The Wall Street Journal recently reported on increased growth in the service sector of the U.S. economy, noting that July 2013 sales figures increased by the largest percentage seen since February of this year. As service-oriented companies expand and engage with the consumer marketplace, their need for working capital increases to a corresponding degree. Asset-based lending solutions can offer real help for these service providers in managing their ongoing cash flow requirements and dealing with financial obligations and emergencies as they arise.
Published August 5, 2013, the Wall Street Journal article included figures released by the Institute for Supply Management that indicated solid growth throughout the service industry sector during July of 2013. This financial expansion is largely attributed to increased sales and the acquisition of new clients and new orders by companies in this market segment. Service industries include medical, construction, hospitality and food service, financial and computing service providers; these collected industries provide employment for approximately 90 percent of the U.S. workforce. Despite slower hiring in recent months, increases in consumer spending have created new opportunities in the service industry segment of the national and international marketplace.
Companies in the consumer services sector often maintain ongoing contracts and service agreements with clients that amount to a significant portion of their revenue. Delays in receipt of payments on these invoice agreements can impair the company’s ability to manage its expenses and to continue operations in their niche industry. Accounts receivable lending arrangements are ideal for businesses that maintain ongoing service contracts with their clients and that bill for services after they have been rendered to their customers. By monetizing these outstanding invoices to acquire immediate cash, service industry companies can often expand their services and take on new challenges to achieve a higher degree of success in the service industry.
Depending on the particular industry in which the company is primarily employed, the options available for invoice and accounts receivable funding include lines of credit, loans and factoring arrangements. Factoring differs significantly from lending arrangements; rather than using invoices as collateral, factoring allows financial institutions to buy these contracts outright at a slightly discounted rate. In all cases, however, these alternative lending arrangements provide added flexibility and operating cash to ensure maximum growth and profitability in the modern service industry.
By partnering with advanced asset-based lenders like Commerce Commercial Credit, service providers can increase their financial resources and ensure sufficient funds for continuing operations in the expanding consumer and business-to-business marketplaces.