Oil Gas Factoring: What It Is & How It Works

Oil and gas factoring is a financing tool that speeds up cash flow. How it works is that oilfield factoring companies fund unpaid customer invoices as soon as they are issued. The oil and gas company can stay focused on growing their operations while the oilfield factoring company waits on the customers’ payments. Here’s how it works:

  • Generate a customer invoice. This could be a private company or a government contract, or even an incremental invoice. It could also be an earnings statement—anything that represents an earned-but-unpaid receivable.
  • Factor the invoice or earnings statement with a top oilfield factoring company and get same-day funding on as much as 95-98% of the invoice (called an advance), for a small factoring fee, which is often about 2-5% of the invoice amount.
  • Once your customer has paid, get any amount held back in reserve (if any).

Want to see how this would work for your business? Enter the amount of your typical customer invoice in the invoice calculator below and it will automatically estimate your advance and factoring fee.

If you’re interested in more information, apply for invoice factoring online and get a free, no-obligation quote from one of the best oil and gas factoring companies. Alternatively, scroll to the bottom of this article and request a quick quote by providing just your basic contact info and average monthly sales.

What types of businesses qualify for oil & gas factoring?

Nearly any type of business, service provider, or vendor involved in serving oil, gas, and energy companies may be able to factor invoices to speed up cash flow. This includes all of the various service professionals involved in sourcing, refining, transporting, shipping, and other aspects of oil, natural gas, and so on. It also pertains to oilfield food service companies, food trucks, coffee and office pantry services, and more. Click here to get a longer list of the types of companies that factor oil and gas invoices.

What are the benefits of factoring for oil, gas, and energy companies?

Oil and gas factoring speeds up organizational cash flow for natural gas and oilfield producers, contractors, suppliers, and more. In fact, it’s often referred to as cash flow financing or a cash flow financing tool. The main benefit of oil and gas factoring is expedited cash flow; however, that, in turn, produces benefits of its own. Let’s take a look at the top benefits of factoring for oil, gas, and other energy-industry companies:

1. Easier to make payroll, aka oilfield payroll funding

Similar to the top reasons staffing and temporary employers use factoring as a staffing payroll funding tool or staffing payroll loan, your company likely puts a lot of money into operations before you see customer invoices getting paid. Waiting on these payments could make it difficult for your business to meet payroll obligations, especially when starting up in a new oilfield or expanding.

Oilfield factoring companies allow you to leverage unpaid customer receivables or earnings statements, including government invoices, to unlock working capital. Whether you choose to factor invoices only occasionally to make payroll or on an ongoing basis to grow faster, we work with top companies for factoring oil, gas, and other energy receivables.

2. Get money to expand operations

Opportunities emerge very quickly in the energy industry. Especially with the tumultuous circumstances currently affecting oil and gas production in the US and worldwide. Factoring invoices puts working capital into your operation on the same day you factor, in most cases, giving you the ability to act quickly and expand or startup operations.

4. Cut your costs

It might be counterintuitive since factoring fees are the cost of this form of financing, but factoring invoices could actually help you reduce expenses. Cost-cutting occurs when you are able to take advantage of quick-pay or cash payment discounts from your vendors and suppliers. While your factoring fee could be as low as 2-5% with the best oil and gas factoring companies, suppliers could be offering you 5-10% discounts for paying quickly or in cash. In many cases, the money you save by unlocking money through factoring to pay vendors during quick-pay discount windows more than covers the cost of invoice factoring.

4. Be more competitive so you can land more contracts

If you don’t have to stress about how fast your customers pay, you can turn that into a competitive advantage. Offering more generous customer payment terms can be the difference between landing a great contract or seeing it go to a more cash-flush competitor.

5. Unlock money to buy new equipment or invest in technology

Sometimes all that’s standing between and oil or gas company and growth is having the equipment or technology needed to compete, produce more efficiently, or expand. Invoice factoring is an ideal way to finance growth initiatives as the additional revenue you can generate is likely to far outweigh the small cost of factoring invoices.

6. Meet unexpected repair or facilities costs

The unfortunate truth is that stuff breaks from time to time. Obsolescing equipment or facilities will inevitably lead to the occasional need to repair or upgrade either, or both. If you don’t have a bank line of credit in place, you may end up turning to high interest credit cards to finance repairs—but this is far from ideal. Instead, you can pay a small fee, called a factoring fee, which is likely to range from 2-5% to unlock all the money represented in one or more of your unpaid receivables. By speeding up cash flow, you can handle unexpected costs far more easily and keep your operations and revenue on track.

Get a free, no-obligation quote for oilfield factoring:

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