Invoice factoring vs invoice discounting for recruitment agencies

• Cash flow challenge: I need to pay contractors weekly, but clients often take months to pay invoices. I want to release funds quickly without putting my agency at risk.

• Perfect for: Recruitment agencies that want to bridge the cash flow gap between paying staff and receiving client payments.

Novuna helps recruitment agencies choose between invoice factoring and invoice discounting, securing the right funding model for steady payroll and growth. We compare providers, support your application, and ensure you get the best deal for your business.

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Why funding is critical for recruitment agencies

Recruitment agencies are particularly exposed to cash flow pressures because payroll is weekly or monthly, while client invoices can take 30–90 days to be paid. Funding solutions like invoice factoring and invoice discounting help smooth this gap.

What is invoice factoring?

Invoice factoring involves selling your unpaid invoices to a finance provider. The provider pays you most of the invoice value upfront and takes on responsibility for collecting payment from your clients.

Benefits:

• Immediate access to working capital

• Credit control managed by the provider

• Helpful for agencies without in-house credit management teams

Considerations:

• Clients know a third party is involved

• Costs may be higher than discounting

What is invoice discounting?

Invoice discounting also releases cash tied up in invoices, but your agency continues to manage collections. Clients usually won’t know you’re using a finance facility.

Benefits:

• Confidential - client relationships remain unchanged

• More control over credit management

• Often lower costs than factoring

Considerations:

• Requires strong in-house credit control

• May have stricter eligibility criteria

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Which is right for your recruitment agency?

• Invoice factoring is best for smaller agencies or those without dedicated credit control teams.

• Invoice discounting suits larger or more established agencies that want funding without client awareness.

• Choosing the right option depends on your agency’s size, client base, and in-house resources.

How Novuna Business Cash Flow helps

Novuna works with recruitment agencies across the UK to find the right cash flow solution. Whether it’s invoice factoring, discounting, or another form of payroll finance, we’ll help you keep contractors paid on time and grow your agency with confidence.