Offshore oilfield marine transportation companies have to give their customers up to 60 days to pay an invoice. Companies offer these terms to creditworthy oil and gas customers as a way to win and retain business. As a matter of fact, many large customers will demand these payment terms as a condition of doing business. The problem is that offering up to 60 days to pay an invoice can wreak havoc on your company. Unless your company is well capitalized, you will risk running into cash flow problems. You may miss critical supplier or employee payments – or worse – you could  go into an unrecoverable financial tail spin.

One way to solve this problem is to use business financing as a stop gap measure that allows you to cover expenses while waiting for payment.  The problem with this strategy is that getting a business loan is not easy. Most institutions will require that your marine transportation company have a solid income statement and balance sheet, ample collateral and a long track record of stressful operations.  Unfortunately, few companies can meet this criteria. However, a business loan is not the only – or the best – option for this type of cash flow problem. Another solution, called invoice factoring, may be better at solving this problem.

Factoring solves this problem by reducing the time it takes you to collect your revenues. This provides the working capital you need to  meet current expenses – and more importantly – the confidence to take one new customers. With factoring, your customers are not required to pay faster. Rather, a factoring company intermediates the transaction an advances funds to your oilfield marine transportation company using your invoices as collateral. The transaction is settled once your customers pay their invoices in full.

One advantage of factoring over other solutions is that it’s easier to obtain. The most important qualification requirement is that your customers must have solid commercial credit. Fortunately, most larger customers in the oil and gas industry meet this criteria. Additionally, your company should meet these requirements:

1. Invoice customers for completed work
2. Your company should not be encumbered with legal or tax problems
3. Your invoices should be free of liens
4. Company owners should have an industry track record and a good reputation

When used correctly, accounts receivable factoring can provide your company with financial stability which can be used as a platform for growth. Most factoring lines will increase with your growing sales, making them a flexible solution for growing companies. This makes factoring an ideal option for growing offshore oilfield marine transportation companies that have cash flow problems due to slow paying customers.

The oil and gas industry has been growing by leaps and bounds in recent years. This, in turn, has increased the demand for oilfield services such as those provided by transportation companies that deliver and haul away fluids and saltwater. However, the rapid increase in demand has also brought some cash flow problems to service companies that were not financially prepared. These problems stem from the fact that most oil and gas companies pay their invoices in 30 to 60 days. Few companies can afford to wait that long for payment and take on new clients at the same time. They simply don’t have the resources because they need funds to meet their ongoing expenses such us vehicle maintenance, vacuum truck maintenance, equipment purchases, and payroll.

One simple way to solve this problem is to use business financing to cover ongoing expenses while waiting for your customers to pay. However, qualifying for conventional business financing can be very difficult. Most lending institutions require that your company have plenty of collateral, substantial assets, and a long track record of successful operations. These restrictive conditions usually rule out small and midsize companies. For many fluid hauling of salt water disposal companies, a better solution is to use an alternative business financing solution called invoice factoring.

Invoice factoring provides financing using your slow paying invoices as collateral. Basically, a factoring company advances a portion of your slow paying invoices to your oilfield services company. This provides the needed working capital to meet ongoing expenses, but more importantly, it gives you the confidence to take on new business without worrying about slow payments.

Most factoring transactions are structured as the funding of your receivables in two installments. The first installment covers around 80% to 85% of your outstanding invoices and is provided to your company as soon as the work is delivered and accepted by the customer. The remaining 15% to 20% (less the factoring fee) is advanced to your company as a second installment, once your customer pays the invoice in full. Please note that your customers pay your invoices on their regular schedule.

One advantage of factoring is that it’s easier to obtain than conventional business financing. The most important requirement to qualify is to have credit worthy customers. This is very important because your customers credit acts as collateral for the transaction. Fortunately, most companies in the oil and gas industry have been doing relatively well and have good credit. Additionally, your company should also meet these criteria:

1. You should only invoice for delivered and accepted work and products
2. Your company should not have major legal or tax problems
3. Your invoices must be free of liens and encumbrances
4. The company owners should have industry experience and a good reputation

Factoring lines are usually designed to be flexible and will grow alongside your sales, provided your customers and your company meet the factoring criteria. This is a very important feature that is not commonly found on other types of business financing solutions. Because of this, accounts receivable factoring is an ideal solution for fluid hauling of salt water disposal companies that have cash flow problems due to slow paying customers.

The oil and gas industry has been growing by leaps and bounds in the past few years. This has created a great opportunity for companies that service it. Demand for services such as oilfield transportation, among others, has been growing at a very healthy clip. However, the increase in demand has also created a financial hardship for some of the smaller providers in the industry. It’s a common practice for large customers to pay their invoices in 30 to 60 days. This can create a problem for companies that need to be paid sooner because they need the funds – so that in turn they can pay their own expenses.

Commonly, companies handled this situation by offering customers a discount in exchange for a quicker payment. Most in the industry offer a 2% discount for customers that are willing to pay in 10 days or less. While this strategy has a number of benefits, it also has one very serious drawback. It leaves your customers in full control of your cash flow. And if your customers decide to return to their slow payment habits, your company could find itself heading for financial problems. A better alternative is to accelerate your revenues using invoice factoring.

Factoring offers a very simple proposition. A factoring company advances a portion of your outstanding accounts receivable, which provides your oilfield services company with the cash flow it needs to meet its obligations. Those transactions settle and close once your customers pay their invoices in full on their usual schedule. When used properly and on an ongoing basis, factoring can provide your company with financial flexibility and enable it to take on new customers without worrying about their slow payment habits.

Since the factoring company is financing your accounts receivable, it is very important that your customers have good commercial credit. Fortunately, most companies in the oil and gas industry are well established financially and have good credit. Additionally, your company should also meet the following criteria:

1. Your invoices must be unencumbered by liens
2. You must only invoice for delivered and accepted services and products
3. The company should not have any serious tax problems
4. The company should not have any ongoing legal problems
5. The owners and managers should have industry experience and a good reputation

Most factoring lines are designed with flexibility in mind. This means that the line can grow dynamically alongside your sales, provided that your existing and new customers have good credit. This is a major distinction between factoring and other financial solutions. Because of this, factoring can be an ideal solution for oilfield services companies that have growing pains and are experiencing cash flow problems due to slow paying customers.

For the past few years the oil and gas industry has experienced substantial growth, especially in the area of hydraulic fracturing (also known as fracking). This has created a substantial opportunity for oilfield transportation companies that have capitalized on this specialized trend. However, with rapid growth usually come challenges. For example, many oilfield transportation companies have had cash flow problems due to the fact that most customers pay their invoices in 30 to 60 days. While larger companies may be able to afford to wait that long for payment, smaller and growing companies can’t. Many need to be paid sooner so that in turn they can meet their own obligations such as fuel, vacuum truck maintenance, vehicle maintenance, salaries, and repairs.

Some transportation companies have tackled this problem by asking customers for faster payments. They commonly use the industry practice of offering a 2% discount to customers that pay in 10 days or less. While this can work very well, this strategy has also some serious drawbacks. One of them is that your cash flow will ultimately depend on your customers willingness to take a discount in exchange for a quick payment. If they change their mind and revert to their old payment habits, your company could be in trouble. For many transportation companies, a better solution is to use invoice factoring.

Invoice factoring accelerates the revenues that are tied in slow paying accounts receivable. It provides your company with the cash flow it needs to meet its obligations, and more importantly, to take on new customers without worrying about slow payments. The transaction works by using an intermediary, called a factoring company. The factoring company handles all funding advances while using your invoices as collateral. They also handle settlements and close transactions once your customers pay on their regular schedule.

Most factoring transactions are structured as the purchase of an invoice in two installments. The factoring company gives you the first installment as soon as the work or load is accepted by the customer. This installment is usually for 90% of the invoice (this varies). Once your customer pays, your company gets the remaining 10% as a second installment, less the factoring fee.

Qualifying for factoring is easier than qualifying for other types of business financing. The most important requirement is that your customers must have good commercial credit. Fortunately, most of the larger players in the oil and gas industry have very good commercial credit. Additionally, your company should also meet the following criteria:

• You must only invoice for delivered and accepted work
• Your invoices must be unencumbered by liens
• Your company must not have any legal or tax problems
• Company owners must have industry experience and a good reputation

Most oilfield transportation companies that use freight factoring do so on an ongoing basis. They factor a portion of their receivables that is sufficiently large to ensure that they have the cash flow to meet ongoing expenses. More importantly, the factoring line is designed to grow with your business.  This makes invoice factoring an ideal solution for growing oilfield transportation companies that have cash flow problems due to slow paying customers.

Getting business financing for small and new companies in the oil and gas industry can be challenging. While the industry is very profitable, most business financing institutions still remain wary of financing small companies regardless of industry. Many institutional lenders have very strict guidelines regarding who they can finance. To qualify for funding, most companies need to have impeccable financial statements, substantial assets that can be collateralized, and multiple years of profitable operations. Needless to say, few small and growing oil and gas companies can meet this criteria. At the same time, it’s usually new and growing oil and gas companies that need financing the most because they are at the highest risk of running into cash flow problems.

Most cash flow problems originate from the difference between how accounts payable and accounts receivable are handled. Expenses, which go through accounts payable, usually need to be paid quickly because suppliers always demand prompt payment from small companies. On the other hand, invoices that are paid by clients (through accounts receivable) are paid on the net 30 to net 60 basis. This is because large oil and gas customers demand lengthy payment terms. In other words, you have to pay your invoices quickly, but your customers pay their invoices slowly, which in turn creates a working capital problem.

One way to solve this problem is to use the business financing tool known as factoring. Factoring financing accelerates the revenues that are tied in slow paying invoices from large customers. It provides the working capital that you need which enables you to meet your obligations on time, and to  to capitalize on new opportunities.

Invoice factoring transactions are structured through a financial intermediary that advances funds using your invoices as collateral. The transaction with a factoring company is then settled once your customers pay their invoices in full on their usual schedule. Obtaining a factoring financing line it’s relatively easy, at least when compared to other financing products. The most important requirement is that your customers must have solid commercial credit. This is critical because the whole transaction is based on using the credit worthiness of your customers as collateral. Aside from this, it is also important that:

• Your company can only invoice for completed product or services
• Your invoices be free of encumbrances
• Your company be free of legal and tax problems
• Thee owners have experience in running and oil and gas related company

Invoice factoring lines are very flexible and can adapt to the growth of your business. When used correctly they can provide an ongoing source of working capital, helping ensure that your company always has cash at hand to execute its plans. This makes accounts receivable factoring an ideal solution for growing oil and gas industry companies that have cash flow problems.

The oil and gas industry has done relatively well despite the economic recession of 2009 and 2010. The world has a steady and growing need for oil and its related products and that won’t change in the near future. Companies that support the energy industry have experienced success, but many ran into cash flow problems as clients started paying invoices in 60 days instead of the usual 30 days.  Although the payments were from safe customers, smaller companies couldn’t really afford to wait that long to get paid because they had their own expenses to cover – rent, payroll, equipment and so on. And although the industry has been doing well, getting conventional business financing has been nearly impossible.

One alternative way to fix this cash flow problem is to use invoice factoring.  This solution addresses the cash flow problem by advancing funds against your slow paying invoices. This allows you to pay suppliers, rent and more importantly – employees. This enables you to run your business without having to worry about when your clients will pay – allowing you to focus your resources on growth.

The factoring transaction is done through a factoring company,  who purchases your invoices for immediate funds, holds them until payment and then settles the transaction when the invoices are paid. One of the biggest advantages of factoring financing is that it’s relatively easy to obtain – especially if you are in the oil and gas industry. The most important requirement is that your customers have solid commercial credit since the factoring company is relaying on their ability to pay their invoices in 30 to 60 days. Aside form that, your company needs to be relatively free of issues and have growth opportunities.