If you have a company involved with the oil and gas sector, you probably appreciate the exponential rate at which this industry has been growing. This trend is likely to continue even with volatile oil prices observed over the past few months.
Due to the volatile market and partly due to the conservative approaches taken by the oil and gas industries, most customers prefer longer terms. That means they get to make payments later than they did in the past.
Though the oilfield companies still get paid, the payments may not come in time to meet the supplier’s financial needs. Rather than stress over whether you have adequate funds to pay employee salaries or cover development and research projects, most companies turn to oil and gas factoring for quick funding.
Oil and gas factoring offers the company fast financing by turning its receivables into cash. This financing type enables companies to undertake new growth opportunities by eliminating payment wait. It is the perfect alternative to traditional lending.
So why would you need to seek oil and gas factoring? Here are some of the needs you might want to meet;-
- To purchase new equipment
- Helps fund a research project
- To offer more generous credit to your customers
- Finance a promising development project
- Hire extra staff while paying salaries with ease
How Does It work?
Gas factoring is not a loan. It is a way for companies to get paid faster by trading their receivables for a cash advance. Once your application is approved, you submit your unpaid invoices and receive up to 95% of their value within 24 hours. The remaining amount is cleared once your customers meet their end of the bargain.
That said, there is no limit to the amount of funding you can receive. As long as you have unpaid invoices, finances are available. The factoring company collects the money from your customers and charges a small fee for its services. This way, you do not have to worry about following up on customers instead of focusing on your business.
Even better, it does not take a lot to qualify for oil and gas factoring. The approval is based on your customers’ creditworthiness, given that they are liable for invoice payment. This means that you do not have to have a great credit score or be in the business for a particular time, unlike traditional lending options.
Benefits of Gas Factoring
Ensures Consistent Cash Flow
Failure to get paid on time can halt cash flow for your business. Gas factoring ensures your company has adequate cash to meet its expenses, including paying salaries, purchasing new equipment, and venturing into new areas.
Quick And Easy Process
Invoice financing is one of the quickest and easiest ways to get the funds you need. There is no credit check, as the company purchasing your receivables is only interested in your clients and not you.
This makes invoice financing the perfect choice for a company trying to get out of debt and improve its credit score. Besides, the process is flexible as you choose the invoices you wish to factor, whenever you need funds.
No More Worrying About Expenses
In the oilfield industry, clients may take longer than expected to clear their debts. This causes a shortfall in cash flow on your end to meet necessary expenses such as water, electricity, and salaries.
With invoice financing, the good news is that worrying about cash flow becomes a thing of the past. When you factor in, you receive money almost immediately to ensure you do not fall behind on your bills and expenses.
No New Debt
With invoice financing, you are not taking a new loan, like is the case in banks. Instead, you are getting funds with invoices of money you are yet to be paid. That is hugely beneficial for companies seeking to work their way out of debt.
Gives Your Business A Chance To Grow
If you keep waiting for your invoices to be paid, you will never have adequate cash to expand and grow your business. Every time a client clears their debt, the money quickly goes into the outstanding bills, and little is left to invest.
Invoice financing gives you funds when you discover a new opportunity before it is too late.
The Oilfield business is quite marshy, especially when you have clients who keep on delaying payments. Fortunately, you can turn to invoice financing companies to get you the funds you want while they are left following up on the debt.