Traditional bank financing just doesn’t move fast enough for companies that do business in the oil and gas industry.
Oilfield service companies often have all kinds of equipment to help in the production and transportation of energy. Power units, vacuum trucks, frac tanks and anchor trucks are just a sample of the machinery companies operate on a continual basis. Demand for that equipment continues to skyrocket, which means business is moving fast.
In fact, business moves so quickly in this industry that companies need to have financing in place that can expand as fast as new opportunities arise. When a company knows growth is coming, it needs a flexible credit facility available to meet its needs no matter how much the company has in revenues and expenses.
Relying on the slow pace of bank financing can mean missed opportunities for new business. Out on the field, that could mean equipment sitting idle; which means no money coming in.
Accounts receivable financing, though, offers the flexibility to quickly respond to new opportunities while providing a credit limit that keeps pace with a company’s growth. In short, it means the equipment keeps running and the cash keeps flowing.
Universal Funding can provide that flexible financing along with the peace of mind in knowing there are no worries about trying to figure out the next financial relationship. We also know that things change fast, and make sure our clients have access to their account rep whenever a need arises. Whether there’s an issue that needs solved or a new opportunity that requires more funds, that person is always available to help.
In the oil and gas industry, a company has to strike while the iron is hot. The potential cost of not taking on a next job or customer is huge, but we all know it takes money to make money. Universal Funding can supply that money, and a business owner can rest assured that the business will grow and the next opportunity will easily be within reach.
Fracking and Invoice Factoring in the North Dakota Oil Boom
The fastest booming industries in the United States right now are oil/gas and invoice factoring. The oil/gas industry has reaped “$290 billion in profits over the last four years,” according to Thomson Reuters. And although the factoring industry has been in existence since ancient times, it has become a more common resolution to companies’ business finance needs in the past few decades.
The sudden boom in the oil and gas industry is thanks to the development of a method to tap “the largest contiguous oil deposit in the lower 48 states. There are an estimated 4.3 billion barrels of recoverable oil in a deposit under parts of the Dakotas, Montana and Canada — about half what the USA uses in a year” (Andrea Stone, USA Today).
Accounts receivable factoring has also experienced a recent boom due to the down economy and the need for alternative business finance methods. This multi-billion-dollar industry offers debt-free financing for business-to-business companies all over the world, especially those experiencing dramatic increases in demand for their products and services, such as those currently at work in the North Dakota oil patch.
Because of this massive oil deposit that has just recently become available through a technique called hydraulic fracturing, or fracking, companies in the oil and gas industry are growing by leaps and bounds. This new technology, along with the high demand, and therefore higher prices, of oil has made it possible for companies to extract the liquid gold from an otherwise inaccessible underground shale formation, raking in billions of dollars.
Even with the high profits being enjoyed by many in the oil/gas industry, many more small businesses are scrambling to install crews of workers in North Dakota to get their piece of the pie. Starting a new operation or expanding into a new area requires a capital investment that many small businesses don’t have access to right now. That’s where invoice factoring comes to their aid.
In order to keep the cash flowing from month to month many of these businesses, both large and small, are factoring their accounts receivable with Universal Funding Corporation, one of the most reputable business finance providers in the United States. Universal has provided millions to the oil industry and its supporting companies over the past decade and especially in the past few years with the increase in drilling in the North Dakota oil patch.
Boom in Oil, Gas & Insurance Industry, Boom in Staffing Industry, Boom in Invoice Factoring
According to CareerBuilder’s 2013 U.S. job forecast, the job market started 2013 at its strongest for three years. More than 60 percent of employers surveyed say that they are in a better financial position than last year. And because of the sudden boom this past year in industries such as insurance and the oil and gas industry, many staffing agencies are scrambling to fill in-demand positions.
With this recent high need for qualified insurance claims managers and skilled workers in the oil and natural gas fields, staffing and personnel companies have been these industries’ go-to solution. Staffing agencies have been gearing up their recruiting efforts and adding staff to their own offices to accommodate more placements in these rapidly growing industries.
To keep up with this wave of growth staffing companies must find capital to fund their marketing campaigns, recruit new employees, place qualified staff in jobs, meet payroll, stay current on taxes and cover increased overheard expenses. Growth does not come cheap these days. Cash is needed right now.
Where is this capital investment supposed to come from when the past few years have been slow and resources have been depleted? Not every small business can get a bank loan. Maybe their line of credit is already maxed due to a slow economy the past few years. One way staffing companies are getting the cash they need to stay in business and grow is through invoice factoring, also termed accounts receivable financing.
Factoring invoices is the perfect way to acquire debt-free financing to keep up with the boom in industries seeking staffing resources. It’s like a cash advance on an asset the company already owns. Instead of waiting 30, 60, or 90 days for customers to pay their invoices, these staffing companies have been able to get paid for their services right away through factoring.
Invoice Factoring: Keys to a Successful Business
Invoice factoring is an effective way for businesses of all sizes to maintain a consistent cash flow, which can be a challenge. Invoice factoring, or the sale of invoices to a third party in exchange for immediate funds, helps businesses in times of financial hardship.
80% of Businesses Fail Due to a Lack of Consistent Funds
Invoices are a valuable asset. Doing business with customers who wait 30-45 days to pay them can become a challenge.While a business can be growing successfully, monthly overhead cannot be met if invoices are not paid on time. This is where invoice factoring can help a business stay afloat.
Invoice Factoring Benefits
Invoice factoring allows you to pay your monthly bills on time, despite an inconsistent cash flow. This allows you to focus on your business and your customers.
Invoice Factoring: Better than a Bank Loan
A traditional bank loan is usually not the most practical option for most businesses. The time it takes to go through the process of applying for a bank loan and to be approved is not feasible when you need immediate funds. Bank loans are also hard for new businesses to acquire; most companies have an established line of credit with their bank that is not possible to newer businesses to attain.
Invoice Factoring Supports Rapidly Growing Businesses
If your business is being held back by consistent funding issues, invoice factoring can help. It’s quick, reliable, and will help businesses maintain their cash flow needed for expenses.
Invoice factoring, the sale of invoices to a third party in exchange for immediate funds, is a most effective way for businesses of all sizes to maintain a consistent cash flow. In today’s economy, this can be a challenge. Invoice factoring can help you overcome this challenge by providing a reliable source for immediate funds.
Invoice Factoring: Simple and Easy to Use
One of the differences between a line of credit with a bank and invoice factoring is the time it takes to keep up with the financing. A “borrowing certificate” is required when using a bank to borrow against your receivables. It can be required every time you ask for an advance, or periodically during the financial relationship. You must complete a form and certify the true value of your company assets, which then must be approved by the bank lender.
Additionally, banks and asset based lenders will require quarterly audits paid for by you, where a team of auditors come into your offices and audit your books.
With invoice factoring, however, all you need to submit is a legitimate, verifiable invoice to receive your advance. The availability grows exponentially with the size and scope of the incoming invoices without having to prove the overall financial condition of the company.
Additionally, receivables financing does not require an in-house audit. You can avoid the time and cost of producing one. Thus, factoring your accounts receivables is a simple to use, easy to access type of financing for a growing business.