Quick answer
Recruitment and labour hire firms borrow mainly to fund payroll for temporary workers while clients pay on 30 to 60 day terms, and to grow into new contracts, open offices or buy a competitor. Lenders read client spread, debtor days, margin per hour, labour hire licensing and how payroll obligations are kept current. Invoice finance and lines of credit are common; property security suits larger needs.
Key points
- Temp and labour hire payroll creates a built-in cash gap.
- Debtor quality is the heart of the lender's assessment.
- Labour hire licensing applies in several states.
- Payday Super from 1 July 2026 brings super forward.
- Common uses
- Payroll, growth, new contracts
- Lenders focus on
- Debtors, margin, licensing
- Unsecured options
- Typically $5k – $500k
- Property-secured
- $20k – $5m
Labour hire has a cash flow problem built into its model. Workers are paid every week; clients pay invoices at 30, 45 or 60 days. The more the business grows, the bigger that gap gets — a new contract with forty extra workers can mean several payroll runs before the first dollar arrives. Lenders know this well, and recruitment is one of the industries where purpose-built facilities work best.
What do recruitment and labour hire businesses borrow for?
- Payroll funding. Wages, PAYG and super for temporary and contract workers ahead of client payment.
- Winning a bigger contract. Mobilising a new site, induction costs, PPE and extra supervisors.
- New consultants and offices. Desks, billing targets and ramp-up time before a consultant pays for themselves.
- Technology. Applicant tracking, rostering, timesheet and payroll systems.
- Acquiring a competitor or a book of clients.
- Workers compensation and insurance premiums that land as large annual bills.
How do lenders look at a recruitment business?
The debtor book. For labour hire especially, the lender’s focus is on who owes you money and how reliably they pay. An aged debtors list by client, with payment history, is central.
Margin per hour. The gap between the charge rate and the full cost of a worker — wages, super, payroll tax, workers compensation, insurance — is where the business lives. Lenders look for margins that comfortably cover overheads and won’t vanish if award rates rise.
Licensing. Several states require labour hire providers to be licensed. In Victoria, providers must hold a licence from the Labour Hire Authority. Lenders and clients both want to see current licences.
Payroll compliance. Unpaid super, PAYG or payroll tax is a serious concern for a business whose main cost is labour. The ATO’s Payday Super arrangements, starting 1 July 2026, require super to be paid alongside wages, which brings that cost forward and tightens weekly cash.
Client concentration. One construction, logistics or health client providing most of the work makes the business exposed to that client’s decisions and payment habits.
About to put a new crew on site before the first invoice is paid? See if your agency qualifies — no credit check is run when you enquire.
Invoice finance, line of credit or term loan?
| Option | How it works | Best for |
|---|---|---|
| Debtor finance | Ongoing advance against the whole debtor book | Established labour hire with many clients |
| Invoice finance | Advance against selected invoices | Occasional large invoices or a single new contract |
| Line of credit | Draw and repay as payroll and payments move | Smaller firms needing a flexible buffer |
| Term or property-secured loan | Lump sum repaid over time | Offices, acquisitions, technology |
Many labour hire firms run a debtor facility for payroll and use a separate loan for growth projects. Keeping the two apart stops a one-off spend eating into the money meant for wages.
Why growth can be the most dangerous time
It sounds backwards, but a recruitment business winning lots of work can run out of cash faster than one standing still. Each new placement adds weekly wages immediately and revenue only weeks later. A firm doubling its temp numbers in a quarter may need to fund several extra payroll cycles before collections catch up.
Lenders look for owners who’ve mapped this out: how many workers will start, when the first invoices go out, the client’s terms and how payroll will be covered meanwhile. A simple weekly cash forecast for the first three months of a new contract makes an application far more convincing.
Documents worth preparing
- Business bank statements for six to twelve months
- Aged debtors list by client, with terms
- Major client agreements and rate schedules
- Labour hire licences where required, and insurance certificates
- BAS, payroll summaries and financial statements
Red flags lenders notice
- Super or PAYG arrears, even small ones.
- Debtors drifting past terms without escalation.
- Thin margins that don’t account for payroll tax or workers compensation.
- A single client dominating the book.
- Operating without a required licence.
What a lender will want to know
- How many temporary workers are on assignment each week?
- Which industries and clients do you supply, and on what terms?
- What’s your average margin per hour after on-costs?
- Do you hold labour hire licences in the states you work in?
- What will the new facility allow you to take on?
Illustrative example
Illustrative example: a labour hire firm supplying warehouse and logistics workers wins a contract adding 35 workers across two sites. Its client pays at 45 days. Weekly wages for the new workers come to about $50k, so the firm faces several payroll runs before payment. It sets up a $250k debtor finance facility that advances against approved invoices, and keeps its existing overdraft as a buffer. Once the contract settles into rhythm, the facility rises and falls with the debtor book.
For businesses that supply workers in cleaning or security, the cleaning business guide shows how lenders read contract-based service firms. The industry finder compares more.
Permanent recruitment versus labour hire: different lenders’ lenses
Not every recruiter has the same cash profile. A permanent placement agency invoices a fee once a candidate starts, often with a replacement guarantee if the hire leaves early. Its main costs are consultants’ salaries and commissions, advertising and technology. Lenders read it more like a professional services firm: steady fee income, consultant productivity and how many placements fall over during the guarantee period.
A labour hire or temp business is closer to a payroll operation. Revenue is large but margins are slimmer, and almost every dollar of cost is wages that must be paid on time. Lenders read it through the debtor book and payroll compliance first.
Plenty of firms do both. If that’s you, show the split clearly — placement fees and temp margin in separate lines — so a lender can see which part of the business drives profit and which drives cash needs. It often leads to a better-shaped facility, such as debtor finance for the temp side and a modest term loan for growing the permanent desk.
How is pricing set?
Each facility is priced on the firm’s own circumstances: debtor quality, client spread, trading history, security and how much is drawn. Invoice and debtor finance typically involve a service fee as well as a charge on funds used, and some providers set minimum usage. Property-secured loans can involve legal and valuation costs. Ask exactly how fees are calculated so you can compare options fairly.
Ready to fund your next contract?
If payroll timing is the only thing between your business and a bigger contract, start with a 60-second enquiry. There’s no credit check to ask, and your details won’t be shopped around a long list of lenders. A real person who understands labour hire cash flow will look at your situation and call you. Fill it in accurately — turnover, debtor terms and the amount — so the first suggestion lines up with how your business really runs.
Frequently asked questions
How do labour hire businesses fund weekly payroll?
Many use invoice or debtor finance, which advances a share of each approved invoice so wages can be paid before the client settles. Others use a line of credit or a property-secured facility for a buffer.
Does a permanent placement agency need finance too?
Sometimes, though usually less than labour hire. Permanent recruiters are paid a fee on placement, often with a guarantee period, so finance tends to go towards hiring consultants, technology and new offices.
Do lenders check labour hire licences?
Yes, in states with licensing schemes. Operating without a required licence is a serious problem for any lender and for the clients using your workers.
Will Payday Super change my cash flow?
For many labour hire firms, yes. From 1 July 2026 employers pay super with wages rather than quarterly, so cash leaves the business sooner. Factoring that into your facility size is sensible.
Can I get finance if one client is most of my revenue?
Possibly, but lenders will look closely at that client's payment record and contract. Some invoice finance providers cap how much of the facility one debtor can make up.