As one of the most rapidly changing fields of our time, the oil and gas industry can cycle quickly through production highs and lows. New technologies and new drilling zones present profitable new opportunities for professionals at oilfield services companies, but the ups and downs of demand and other changes can present significant challenges. To stabilize their cash flow, an increasing number of oilfield services companies are turning to invoice factoring to maintain and expand their operations.
Here’s how oilfield services factoring works. When the oilfield services company completes its work for a particular customer for a set time period and sends out its invoice, that customer may not pay for 30, 45, or even 60 days, based on the negotiated payment terms. Meanwhile the oilfield services company must continue to make payroll, pay its suppliers, and pay other bills to keep operating.
To help close the gap between completing the job and getting paid for it, the oilfield services factoring company advances its client a large portion of the invoice value, typically between 75% to 95%. When the oilfield services company’s customer pays the invoice, the factoring company pays its client the remainder of the invoice value, minus a small factoring fee. The oilfield services company can use the advance for payroll, vendors’ bills, new equipment, more workers, or whatever it needs to maintain and grow the business.
Oilfield Services Factoring Benefits
- Improves oilfield services cash flow by turning invoices into immediate cash
- Adds stability to revenues during seasonal ups and downs
- Provides a debt-free financing solution
- You receive the funds you’ve earned without waiting long payment terms
- Provides additional benefits such as credit checks and collections services
- Retain good employees by ensuring payroll costs are covered
Interstate Capital works with a variety of companies serving the oil and gas industry, partnering with them to turn the funds sitting in their accounts receivable into cash in their pockets. With high advance rates and low factoring fee structures, Interstate Capital is ready to help oilfield services companies take their business to the next level.