The upfront cost of hiring new staff can be costly for businesses. David Beaumont, regional director for Lloyds Bank Commercial Banking in Wales, looks at the funding options available to help firms on a recruitment drive make sure cash doesn’t get in the way of growth

Wales has had to work hard to keep pace with other parts of the UK due in part to the decades-long decline of major heavy industrial sectors like the steel industry.

But recent data shows that, when it comes to employment, this hard work is paying off.

The latest government employment figures reported only a 3.8 per cent unemployment rate in Wales, compared with a national average of four per cent.

What’s more, optimism among Welsh businesses in general is also on the increase. Our latest Business Barometer research showed a net balance of 24 per cent of firms expected their business activity to increase over the next 12 months, up two points compared with August.

The same research also shows that more than a third (38 per cent) of Welsh businesses are looking to increase their staff numbers over the next year, compared with only 15 per cent that expect headcount to fall.

Confidence and economic prosperity are fundamentally connected and it’s encouraging to see Welsh businesses are looking to boost their headcount and capitalise on this positive outlook.

In a business environment where the demands of the latest technology are increasing, bringing in new skill sets can help companies turn this challenge into an opportunity.

More broadly, investing in this way can improve staff morale by showing the business is growing which can have a positive impact on the economic prosperity of a local community.

But it doesn’t come without its challenges. For those on a recruitment drive, the initial cost of hiring a raft of new employees can be a costly hit for businesses, and failure to prepare ahead of it can be particularly damaging.

In most cases, new staff will need adequate time to embed themselves into a company before delivering a financial return. They will often require internal or external training to equip them with new skills, and they might need additional equipment.

As a result, a company might not see the financial benefit of increasing their headcount trickle trough for several months. This is where some short-term finance options can help.

What are the financial solutions?

One such option is invoice finance. This allows businesses to release up to 90 per cent of the value of an invoice, typically within 24 hours, providing them with the cash they need to use elsewhere, such as salaries or new equipment.

This is particularly useful for growing business that are issuing more invoices, and can be perfect for firms creating new jobs in line with their order books.

Similarly, growing businesses often need to increase the amounts of stock or raw materials they hold. Here, asset-based lending can help firms untap the value in these variable assets to free up cash that can be reinvested back into the business.

Alternatively, asset finance can be used to make large purchases such as new equipment or even new property, while spreading the costs of these investments over the life of the asset and protecting business’ working capital from the impact of large up-front costs.

There’s no doubt that the initial cost of increasing a business’ headcount can be daunting, but the benefits can far outweigh the challenges, and firms should not allow the upfront cost of recruiting get in the way.

With so much support available to firms, companies right across Wales should make the most of it, so they can continue to prosper.