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Streamlined oilfield invoice factoring
WHAT'S IN THIS GUIDE
Many businesses in the oil and gas industry are very seasonal. Because of this, their cash flow is often lumpy and they experience cash flow gaps. Additionally, the project-based nature of much of the work within the oilfield industry means much of your earnings are tied up in accounts receivable, making it challenging to cover everyday expenses or take on new projects that would let you grow your business.
If you’re frustrated with chasing down unpaid invoices and dealing with late payments, you’re not alone. Research shows that across industries, business owners experience a ton of stress over payment challenges. We’ve experienced it personally as entrepreneurs ourselves, as well as through our work with clients in the oilfield and other industries. We know that it can often feel as if accounts payable departments are trying to slow things down with delays and disputes, and the stress this places on you as a business owner. Never mind that common payment terms for oil and gas are already 60-90 days, but add in these issues and it can stretch them out for months.
FundThrough has helped hundreds of companies in oil and gas with these exact issues by paying their invoices in days, saving them admin costs of being in constant communication with AP departments and chasing down payment, and giving them back valuable time in their day that they can instead spend on growing their businesses.
Oilfield factoring is a form of accounts receivable factoring in which you sell your unpaid invoices to a factoring company for a fee in return for cash in a matter of days — well ahead of net terms. Essentially, factoring is a tool that allows you to receive your invoice payments ahead of the typical 30, 60, or even 90 days for payment. By design, invoice factoring for the oilfield provides a swift and dependable solution for cash flow issues that can inhibit business growth. With factoring, you’re in control of when your outstanding invoices get paid, unblocking cash flow tied up in slow receivables, smoothing out cash flow due to seasonal strain, and reducing your admin load.
Knowing how the factoring process works will help you decide if it’s the right funding method for you and your business. It will also help you be able to better evaluate different factoring oilfield companies. After our simple set up, you can submit invoices to FundThrough for funding without the need for filling out time-consuming paperwork. Here’s how it works:
1. Create (or connect) your account. The first step in oilfield financing is to create a free account or connect your QuickBooks or OpenInvoice account to FundThrough’s dashboard. Setup takes just a few minutes. After that, we just need some basic information about your business to get you set up. A tech-backed company like FundThrough makes it easy to apply for funding online.
2. Select which invoice(s) to fund. You can upload into FundThrough’s online portal directly, or pull in eligible invoices from QuickBooks or OpenInvoice. We provide unlimited funding for your business based on the size of your outstanding invoices. Simply choose the invoice(s) you want to fund, and submit them in one click (after initial customer setup).
3. Get funded, then, get back to business. Upon approval, funds are deposited into your business bank account as soon as the next business day. You can then get busy putting your capital to work for growth projects, covering payroll, purchasing equipment, making strategic hires, and more. Because factoring is not a loan, you don’t have to worry about taking on debt or making repayments.
4. Your customer pays the factoring company. When the invoice is due, the customer pays the factoring company according to the original invoice terms, and the process is complete.
There are several benefits of factoring for oilfield contractors. These are just some of the benefits to factoring the oilfield service businesses we work with have shared with us:
While different businesses will use factoring oil field services for different reasons, there are a few common use cases that come up time and time again. These are the top reasons for using oilfield factoring that we’ve heard from oil and gas companies like yours.
Factoring an invoice is a lot less complicated than you might think. In fact, in just a few simple steps, you can get the cash flow you need to cover any gaps, or grow your business.
1. See if you’re qualified. The first step in factoring an invoice is to create a free account or connect your QuickBooks or OpenInvoice account to FundThrough’s dashboard. Next, provide some basic information about your business to get started and see if you qualify.
2. Select which invoice(s) to fund. FundThrough’s portal lets you upload invoices directly, or pull in eligible invoices from your QuickBooks or OpenInvoice account. We offer revenue-based financing, which means the more you invoice the more funding you can access. Simply choose an eligible invoice to fund, and submit in one click (after initial customer setup).
3. Get funded. Upon approval, funds are deposited into your business bank account as soon as the next business day. You can then get busy putting your capital to work for growth projects, covering payroll, purchasing equipment, making strategic hires, and more.
The below is a good summary of what to look for in oil and gas factoring companies.
Industry Experience: Experience with oil and gas energy industry means that a factoring company will understand the complexities of oil and gas invoicing and payments, making them easier to work with.
Speed and Efficiency: Many oilfield invoice factoring companies still use manual, paper-based processes, leading to a slow process. Save yourself time by partnering with a company that uses technology and automation to get you funded in days. Speed matters because you can’t pay your hires, buy materials, or go after that growth project if you don’t get funded quickly.
Unlimited Funding: For oil and gas specifically, the potentially unlimited funding that oilfield invoice factoring provides is appealing. You might find yourself in a position where you need to access a large amount of funding for your projects, and you’ve hit your limit with line of credits or other factors. Take advantage of every opportunity without worrying about funding limits with FundThrough — even into the millions!
Fee Transparency: All factoring companies charge a funding fee that could range from 1% to 5% per 30 days. But they don’t all tell you about hidden fees – like service fees, sign-up fees, or annual fees – that can leave you with less of your invoice than you thought. You can check out FundThrough’s pricing here.
Advance Rate: This refers to the percentage of the invoice amount that the factor is willing to give you up front. Many factoring companies only have advance rates of 80%. The whole point of a factoring program is to put your money to work, so you need as much of it upfront as possible. With FundThrough, you get the entire invoice value, less the factoring fee, upfront.
Partner in Your Success: This should be a given, but it’s often not. Whoever you choose for your oil and gas factoring needs should be invested in your long-term success and able to grow with you as your business grows. At FundThrough, that means finding financing solutions to help you get funded, dedicated account management, and treating your customer like our own. (For many companies in oil and gas, we can also accommodate Houston invoice factoring.)
We work with a wide variety of companies who benefit from oil field factoring, including financing oilfield suppliers in these specializations:
Global Pipeline partnered with FundThrough to accelerate its cash flow, making it possible for them to scale up on larger projects and make bids on projects worth millions of dollars.
The main factoring fee is also called the discount rate, and is the amount of money that the oil and gas factoring company withholds from the invoice total as their payment for advancing cash and waiting to get paid for you.
The cost of factoring for oilfield service providers varies from one factoring company to the next. We can only speak to FundThrough. With us, you’ll always know the cost of factoring before you fund an invoice. We don’t charge hidden fees, and and there is no cost to open an account. See our pricing page for more info on our oilfield invoice factoring rates.
Don’t forget that payment terms are a part of pricing too. Extended payment terms mean higher costs in the long run, and terms tend to be longer in the oil and gas sector compared to other industries. Ultimately, it’s up to you to decide whether it’s worth having funding now to take on a project that will grow your business long-term, or to make payroll with peace of mind, or whether it’s better to wait it out for your customers to pay.
Here are the main requirements for qualifying for oilfield invoice factoring:
Learn more about your factoring eligibility with FundThrough here.
Like most things, the answer as to whether or not oilfield factoring is better than a loan depends on your situation. Here’s why some of our clients prefer oilfield factoring to a loan:
Your questions answered.
On the surface, invoice financing for the oilfield and invoice factoring might look the same — they both allow you to turn outstanding oil and gas invoices into cash, after all. However, there are some differences when it comes to invoice factoring vs financing.
With invoice factoring services, you sell your invoice to the factoring company. They give you 100% of the invoice value (minus the factoring fee) in exchange. The factor then works with your customer to redirect payment from you to them.
With invoice financing for oilfield, a factoring company gives you money for your unpaid invoices. You repay the factoring company for this cash advance over an agreed upon period of time, with the financing fee spread out across the payments. Additionally, you are still responsible for collecting payment from your customer.
Typically, B2B businesses that have to wait months for customers to pay their invoices. Often, businesses turn to invoice factoring for quick cash to make payroll on time, purchase equipment, make hires, and go after growth projects.
No, banks generally don’t offer invoice factoring. Banks are in the business of lending money.
Interested in possibly embedding FundThrough in your platform? Let’s connect!