The State of U.S. Funding for UK Recruitment Agencies

The United States remains one of the most lucrative and largest recruitment markets in the world and despite political noise around offshore hiring, UK recruitment firms remain well-positioned to thrive, particularly in niche and in-demand contractor markets. But to tap into it seriously, UK agencies need the right financial foundations to expand without unnecessary risk and then scale with confidence.

Success in the U.S. hinges on more than just demand. It’s about funding the upfront costs of contractor payroll, navigating long client payment cycles (60–90 days), and setting up without the drag of red tape or a physical US presence. Whether you’re testing the market or preparing for high-growth expansion, access to the right kind of U.S. funding will be critical. In this blog we explore:

• The US Funding Landscape
• Challenges in Securing Funding
• Types of Funding Available

The US Funding Landscape

The funding landscape for contract recruitment agencies has evolved dramatically over the past few years. In the past, agencies typically relied on traditional financing sources, such as bank loans and lines of credit. However, these are no longer the only (or possibly best) option for UK Agencies looking to operate in the United States.

Specialist funders now offer tailored finance solutions designed specifically for US contract staffing, with features like 100% invoice funding, multi-currency support, and even payroll and compliance services bundled in.

Then (Pre-2018)	Now (2024–2025)
Reliance on traditional bank finance	Recruitment-specific funders with industry focus
UK-centric operations	International contractor placements common
Manual credit control and payroll	Integrated tech platforms for funding, payroll & back-office
Compliance managed separately	As standard with (some) Outsourced funding and EoR/AoR services
Static credit criteria	Flexible, risk-based underwriting approaches

 Agencies are also facing more scrutiny from U.S. clients and PRO/MSPs, for example extended supplier qualification processes, tighter payment terms, and greater compliance demands. That’s why funding is no longer just about cash flow - it's a strategic lever for growth.

For UK SMEs, this shift in funding options is a welcome development. Many agencies, especially those in early growth stages, find it difficult to secure traditional financing. They simply can’t meet the criteria required, especially for U.S. funding, such as strong credit histories, detailed financials, and physical collateral.

On top of that, the application process for bank finance can be lengthy and administrative-heavy. Time that could be better spent on core activities like sourcing candidates and building client relationships.

Specialist recruitment funders streamline access to working capital, making it easier to scale contract placements without stretching internal resources. They understand the complexity of contract recruitment and offer tech-driven platforms, faster access to funds, and flexible models built around your business. In short, the right funding partner can help you scale with confidence, globally.

Top Challenges UK SME Agencies Face in Securing U.S. Funding

Expanding into the U.S. contractor market can be a big opportunity for UK recruitment agencies, but securing the right funding to support that growth is often easier said than done.

Small and mid-sized agencies, in particular, can struggle to access U.S. based finance due to a range of legal, financial, and operational hurdles. Traditional funding routes like bank loans tend to be out of reach or highly priced, as many specialist U.S. funders have criteria that UK agencies can’t easily meet.

Here are some of the most common barriers:

• No U.S. legal entity – Most funders require a U.S. company (LLC or Inc.) to provide finance. Without one, UK agencies are often seen as high-risk.
• No U.S. credit history – UK businesses don’t have U.S. credit scores or payment records, making it hard for lenders to assess reliability.
• No U.S. bank account – Without U.S. banking, agencies struggle to manage payroll or receive client payments efficiently.
• Legal and tax complexity – U.S. contractor placements may trigger tax and compliance obligations that complicate funding approval.
• Contractor model risk – Weekly payroll and long client payment terms can put pressure on cash flow, which funders see as a higher risk.
• Lack of collateral or guarantees – Many smaller agencies don’t have U.S. assets or the ability to offer personal guarantees, limiting financing options.
• Unfamiliarity with U.S. clients – Funders need confidence in client payment reliability, which is difficult without a local trading history.
• Funding restrictions – Many finance facilities include export or concentration limits that can cap the amount of U.S.-based revenue or client exposure, restricting your ability to grow overseas.

To overcome these early challenges, many UK agencies start by partnering with a U.S.-based Employer of Record (EoR) that packages funding, payroll, and compliance into one managed solution. Others work with UK-based funders who understand the nuances of international contractor placements and offer specialist state-side finance for U.S. operations.

As agencies grow and establish a stable US contractor base, more funding options begin to open up. With a proven track record, better credit strength, and possibly a U.S. entity in place, they can explore models like invoice factoring or asset-based lending (ABL), which in the right circumstances can sometimes offer greater flexibility and lower costs for more mature businesses planning long-term expansion and increased operational headcount.

5 Types of U.S. Funding for Recruitment Agencies

As UK agencies expand into the U.S. market, understanding your funding options is key. From early-stage payroll support to long-term capital solutions, here are five common types of U.S. funding - each with different levels of control, flexibility, and risk.

1 - Invoice Discounting / Factoring

Classic recruitment finance, where you access cash tied up in client invoices. The funder advances 80–90% of the invoice value upfront, with the rest paid (minus fees) once the client settles.

• Supports cash flow without waiting for long U.S. client payment terms.
• Invoice factoring involves the funder handling collections — this is disclosed to your client.
• Invoice discounting is usually confidential — you retain credit control and collections.
• May come with contract restrictions (minimum volumes, lock-ins, concentration limits).

Good for agencies with reliable clients/steady invoice flow and internal credit discipline, but watch out for provider restrictions.

2 - Payroll Funding (Recruitment-Specific Finance)

A full-service solution for contract staffing where the funder pays 100% of contractor payroll, handles back-office tasks, and gets repaid once the client pays.

• Covers gross pay, taxes, and compliance in both UK and U.S. settings.
• Back-office support includes timesheet processing, weekly payroll, invoicing and fully outsourced credit control.
• Can include integrations with EoRs/AoRs for compliant U.S. workforce onboarding.
• Helps smooth cash flow and reduce admin burden - especially useful in early-stage expansion as funding scales with your contractor book growth.

The go-to for SME recruiters growing U.S. contractor placements with limited in-house ops.

3 - Asset-Based Lending (ABL)

A revolving line of credit secured against business assets - usually receivables, but can also include equipment or property.

• Grows as your accounts receivable ledger expands - scalable for larger ops.
• Often includes covenants and monitoring, so best suited for established firms.
• Requires more rigorous financial reporting and potentially U.S. legal structure.
• May offer better pricing than factoring at higher volumes, with more flexibility over time.

Best for mid-sized agencies with multiple revenue streams and more predictable billing cycles.

4 - Line of Credit (Bank or Alternative Lender)

A set borrowing limit you can draw down and repay as needed, often used for smoothing working capital or investing in growth.

• Available through banks or non-bank lenders (including some UK funders with U.S. reach).
• Requires strong financials, solid credit history, and possibly U.S. entity status.
• Usually comes with personal guarantees, collateral, or restrictive terms.
• Can be more cost-effective than invoice finance, but slower to secure and less flexible for new U.S. entrants.

A useful option for mature agencies with solid U.S. infrastructure already in place.

5 - Private Equity / Investor Funding

Capital investment in exchange for an ownership stake or revenue share — often used to accelerate U.S. market entry or fuel acquisitions.

• Not debt-based - no repayment required, but dilutes ownership.
• Investors can bring networks, credibility, and strategic input, not just cash.
• Requires a clear growth story, business plan, and strong leadership team.
• Involves more rigorous due diligence and longer deal timelines.

Best for aggressive expansion plans, strategic hires, or building infrastructure at speed.

Summary

Entering the U.S. recruitment market is a promising opportunity, but success requires solid financial foundations to manage payroll demands, long payment cycles, and compliance complexities. While traditional funding can be challenging for SMEs, new tailored options now better support UK agencies expanding stateside. Choosing the right funding not only smooths cash flow and reduces admin but also empowers sustainable growth - helping you confidently unlock the full potential of the U.S. market.

Last Updated: 05/06/2025