Asset-based Loans – A Working Capital Solution For Service Businesses
While service businesses do not necessarily require an intensive plant and equipment operational base, human capital expenses for these types of businesses account for a huge balance on the profit and loss statement. The majority of operational expenses are made up of labor costs; these expenses demand frequent, ongoing settlements, usually weekly or bi-weekly.
Investments in information and technology also constitute a major portion of overall expenditure for service businesses. In line with global trends, service businesses in North America are either highly digital or steering toward huge digital transformations.
Working capital management for service businesses requires focus on ensuring current assets—most importantly cash— is available to settle current liabilities and other obligations when due. Having simple, reliable access to cash is essential for service businesses, especially as accounts receivable balances build up on credit sales.
To ensure continuous business operations and keep quality services running for customers, heavy recurring labor and project expenses need to be funded. The mismatch between current assets and liabilities needs to be effectively managed to avoid a cash crunch.
Working Capital Management And Financing Options
With access to funds through alternative lenders, service businesses can take advantage of growth opportunities, continuous operations and digital transformation projects.
When in dire need of cash to manage business operations, service based organizations may not have certain financing options such as equipment financing and inventory financing but can explore different forms of loans and accounts receivable financing.
Accounts receivable can be leveraged to obtain financing toward growth and settling current liabilities. Service businesses can sell accounts receivable at a discount in exchange for access to cash for paying off huge payroll costs, vendor payables and other outstanding expenditures. Accounts receivable financing provides an effective option to fund business operations in the absence of collateral or other strict conventional funding requirements.
Another working capital management strategy service business may adopt is leveraging other eligible assets such as available software and technology, intellectual property and patents or other intangible assets owned by the business. Valuable and eligible intangible assets can be explored as a collateral towards intangible asset financing.
Financing Your Service Business With Accord
When you think of effective working capital management strategies to help you thrive, think Accord. Accord Financial provides financing to match your current assets and liabilities. Your service business just needs to focus on generating more sales and issuing invoices, while Accord utilizes unparalleled expertise to manage your accounts receivable.
Accord Financial has effectively supported a plethora of service based businesses and continues to be the preferred partner for service business financing. Within a wide range of businesses in recruitment, transportation, security, maintenance, and financial services, amongst others, Accord Financial provides finance and cash flow solutions to solve your business’ unique challenges.
Our highly experienced team utilizes industry-leading technology and software to make asset-based financing and factoring a seamless process for service businesses. We are committed to financing and moving businesses forward while supporting growth in a challenging economy and business environment.