Many companies in the oil and gas industry struggle to find financing as lending from traditional financial institutions has tightened significantly due to strict regulations, increased interest rates, and a volatile economic climate. You can overcome cash flow challenges and fuel the growth of your business with invoice factoring.
Capstone understands project financing and is focused on providing flexible working capital to support our client’s needs through invoice factoring. The key to remaining competitive is ensuring you have a steady cash flow and having the ability to move quickly. By leveraging your accounts receivable with invoice factoring, companies can convert their outstanding invoices into immediate cash, which can be used to cover immediate needs such as payroll and operational costs or longer-term needs such as investing in new equipment or funding new growth opportunities.
Whether you’re an upstream, midstream, or downstream business, we can help keep your cash flowing to keep your business moving forward.
Turning down a profitable project because you are unable to wait for payment is simply not an option. You may never get a second chance at that kind of opportunity. Invoice factoring allows businesses in the oil and gas industry to monetize their accounts receivable as soon as invoices are generated instead of waiting for their customers to pay their invoices or chasing customers down to collect past due receivables. Most businesses wait between 60 and 90 days to get paid — oftentimes more in some cases.
The delay in receiving payments ties up vital working capital you need to keep your business running. For example, smaller oilfield service companies may struggle to pay their bills if their customers take two to three months to pay. Delays in payment create downstream cash flow problems with suppliers and prevent them from getting the materials they need to get the job done. Factoring provides immediate cash flow for your business rather than waiting 30, 60, or 90 days for payment.
1You submit an invoice/ progress payment on work that has been completed
2The invoice is verified with your client
3Capstone provides immediate funds
4Your client remits payment within their payment terms which is typically 30 to 60 days
5Capstone issues a rebate for the remaining reserve balance, less the factoring fee
Factoring is also fast and flexible. Unlike bank loans or other traditional financing options, invoice factoring does not have a lengthy approval process. The amount of approved funding is based upon the creditworthiness of your customers and the diversification of your customer base. So, as your business grows, the amount of invoices eligible for factoring also grows, making it the ideal solution for businesses experiencing rapid growth. This is especially important as new opportunities pop up in the oil and gas industry quickly and you need the cash flow to act.
With invoice factoring, you can fund any of your working capital needs, including:
Besides paying for expenses, capital can also be used for new initiatives or growing the business. Many companies use factoring to augment their cash flow, allowing them to offer more generous credit terms to customers or offer more competitive rates on financing.
Invoice factoring can be a useful funding tool for companies in the oil and gas supply chain with the following characteristics:
– Smaller and independent with limited cash flow.
– Irregular customer payment schedules or seasonal fluctuations in revenue.
– In need to finance growth and expansion.
– Incurring emergency costs or unexpected expenses.
– Work on a contractual basis.
Factoring is a great option for any oil and gas business with slow-paying customers. Other types of companies that benefit from factoring include:
If you are an oil and gas business, don’t let a lack of funds stop you from growing. Speak to a factoring consultant at Capstone today to accelerate your cash flow; call (212) 755-3636.
