Over the past decade, the oil and gas industry has rapidly grown. In fact, many individuals are capitalizing on this opportunity by starting new service businesses such as water haulers, equipment haulers, roustabouts, welders, and more.
However, starting and growing a new business in the oilfield industry isn’t easy. While many individuals have the technical knowledge and experience to manage operations, they may not have the resources they need to manage necessary cash flow.
While this problem may seem trivial, it’s important to understand that many businesses quickly go out of business due to cash flow problems. With that in mind, it’s essential to be familiar with financing information for service companies in the oilfield industry. Below, we’ll explore how oilfield factoring fits into this picture.
Cash Flow Problems
Most oilfield clients require specific payment terms when they sign a contract with you. Whereas most businesses have 30 or 60-day payment terms, large, multi-national corporations are pushing their payment windows to 90 days or more now. This is a pretty common industry practice, as most clients are used to negotiating these types of contractual terms.
The problem, however, is that many oilfield service companies can’t afford to wait to get paid. They simply don’t have the financial ability to maintain company expenses while waiting for their clients to pay. For many, securing the right funding for oilfield ventures, like fast, flexible programs tailored to oilfield service companies, becomes essential to cover payroll, equipment costs (such as leasing oilfield equipment), and other critical expenses during these long payment cycles.
To help solve this problem, there is a better, easier financial solution: oilfield factoring. You can finance your service company using invoice factoring, a business financing option designed to solve your cash flow problems.
Oilfield Factoring
Imagine if your oilfield clients paid their invoices in a matter of days rather than two months or more. If your service company is like others in the industry, you wouldn’t have cash flow problems because you would have enough money to pay your employees, maintain equipment, and manage other important business expenses.
You can accomplish this by simply factoring your invoices. This doesn’t require any changes to the payment terms you’ve established with your clients. Instead, you partner with an invoice factoring company like Oilfield Factoring, which finances your receivables from creditworthy clients. Your oilfield factoring company then provides you with a payment advance on your invoices and holds the invoice until your client pays. This enables you to offer your clients flexible payment terms without risking cash flow problems for your business.
Ease Of Use
Implementing an invoice factoring solution is relatively easy and can be used by most oilfield service companies. At Oilfield Factoring, we can finance your invoices in two installments. The first installment covers a significant portion of the invoice’s gross value and can be wired to your account in as little as 24 to 48 hours. You will then receive the remaining invoice amount once your client pays, minus a small oilfield factoring fee.
Keep in mind, however, that it’s important to have creditworthy clients in order to utilize any oilfield factoring solutions. This requirement works to your advantage because your credit isn’t taken into account. Furthermore, most established companies that you work with in the oilfield industry have established good commercial credit.
Strategic Advantage
Oilfield factoring can provide your service company with a strategic advantage. Unlike traditional financing solutions, invoice factoring doesn’t come with fixed financing limits. Rather, the amount you receive is based on the value of your receivables, the creditworthiness of your clients, and your invoice diversification. Furthermore, your invoicing line can grow as your business revenues grow, without having to repeat the whole underwriting process. This provides you with a flexible, dependable financial solution to support the growth of your company. It’s particularly useful in regions with volatile market conditions, such as the Rockies, where Colorado and Wyoming oilfield factoring supports service companies.
Invoice Factoring Solutions
Oilfield Factoring is a leading invoice factoring company that has funded hundreds of millions of dollars in invoices for our oil and gas clients, from water haulers to frac sand trucking companies, pipe welders, roustabouts, and those involved in oil and gas transportation. We are more than happy to answer any questions you may have and provide you with a specific oilfield factoring program that will fit the needs of your business to help you succeed. If you would like more information or are ready to get started, fill out our online form.
