Zetl Eyes Recruitment-Specific Business Finance
The United States may be in the middle of a big resignation, but professionals around the world are looking for more efficient, digitally-focused ways to change employers and connect with the right company. .
Recruitment firms and recruiters, like many other industries, are seizing opportunities for modernization. Yet the traditional cash flow patterns of this industry are not always conducive to growth, let alone investment in innovative technologies.
Shan Han, co-founder and CEO of Hong Kong and Singapore-based Zetl, told PYMNTS that the service economy in Asia is growing rapidly and will likely overtake traditional manufacturing in terms of its contribution to gross domestic product ( GDP) overall. Amid this expansion, recruiting agencies are struggling to keep pace.
âThis growth will be driven by the next generation of businesses, which are light on assets and see most of their costs on white collar,â Han said. “These companies, whether they are tech startups, consulting firms or recruiting agencies, are all currently completely underserved by the market.”
According to Han, by tailoring financial services to the needs of a company’s unique use cases, not just the size of a company, FinTech can help strengthen the financial stability of a market leading to more economic growth. large.
Cash flow is thin
Like many businesses providing services to other businesses, cash flow can be an issue due to late bill payments.
However, this challenge can be particularly acute for recruiting companies. The industry operates on the basis of supplying talent, which must be paid in a timely manner, no matter what. During this time, however, customers can take months to settle the bill.
This âmismatch,â as Han described it, between accounts payable (AP) and accounts receivable (AR) is preventing companies in the industry from growing.
âThis creates a big obstacle to growth for many companies of this type, as they need to have the bank balance before they can launch larger contracts,â he said. “This results in either slower growth while waiting to save necessary cash balances, often losing business to competitors in the process, or having to dilute their equity, which can be very costly for business owners. ‘long-term business. “
The pandemic has exacerbated this problem, as more companies have delayed payments due to their own disruptions related to the migration of AP to a remote work environment. In other cases, however, Han acknowledged that âsome end customers are notorious late payers,â using late payments as a cash management strategy.
Funding use cases
Cash hiccups are common, but the reasons behind them and the use cases for funding differ from company to company. As a result, traditional bank financing is not flexible enough to cope with the particular cash flow challenges of the recruiting services market.
âIf you only need two-month bridging payroll financing, why should you be stuck on a three-year term loan? Han pointed out.
Zetl, which in July raised about $ 700,000 in seed funding, wants to fill the recruiting industry’s cash flow gaps with targeted financing products, including invoice and salary financing. As the business grows, it introduces additional services tailored to the industry, including payroll technologies to manage workflows for hiring clients and an early access salary solution for talent. .
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According to Han, this industry-specific tactic is the future of alternative lending and FinTechs.
In the context of broader innovation in financial services, Han also highlighted the desirability of integrated financing to further ease friction on an industry-specific basis.
With the expansion of open banking across Asia, Han said the market needs to know your customer (KYC) and standardize corporate identity verification to remove barriers to accelerated innovation. .
âThe future of corporate finance will be based on use cases rather than products,â he noted. “Like [a small- to medium-sized business (SMB)], when you go to a bank, you have the option of choosing from limited loan products that often do not fit well with your actual needs … We believe that integrated financing tailored to specific use cases will be the future of corporate finance.