How Does Accounts Receivable Factoring Work?
Do you have unpaid invoices that are restricting your oilfield business from operating at levels of maximum success? A business can’t optimize operations when working capital is constantly stalled. If slow-playing customers are holding your company back, accounts receivable factoring can transform your business from struggling to booming in a few simple steps!
Factoring your oilfield accounts receivables, or invoices, can unlock the cash you need to sustain ordinary business practices. Whether you’re brand new to the oil and gas industry, have questionable credit, or even need funds to expand, invoice factoring is a financing option available so that you can worry less about money and more about profits.
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The Process of Factoring Receivables
Every business incurs expenses. However, when expenses outweigh incoming cash, problems arise. Traditional bank loans can be difficult to obtain and even a loan can’t guarantee you’ll get all the money you need. Factoring enables businesses to sell their outstanding invoices in exchange for a cash advance. Sound too good to be true? It’s not.
First, your oilfield company will provide goods and services as normal. Once the goods or services have been delivered or provided, you send the invoices to a factoring company. The factoring company will verify the invoices, and then advance you up to 98% of the total amount within 24 hours. Then, your customer will pay the invoice as normal to the factoring company. Once they receive the payment, the factoring company will release the balance of the amount, minus a small fee for factoring.
Accounts receivable factoring is meant to work for you and your business. The factoring company provides much needed working capital, allowing you to focus on vital operations to grow and develop.