If your business provides services in the booming oil and gas industry, you know how difficult it can be to manage the ebb and flow of cash flow. The rapid growth of the Permian Basin and other U.S. oilfields has presented many opportunities and challenges – both of which require having adequate cash reserves. In order to take advantage of the high levels of industry growth, your business needs access to steady working capital for every step of your operation.
Invoice factoring for oil and gas companies is a financial solution that allows you to increase your working capital and facilitate sustainable growth, all without incurring any debt. To get started, your business sells its outstanding invoices to a factoring company (factor) at a discount. The factoring company quickly advances the funds you need – known as the “advance rate” – against your unpaid accounts receivable. After receiving payment from your customer, the factor will then forward the remaining balance of the invoice to you, minus their fees.
Take a closer look at some of the top ways invoice factoring can help you maintain and grow a successful oil and gas company:
Fast Access to Cash
Unlike other methods of financing, the factoring process is known for being quick and easy. Partnering with a reputable invoice factoring company provides access to cash almost immediately. Rather than waiting 30, 60 or even 90 days to receive payment from customers, once approved, your business can have cash in its bank account in as little as 24 hours. Some factoring companies, like Bold Business Capital, are also able to advance as much as 90% of your invoice’s value.
Easy Set-Up
Trying to setup financing with a traditional lender involves a lot of red tape. It can take weeks or even months of endless paperwork and stress to get approved, or to hear back that you have been denied funding; thus, wasting time your rapidly growing business could have devoted to finding other financing options. The factoring process, on the other hand, is simple and straightforward. After the factoring company receives your application and supporting documentation, your business can have an account setup and start funding receivables in just a few days. (The initial setup process averages 5-10 days.)
Stay in Control
Contrary to popular belief, using invoice factoring does not mean you lose control over your business’ invoices. Even though you are taking advantage of the factor’s services, you get to choose which invoices you wish to factor (and from which credit approved customers). In addition, factoring companies do not dictate how you spend the funds you receive, unlike other funding sources. You can use this steady source of working capital for every step of your operation, from covering payroll and boosting cash flow to purchasing equipment and funding expansion.
Administrative Support
The best factoring companies offer assistance with key back-office tasks like collections, online reporting, checking payment progress, managing records and more. Taking advantage of their free credit reporting services can also help you confidently take on projects, knowing that you are working with the most reliable customers. This additional support will not only reduce the time and effort it takes to run your business, but also help you build strong, positive relationships with your customers.
Strong Financials Not Required
One of the biggest challenges for business owners when searching for financing is finding a lender willing to work with a business that is new or recovering from credit issues. Unlike traditional financing options, factoring companies do not rely solely on your business’ creditworthiness when making their decision to factor your invoices. Instead, approval is largely based on the creditworthiness of your business’ customers. This makes it much more likely that a startup or a business rebuilding its credit will be able to secure a factoring line.
Funding with No Limits
With invoice factoring, there is no maximum financing amount. The amount available is only limited by the number of eligible invoices your business has to factor, making it one of the most flexible forms of financing. In fact, factoring is the only source of financing that grows with your sales and success; your line of credit grows as your receivables grow.
Does your oilfield business lack the working capital necessary to take on new projects and cover expenses? From oilfield hauling and pipeline construction to drilling and exploration services, invoice factoring helps oilfield companies manage cash flow crunches without taking on more debt. Your business can have cash on hand in as little as 24 hours, and you secure unlimited funding potential. It is easy to see why more and more businesses are using factoring to pay bills, invest in equipment, purchase supplies, meet payroll, hire more workers and fund growth.
Would you like to learn more about how invoice factoring works and how it can help your oil and gas company grow? Contact our cash flow experts at Bold Business Capital to get started.
Sources: https://www.debt.org/small-business/sba/
