Is Oil And Gas Factoring Right For You?

The oil and gas sector is among the competitive and promising industries. However, you need significant capital to scale your business since most expansion opportunities demand significant cash injection. So, how do you access such capital and even the playing field as a small or medium business? Among the most effective strategies includes oil and gas factoring. Factoring, in simple terms, is selling the value of your invoices to a factor at a discount. This means you get immediate cash flow, which translates to steady working capital. But is it right for your business? Virtually any business can benefit from factoring, but it depends on why you are considering it in the first place. Among the top situations that make oil and gas factoring a smart business decision include:

Slow paying clients

You have a client owing you a huge balance, and as their policy, you have to wait at least two months. They are a solid business with a great credit history, so you accept the terms. But, as new opportunities arise, would it be wise to wait for those months to lapse? Let alone the anxiety that comes with the waiting game; such a window could mean lost opportunities. This is where oil and gas factoring comes in handy.

You can sell such invoices and get immediate cash flow, for example, within 1-3 business days. Sure, you may have to part with 20% or so of the total invoice, but the immediate cash flow can help you secure more profitable business opportunities. This makes factoring an excellent solution for a business looking to finance great growth opportunities but being strained by slow-paying clients.

Coping with seasonal trends

Fluctuating sales patterns can impede your oil and gas business progress. Seasonal trends and other factors leading to such fluctuations can be financially straining, an aspect that can affect your operations. As you strive to maintain good working capital, cope up, and keep your business going, oil and gas factoring can help. For haulers, for example, you get immediate cash flow that helps keep your trucks rolling.

Such continuity, or lack thereof, can make or break your business. For instance, your competitors gain an edge if you win more business but can’t meet the volume due to the fluctuation and cash flow. Regaining such a competitive edge takes longer and more money, a hiccup you can eliminate through oil and gas factoring.

More working capital

Winning more business in the oil and gas industry may mean measures like offering longer credit terms. This requires more working capital to meet the growing demands. While such measures translate to more business, the extended credit terms mean your cash flows won’t be as amazing to keep you running efficiently. With oil and gas factoring, you can comfortably offer such terms and sell the invoices to finance your operations. It is a win-win since you get more business and immediate cash flow to keep building your business.

Managing rapid growth or seeking extra capital to take advantage of new opportunities is among the top reasons businesses turn to oil and gas factoring. Nonetheless, the services come in handy in many instances, and virtually any business, regardless of size and shape, can benefit.