The oil and gas industry involves logistics to ensure supply chains run efficiently from the source to the refinery, distribution, all the way down to deliveries at the consumer level. However, in addition to complex logistics and skilled professionals, the oil and gas industry – at all levels – requires healthy cash flow. To accelerate cash flow to keep all the pieces moving, businesses in the oil and gas industry turn to factoring for oil and gas company operations. But what exactly are the benefits of oil and gas factoring?
1. Oil and Gas Factoring Boosts Cash Flow
Businesses in the oil and gas industry adhere to the transactions structured around staggered payment schedules. Shippers, refineries, distributors, and more issue invoices with schedules of 30, 60, and 90 days in which clients must pay the balance due.
The issue is that staggered payment schedules make cash flow dependent on a waiting game. If clients wait until the last possible day before issuing payments, then cash flow slows down, which in turn makes it difficult for businesses in the oil and gas industry to maintain operations, cover payroll, maintain equipment, and more. Oil and gas factoring changes this by converting unpaid invoices into cash quickly, thereby accelerating cash flow.
2. No Debt or Impacted Credit Ratings
When oil and gas businesses experience a strain on cash flow, the traditional solution to correct the issue has been to take out a short-term loan. Yet short-term loans impact credit ratings, require collateral, and place debt on the books. Short-term loans are designed to be short-term solutions for temporary issues.
However, cash flow issues caused by delayed or unpaid invoices are typically recurring, so repeatedly taking out short-term loans can severely impact credit ratings and rack up debt on the balance sheet. Additionally, the debt accumulated from short-term loans means more revenue needs to go towards repaying the balance than going directly into the business. By contrast, oil and gas factoring does not place any debt on the books or impact credit. This is one of the big reasons why oil and gas businesses use factoring as a means to accelerate cash flow and avoid the problems of short-term loans completely.
3. Oil and Gas Factoring Enables Rapid Growth
In addition to accelerating cash flow, oil and gas factoring allows businesses in the industry to achieve rapid growth. If invoices are being converted into cash, then oil and gas businesses do not need to chase after clients for payments.
With staggered payment schedules removed from the equation, businesses can cover overhead, make payroll, and then build up capital reserves for growth, including marketing campaigns, exploration, research and development, and making inroads into new markets.
At New Century Financial, we provide comprehensive oil and gas factoring. We turn unpaid receivables into cash within 24 hours and allow our clients to choose which invoices or parts of invoices they want to factor. Additionally, there are no hidden fees and no long-term contracts. If you want to accelerate cash flow and take advantage of the big benefits our factoring for oil and gas factoring companies has to offer, contact New Century Financial today.