Almost every aspect of our economy depends on the oil and gas industry, right down to the supply chains that move energy resources and finished products from coast to coast, and even overseas. Oil and gas sales are on the rise, but that doesn’t mean revenue is coming in any faster.
Business is Faster Today than Just a Few Years Ago
Everyone from private homeowners to gas stations, heating companies, petroleum distributors, on up the market have the ability to monitor gas an oil, and place orders immediately. In response, oil and gas companies have had to improve supply chains and response time. However, despite advances in the oil and gas industry, the aging windows on invoices has remained the same. Customers at all levels still have up to 90 days to remit payment on open invoices. The lag in revenue is felt on the back end, and companies cannot keep up with customer demands because the capital simply isn’t there to maintain overhead expenses. If there were a way to bring the ratio of sales and orders closer to the amount of revenue coming in, oil and gas companies would be able to grow to meet customer demands at all levels.
Boosting Cash Flow with Invoice Factoring
Fortunately, businesses within the oil and gas industry have a way to bring in revenue at the rate of customer orders. Invoice factoring boosts cash flow and streamlines the accounting process. Instead of waiting between 30 and 90 days to see payments on orders, factoring converts open invoices to capital with the span of a single business day. As invoices are generated, they are submitted for factoring, and the funds are made available immediately. Invoice factoring improves cash flow, allows businesses to speed up transactions, frees up internal resources, and reduces the need for loans.
New Century Financial provides comprehensive factoring services to the oil and gas industry to allow businesses to even out cash flow, cover overhead expenses, build up growth capital, and much more. Contact our offices today and put our expertise to work for your business.
Distributors are experiencing an increased demand from all industries. Being able to supply businesses ranging from the healthcare industry to the energy sector, retailers, and everyone in between is essential for success. Yet the increasing demand from customers means distributors are facing large and unexpected orders, and keeping a well-stocked inventory is a necessary part of the supply chain, and integral to economic growth.
Distributors and Staggered Payment Schedules
When distributors fill orders from clients, invoices are issued with staggered payment schedules ranging from 30 to 90 days. The staggered payment schedules reduce the rate of incoming revenue, which can place a severe strain on finances when distributors are facing an uptick in the size and volume of orders placed by customers. Some distributors resort to taking out short-term loans to bulk up their inventory. In extreme cases, distributors have to turn away potential sales because they do not have the materials and items available to complete large orders, which is frustrating to everyone involved, and pushes customers to purchase from larger competitors.
The Dangers of Loans and Cash Advances
Using short-term loans and cash advances to maintain or increase inventory can have undesired financial repercussions for distributors. Short-term loans place debt on the books. The brief and finite amount of capital can be used to replenish inventory, but once the capital is used, a distribution company has to repay the balance. If inventory runs low again, another loan can be used, which further impacts business credit ratings and only adds to the existing debt on the balance sheet. Short-term loans can quickly add up, especially if the revenue from sales is not coming in at a rate fast enough to pay off the loans and replenish stock. Similarly, cash advances can also place a major strain on cash flow. Cash advances are often advertised as an instant injection of debt-free capital that distributors can use to replenish inventory or even grow their operations. Cash advances have very high interest rates, and they are repaid from a small percentage of customer credit card transactions. This leaves distributors with large balloon payments when the terms of the agreement end. Cash advances also do not guarantee a faster rate of revenue and they withdraw the payments automatically from your bank account.
A Smarter Solution
Factoring allows distributors to get fast access to funds from sales without debt. When a sale is made, the distribution company submits the unpaid invoice for factoring. The invoice is then converted to capital which can be accessed the very same day. This gives distributors the funds necessary to maintain inventory and supplies to fill customer orders of all sizes. If you are in the distribution market and are looking for working capital solutions to maintain or even grow operations, contact the experts at New Century Financial today.
The service industry has exploded over the past few years. Conservative estimates place the combined revenue of the entire service industry at close to one trillion dollars annually, though most realists would place figures over that amount. However, despite high sales and revenues, service companies have a difficult time securing loans and other types of financing needed for general growth or to expand into new markets.
Service Companies and Loans
Service companies provide intangible products and services. Trucking, Software as a Service (SaaS), janitorial companies, legal firms, and more fall under the umbrella of the service industry. These businesses provide intangible goods and services, and are not direct manufacturers. Since many of these companies do not provide physical goods and use leased equipment, they are able to lower overhead expenses while increasing sales. Unfortunately, the lack of fixed assets means there is little collateral to put up against a traditional loan. This leaves service companies in an awkward position when they need financing to get a stronger foothold in today’s marketplace.
Invoice factoring is a form of financing structured around receivables, instead of equipment, property, and debt. Invoice factoring is debt-free financing whereby open invoices are converted to funds within 24 hours. Service companies issue invoices that typically have a window of up to 90 days before customers need to make payments. Waiting three months for revenue while still trying to meet payroll and overhead expenses can place a strain on cash flow. Staggered payments schedules also mean that growth strategies are put on hold. Factoring accelerates the service industry by providing fast turnaround on open invoices as they are generated. Factoring allows business owners to quickly build up capital reserves to engage new markets, hire staff, get new and better equipment, launch marketing campaigns, and anything else needed to carve out a larger market share in an increasingly service-based economic landscape. Factoring is fast, easy, debt-free, and does not involve the red tape and arbitrary decisions associated with traditional lending institutions.
New Century Financial works with service companies of all types to provide improved cash flow and supplementary funds for growth. As the service industry becomes more integrated with other businesses and the lives of private citizens, the need for a reliable source of funding is crucial for long-term growth and success. Contact New Century Financial today and learn more about our factoring services.
The current economic climate is favoring manufacturers, and taking advantage of growth opportunities can help business owners carve out a larger market share for their companies. However, using traditional loans can keep manufacturers from growing to their full potential.
Debt Has a Ripple Effect
Growth is about reaching new milestones, tapping into new markets, and rolling out new products. Traditionally, growth projects involve taking out loans, which impact credit scores and place debt on the balance sheets. The balance on the loan is repaid from a portion of the post-growth revenue. Yet growth combined with debt is a big risk. Even if sales are low during that period immediately following expansion, loan payments must be made or else the business is in danger of defaulting. At the same time, manufacturers still have to maintain overhead expenses, payroll, maintenance on equipment, and more. Frequently, manufacturers end up scaling back their plans for growth to figure how much of a strain the debt form a loan will place on cash flow.
Rethinking Growth for Manufacturers
Manufacturers can quickly accumulate the capital necessary for growth without having to rely on debt-based financing. Instead of waiting on staggered payments from customers, manufacturers are leveraging receivables to boost cash flow and build up cash reserves. Manufacturers are used to issuing invoices with payment schedules of up to 90 days. The payment schedule is a standard business practice, but it also leaves manufacturers waiting on revenue. By leveraging receivables through factoring services, businesses can submit unpaid customer invoices and receive access to funds on the same day. Factoring reduces the need to take on debt for growth because the fast turnaround allows manufacturers to build up capital for everything from acquiring new equipment to moving into larger facilities, research and development on new products, and even hiring more staff or marketing campaigns. Being able to grow your business without the burden of debt allows you to focus on operations and clients instead of trying to maintain a strong cash flow to balance overhead expenses with loan installments.
At New Century Financial, we specialize in working capital solutions so manufacturers can improve cash flow and reach their growth milestones without limiting their potential with debt-based loans. Contact our offices today and get a competitive edge on growing your business.