The oil and gas industry has grown rapidly in the past few years. This growth has fueled great opportunities for companies that serve this industry. Demand for services such as oilfield transportation has been steadily increasing. However, the increase in demand has also created a financial hardship for some of the smaller providers in the industry.
The problem is that most smaller providers are not well financed, which can set them up for failure. Finding conventional financing for small oil and gas companies can be difficult in the current environment. However, the most common financial problem can be solved using an alternative solution.
Is cash flow tight?
Most large oil and gas clients pay their invoices in 30 to 60 days. These industry-standard payment terms are required by most large companies as a condition of doing business. However, many smaller oilfield service companies do not plan for this condition, which can create a problem for companies that need to be paid sooner in order to pay their own expenses.
Can you ask for quick payments?
Companies traditionally handle this situation by offering customers a discount in exchange for a quicker payment. Most companies in the industry offer early payment discounts to customers willing to pay in 10 days or less. While this strategy has benefits, it also has one very serious drawback: it leaves your customers in full control of your cash flow. And if your customers return to their slow payment habits, your company could find itself in financial trouble.
A better alternative is to accelerate your revenues using invoice financing.
Quick payments by financing invoices
Our solution offers a simple proposition: we advance a portion of your outstanding accounts receivable, which provides your oilfield services company with the cash flow it needs to meet its obligations. Transactions settle and close once your customers pay their invoices in full on their usual schedule. They do not need to pay sooner.
If used properly and regularly, invoice financing can provide your company with financial flexibility and the capacity to take on new customers without worrying about their slow payment habits.
For more information, please read “How does invoice factoring work?”
How to qualify
Since we are financing your accounts receivable, it is critical that your customers have good commercial credit. Fortunately, most companies in the oil and gas industry are well established financially and have good credit.
Additionally, your oilfield services company should meet the following criteria:
- Your invoices must be unencumbered by liens
- You must only invoice for delivered and accepted services and products
- The company should not have any serious tax problems
- The company should not have any ongoing legal problems
- The owners and managers should have oil and gas industry experience
Finance your growth
Most invoice financing lines are designed to be flexible. As long as your existing and new customers have good credit, the invoice financing line can grow dynamically alongside your sales.
This flexibility is a major distinction between invoice financing and other financial solutions, and it offers a strategic advantage to oilfield services companies experiencing cash flow problems due to slow-paying customers.
Get more information
We are a leading factoring company and work with oilfield services companies. For information, get an instant quote or call (877) 300 3258.