Over the past decade, the oilfield industry has grown tremendously. In turn, this growth has increased the demand for oilfield service companies like water haulers, mud haulers, gravel haulers, pipe haulers, and more. However, this increase in demand has brought with it certain problems for companies who aren’t financially prepared to manage the necessary cash flow. That’s why Oilfield Factoring would like to provide you with the following information about financing an oilfield hauling company with factoring.
Cash Flow Problems
Oilfield clients typically pay hauling service companies within 30-60 days. This, in turn, delays necessary cash flow a business needs to meet ongoing expenses, pay employees, and purchase equipment. This makes it almost impossible to wait that long for payment. For many service companies, this delay in payment is the number one source of cash flow problems.
Traditional Financing Problems
A simple way many companies use to resolve these cash flow problems is to try and secure traditional financing from a bank while waiting for their clients to pay. However, qualifying for traditional loans can be extremely difficult. Most banks require a company to have plenty of collateral, good credit, and a long history of successful operations before they are approved. Also, most lending institutions view your current cash flow as the main source of your loan repayment. This often rules out small to mid-sized service companies. However, there is an alternative financing solution for small hauling service companies that cannot qualify for traditional financing: invoice factoring.
Oilfield Factoring
Factoring provides the necessary cash flow using your invoices as collateral. Basically, a factoring company like Oilfield Factoring advances you a portion of your invoices up to 80%. This allows you to meet ongoing expenses without the worry of slow payments. Once your invoice has been paid by your client, you will then receive the remaining balance of the invoice minus a small factoring fee.
Factoring Advantages
One of the greatest advantages of factoring is that it’s easier to obtain than traditional business financing. The most important qualification is that your clients have good credit because their credit acts as collateral for the transactions. The good news? Most companies in the oilfield industry have been doing very well and have good, established credit.
Company Growth
Most hauling service companies in the oilfield industry use factoring to improve their cash flow. However, the biggest benefit of factoring is how it is used as a strategic source of financing. Unlike traditional financing, factoring lines are not restricted to credit limits. Your factoring line can grow as much as your sales do, as long as you work with quality clients. Because of this, factoring is an ideal solution for hauling service companies that are being held back due to cash flow problems.
Get More Information
Oilfield Factoring is a leading factoring company and works with oilfield hauling services companies. For more information contact us by filling out our online form or give us a call at 1.866.834.7338.
