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How Factoring Companies help Canadian Oilfeild Service Companies

Posted on February 01, 2014 in Oil & Gas Industry

Are you tired of your invoices being ignored by the oil drilling and refining companies you service and need cash fast? Buying your invoices and giving you cash today is the essence behind oilfield and gas factoring. This system has been used for decades and has become an essential for companies behind the scenes that help oil companies succeed.

The oilfield and gas industry is simple; companies drill for oil, refine it, and sell it on the market. However, any company that provides services to oil companies know that it is a buy now/pay later industry. Naturally, in order to operate an oil company, uniforms need to be laundered, fracking sands need to be moved, and water haulers need to be on call when they are needed. You would think that oil companies would pay upon delivery, but this is rarely the case.

The truth is that oil companies do not pay on time

Despite the fact that there are common sense necessities that the oil company needs to operate, they often do not pay up front. This is ironic because, unlike small businesses, the drilling and refining companies have lines of credit with their banks and that means that they can take money they do not have and pay bills anytime they want. Regardless of the fact that oil companies may have money to give to small businesses that support them, it has always taken a significant amount of time for oil companies to pay for their services.

While your invoice is processing and going unpaid for months on end, money that you pay out of your own pocket for workers, supplies, and equipment can quickly add up. If you are managing an oil-related service company, you know that over $100,000 can be charged for only one day of work.

Are you rich enough to have oil industry clients?

Unless you have a few million dollars to pay your employees while you are waiting up to three months to get invoices paid, where does access to quick cash come from in the meantime? In situations like these, oilfield and gas factoring services are the financial solution you have been looking for. Whether you are an oil industry insider or are new on the scene, oilfield factoring companies have the working solutions that put your invoice worries to rest.

Some of the benefits an oil and gas factoring service provides are:

  • Same-day cash for all unpaid invoices
  • Money for referring other clients
  • Immediate funding options
  • Online credit approvals for free
  • Protecting your credit
  • A line of credit to pay your own invoices on time
  • No recourse on your company once the invoice is bought

Naughty clients: The history of oil and gas factoring

Unfortunately, the financial history of large corporations is that they do not pay their bills on time. This is interesting considering that homeowners accessing utilities only have a few weeks to pay a bill that is due before the service is disconnected. Alternatively, oil and gas companies are notorious for leaving bills unpaid for months at a time. Sadly, this has been the practice of this industry for so long that some oil and gas factoring companies have been in business for over four decades.

Before oil and gas factoring companies existed, most service companies that supported drilling and refining could only be owned by the rich. After all, paying for hundreds of thousands of dollars of equipment and labor upfront is a burden that an ordinary wage earner could not endure. When big banks tired of giving the little guy a temporary loan, oil and gas factoring companies formed to create a more cost-effective solution.

Oil and gas factoring is building businesses

Of course, if it was not an effective solution, oil and gas factoring businesses would have closed their financial services years ago. Instead, upstart service industries that support refining and drilling consider it the only way to keep turning a profit. After a small business moves into long-term financial success, they still come back to the oil and gas factoring services that helped them to succeed.

Primarily, when it is time to expand the business and more potential unpaid invoices are expected, financial factoring services assist to bring this growth opportunity into existence. When new oil fields are discovered, companies that want to dip into this new found wealth have to get to work quickly and worry about getting paid later.

Oilfield services and businesses that are succeeding with the help of oil and gas factoring services include:

  • Reefers
  • Swampers
  • Roustabouts
  • Riggers
  • Roughneck crews
  • Field safety representatives
  • Swabbers
  • Drillers and pluggers
  • Vacuum trucks
  • Pipe inspectors
  • Case pullers
  • Independent pipeline construction workers

Invoice help for solo trucking and logistics services

When you are the only person working in your small business, your pride can get the best of you. After all, when you are not getting paid for the invoices that you send to the oil company you provide services for, you simply think that this is part of working for yourself. You might put off contacting the accounting office at an oil company for over a month. However, when you realize that you do not have enough money to continue fulfilling your contract, it is time for a solution.

Like other businesses associated with the oil industry that charge millions of dollars a month, your claim of a few grand is just as important to an oilfield and gas factoring service. Their approach has historically placed importance on any person that is sending an invoice to an oil company and not getting paid. Even if it is $100, you can sell your invoice to an oil factoring company and move on to the next oil boom.

Types of trucking and logistics services that are associated with the oil industry are:

  • Van drivers
  • Hot-shot delivery
  • Rig transport and rentals
  • Water, frack sands, gravel, and other heavy haulers
  • Vacuum truck drivers
  • Flatbed truck rental
  • Distribution services
  • General freight services
  • Rig movers
  • Freight brokers
  • Flatbed carriers

How much will it cost to use oilfield and gas factoring services?

At the end of the day, the problem small businesses have is always timing and money. If you need the money now and cannot wait for it, how much will it cost you? Believe it or not, one of the lowest interest rates on the market is found with oilfield and gas factoring.

If you have secured payday loan from a pawn shop in the past, the interest rates were much higher than the type you will see with oil field and gas factoring. With a payday loan, they do not have anything but a promise and a copy of your bank records to reassure them that you will them back. For this reason, a payday loan charges higher interest since they do not know they will actually get re-paid.

With oilfield and gas factoring, the companies that front you the money know that the oil companies will pay them eventually. As some cases, if the oil company waits too long to pay, the invoice holder can charge an extra percentage. Of course, as a small business owner, the problem that you have is that you do not have time to wait. For this reason, it is easy to forgo one to four percent of your invoice in order to get the other 99 to 96 percent right away.

Are outside industries welcome at oilfield factoring companies?

Obviously, paying one to four percent is a small price to pay for peace of mind and oilfield and gas factoring companies know that. Furthermore, they do not cater specifically to companies that only service the oil industry. Instead, any outsiders that have never dealt with an oil company and their maddening process of invoicing are welcome at an oilfield and gas factoring office. The only thing the oilfield and gas factoring companies need to know is that the invoice is going to an oil company.

Some of the lesser known small businesses associated with the oilfield industry are:

  • Caterers
  • Ditch diggers
  • IT contractors
  • Oilfield loggers
  • Crane operators
  • Welding and fabrication
  • Oil workers apparel and uniform laundering services
  • Technical and nontechnical environmental services
  • Maintenance services
  • Printing
  • Equipment rentals
  • Security services
  • Staffing coordination
  • Warehousing
  • Government contractors