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Invoice Factoring for Oil and Gas
Oil and gas companies are very capital intensive. As a result, they can have large amounts of money tied up in invoices awaiting payment. This can hamper a company’s ability to grow and expand, limiting its potential. Banks are credit firms are hesitant to work with oil and gas companies due to the speculative nature of the industry, and those that do frequently charge substantially higher rates than they would offer other businesses. The result is that oil and gas companies can find themselves in a cash crunch that feels like there’s no way out. However, many oil and gas companies have found that invoice factoring is the answer they’ve been looking for.
What is Invoice Factoring for Oil and Gas?
Invoice factoring is a business process that involves selling invoices and other receivables to an invoice factoring company. The factoring company will pay an initial funding, usually 80-95% of the value of the invoice, and pay out the remainder once the invoice has been paid, minus their discount rate. Many invoice factoring companies provide funding within 24 hours, and so they can be a great solution to getting cash on hand quickly.
Benefits of Invoice Factoring for Oil and Gas
Invoice factoring affords several benefits for companies in the oil and gas industry. The first and biggest benefit is that it gets liquid capital into your accounts quickly. There’s no restriction on how you use this money, so you can spend it for more property rights, hiring more labor, buying new equipment, or anything else that your business needs to grow. The result is faster growth and fewer headaches waiting for customers to pay their invoices.
Moreover, invoice factoring also centralizes many bookkeeping aspects, making the administrative and accounting end of the business take less of your precious time, leaving more time to focus on growing your core business processes. The result is a greater profit for you and faster extraction and sales of your products.
Finally, invoice factoring checks the credit of your clients rather than the credit of your business. As a result it can be the perfect solution for new firms that don’t have the history needed for other types of funding, or firms that have had credit issues in the past.
As you can see, there are many benefits for invoice factoring for oil and gas companies. If your growing oil and gas company is facing a cash crunch and has outstanding receivables, try invoice factoring today!