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How to scale your labour hire business

Looking around the country, it is fair to say that things are bustling in the construction, manufacturing and primary industries. The NZ Labour market snapshot shows how fast online vacancies have increased!

MBIE Monthly Labour Fact sheet Feb 2022 - All Vacancies Index
All Vacancies Index (AVI) − online job advertising, MBIE Monthly Labour Fact sheet Feb 2022

The pandemic lockdowns forced many businesses to reduce working hours for their permanent and casual staff. As a result, the number of underemployed people has actually increased, even as total unemployment is in decline.

The trend towards agile workforces and increasing use of labour hire firms has been going strong since 2018. The adaptability of Kiwi businesses and workers is worth admiring.

The stories of labour hire firms are inspiring and also point out one of the biggest challenges in growing a labour hire firm.

Growth challenges for labour hire firms

In a tight labour market, being able to pay well and on time is critical to support growth. Delay or missing a contractor payment, runs the risk of losing the workforce, or worse permanently damaging brand reputation.

Labour hire firms need to pay contractors at set intervals, typically weekly, while they are paid on standard contract terms i.e. a month later. This can create a cash flow gap that needs to be bridged by working capital facilities. Without cash flow, labour hire companies cannot provide payment security to their contractors.

Being asset poor makes borrowing from banks challenging

Labour hire firms don’t tend to own significant assets, especially at start-up. Which makes getting bank overdrafts impossible because there is no trading history. Banks say the only way to secure working capital is to secure investment or borrow against the family home. With the impacts of the CCCFA and tightening credit conditions, access to credit is getting harder.

Invoice finance to speed up cash flow

This is where invoice financing is most effective in providing working capital solutions. Invoices can be borrowed against with no additional security required because we treat invoices like assets.

We believe that entrepreneurs take on enough risks, without needing to put their personal assets as security, to grow. So we design finance solutions to speed up cash flow to help businesses grow.

How it works for labour hire

We work with a number of labour hire firms to structure working capital facilities that scale with their contracts.

As soon as a firm secures a new customer, they can draw down funds from issued invoices. This means that they can offer consistent payment terms to their contractors while they are paid monthly by their clients.

The invoice finance facility scales with the value of invoices the firm issues. Unlike a bank overdraft, invoice finance grows with the value of invoices issued. We call this self-scaling working capital.

We believe in creating win-win cash flow solutions that help entrepreneurs grow. If you’re interested in seeing how it could work for you, use our online calculator to see how it could work for you.