Many business people might have heard about the term factoring, but do not the exact meaning of the factoring companies. A factoring company is a business that purchases another company’s invoices. The factoring companies offer the best financing solutions to the businesses, which have cash flow issues. If you are involved in the business of oil and gas industry, then long payment terms are common in the oil and gas industry that makes it difficult for the oilfield service providers to keep a steady cash flow. The oil and gas factoring is the most flexible solution for the oil and gas companies as it provides fast financing by turning receivables into cash. Factoring is a business-friendly alternative financing solution for the oilfield industry.
Many oil and gas companies are struggling to come up with sufficient capital to cover their operating costs due to low market prices. To overcome this issue, factoring is a highly flexible solution where the oilfield companies can obtain funding within as little as 24 to 48 hours. Also, you have to know another important thing that factoring can be done on a recourse or non-recourse basis. In recourse factoring, funds can be extended for a specific period of time. If the invoice is not collected, then the client must replace with a new creditworthy one or repay the factor. The oil and gas factoring works in following simple steps:
- First, the oil and gas company provides the factoring company with a copy of an invoice that was sent to the client.
- Next, the factoring company verifies the invoice and runs a credit check on the client.
- Within 48 hours you will receive the upfront cash up to 96% of invoice depends on the factoring company you choose.
- After the client pays the invoice, you will receive the rest of the sum minus a small fee.
The factoring process is simple as an oilfield service sell its accounts receivable to a factoring company in return for an immediate cash advance usually 90% of the invoice amount. If you cannot wait more than 60-90 days for payment, then you can get the help of factoring company. It helps you to meet the payroll, grow your company, and pay suppliers. Thus, learn more about factoring, and you can enjoy a lot of benefits. With factoring, you can send invoices any time for purchase.