan
This option is for if you’re starting a new business or have been trading for no longer than 24 months to date. In this scenario, you can get a personal loan through the Government Start Up Loan scheme.
The loan can be between £500 and £25,000 at a fixed interest rate of 6% per annum. Each owner or partner in a business can apply for a loan, and a maximum of £100,000 is available per business. You must pass certain credit checks and be able to repay the loan over one to five years. There’s also 12 months of free mentoring and business support with the loan.
Similar to the Recovery Loan Scheme, the Start up Loan Scheme is offered by the British Business Bank.
Option 3: Angel investors
Angel investors could be a way to secure funds to launch your start-up.
Also known as business angels, these are usually wealthy individuals who’ve had their own successes in business. And they're are now looking to invest in companies at an early stage. In return, they ask for an equity stake in your business. They also want to see a specific return on their investment within a certain time frame.
Angel investors may want to take an active role in your business,. Or they may want to be a sleeping partner who just provides the capital.
Option 4: Franchising
There are different types of franchises, but the most common if you’re looking to start your own business is a business format franchise.
As a franchisee, you buy the right or the license from another business (the franchisor) to trade under their name in your area. This will usually be a well-known, well-established brand. You get a head start in building your business as you can use the brand’s existing customer base and extra marketing support the franchisor is offering.
As well as the initial fee of buying the franchise license, you’ll also need to pay ongoing royalties to the franchisor.
A franchise might suit you if you want to be your own boss but don’t have an original business idea of your own. However, as a franchisee you won’t have much control over how your franchise business will operate a. They do tend to stick to a tried-and-tested pre-existing system. You can find out more from the British Franchise Association.
Business investment option 5: Joint venture
A joint venture is a way to get the financial backing, ongoing support and expert mentoring that your existing recruitment business needs. It can also be the next step if you have an idea for a start-up.
There’s a perception that joint ventures are solely between large corporations, but this is false. Basically, entering into a joint venture with a larger group (or parent company) means that you get to benefit from their name, size, reputation and expertise.
They take care of all the back-end support functions, including financial systems and management, marketing and branding, contracts and legal, HR and IT services. This leaves you to concentrate on what you do best - growing your recruitment business and competing with larger agencies in your area or niche.
Unlike a franchise, you don’t pay up-front costs with a joint venture. You do receive a guaranteed monthly salary, however. Given all the uncertainty many recruitment businesses have been through recently, that’s definitely a plus point.
Entering a joint venture with the HR GO Group, for example, means you still own equity in your company. You’ll receive profit share bonuses, dividends and capital growth as the value of your shares grow.
More information on joint ventures with the HR GO Group
At the HR GO Recruitment Group we’ve invested in over 30 recruitment businesses, some of which are now multi-million pound companies. If you want to take advantage of our recruitment industry experience, read more of the benefits of a joint venture with the HR GO Group.