Service companies in the oilfield industry need money to operate. From payroll to supplies to daily business expenses, having cash on hand is extremely necessary. However, consistent cash flow can be tricky when you have clients with extended payment terms. That’s why Oilfield Factoring would like to provide you with the following financing options for oilfield service companies.
Financing Options
Traditional Loans
Traditional business loans are a common financing option for many oilfield service companies. However, when you apply for a loan through a bank, you must qualify and get approved for a set amount. Once the approval process is complete, you will then get the cash you need. Keep in mind that this process can take weeks or months before you get access to any money. When it comes to day-to-day operations, this may not work for your company.
Furthermore, when you finally get approved for a traditional bank loan, the funding is usually secured by business and personal assets. You must also pay monthly interest to the bank depending on your credit and other factors.
Oilfield Factoring
Oilfield factoring is a common way for service companies to get the money they need to operate. If you are unfamiliar with the process, here is an introduction: Ultimate Invoice Factoring Guide. To put it simply, factoring is a financing option where a service company sells its invoices to a factoring company at a discount. This provides you with a wide variety of benefits.
- Fast Cash: Instead of waiting 30-60 days for a client to pay, factoring provides you with the immediate cash you need on your invoices. Depending on your situation, you can be advanced as much as 90% of your invoice value within 24-48 hours. Once a client pays their invoice, you will be paid the remaining balance minus a small factoring fee.
- Bridge the Gap: Factoring helps to bridge the gap when it comes to meeting payroll and other expenses while waiting for your clients to pay.
- No Debt: With factoring, you won’t have any debt you have to pay back like you would a traditional bank loan.
- Credit: Factoring doesn’t require good credit on your part. Rather its the credit of your clients that is taken into consideration.
- Cash Availability: When you factor your invoices, you will have a consistent cash flow that will allow you to grow your business and take advantage of new opportunities.
- Back-Office Support: Factoring companies provide back-office support including invoice management services, credit checks, and collections at no extra cost.
Investors
While asking friends or family to invest in your service company may sound like a good idea, you may want to think twice about it. When money comes between loved once, things can get difficult – especially if things don’t go as planned. Angel investors, on the other hand, are professionals that invest money into different businesses. However, they require some sort of profit-sharing, a percentage of your company, or their money paid back with interest.
If you do decide to finance your service company through investors, it’s important to do your research and be prepared to convince them to invest.
Choosing The Right Financing Option
Whether you decide a traditional bank loan, factoring, or investors is the right way for you to finance your business, it’s important to take the time to do your research. If you have any questions, contact Oilfield Factoring to speak with one of our financing experts. We are more than happy to answer any questions you may have and provide you with a free, no-obligation quote. Contact us by filling out our online form or give us a call at 1.866.834.7338.
