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The oil and gas sector depends on steady, around-the-clock operations to keep projects on schedule and maintain productivity across multiple job sites. These operations demand upfront access to labor, equipment, and transportation long before receiving client payments.
However, many energy clients operate on extended payment terms, often 30, 60, or even 90 days. This creates a significant mismatch between incoming revenue and the immediate costs of doing business, including fuel, payroll, permits, and equipment transport.
These payment delays can lead to persistent cash flow challenges that disrupt operations and limit growth. To close that gap, many businesses turn to oilfield factoring as a reliable and responsive solution.
Oil and gas factoring allows you to convert outstanding receivables into working capital within 24 to 48 hours without taking on debt or waiting for checks to clear. It provides the liquidity needed to cover payroll, secure equipment, and move projects forward without interruption.
How Oil and Gas Factoring Works
Turn Unpaid Invoices Into Working Capital in as Little as 24 Hours
Here's how it works:
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Submit Your Unpaid Invoice
Send us your invoice for completed work, whether under a project milestone or standard contract.
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Invoice Verification and Credit Checks
We review the invoice and customer credit. Approvals are fast, and you don’t need perfect credit to qualify.
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Advance Payment and Reserve
Receive up to 96% of the invoice value within 24 to 48 hours, giving you working capital when you need it most.
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Final Payout
Once your customer pays, we release the remaining balance minus a small factoring fee.
Costs and Fees
What to Expect With Oil and Gas Invoice Factoring
How Factoring Fees Are Structured
Every factoring agreement comes with its own cost model, and for oilfield contractors those costs can make a difference when margins are already tight. In practice, two of the most common pricing structures are monthly and weekly fees.
Example 1: Monthly Fee Model
Imagine factoring a $100,000 invoice with an 85% advance rate. You would receive $85,000 immediately, while $15,000 is held in reserve until your customer pays.
If the factoring company applies a 3% monthly rate ($3,000) plus a one-time $200 due diligence charge, fees are applied at the start of each month. Should your customer take five weeks to pay, the total cost comes to $6,000.
Example 2: Weekly Fee Model
Consider the same $100,000 invoice with an 85% advance. Instead of a monthly charge, the factor applies a 0.75% fee each week, or $750.
If the client pays in five weeks, your total cost would be $3,750, which is less than the monthly model in this scenario. The trade-off is that weekly fees can add up quickly if payments stretch out for several months.
Hidden Fees and How To Avoid Them
Factoring agreements can look straightforward on the surface, but the real costs aren’t always limited to the headline discount rate. Make sure to watch for:
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Monthly Minimums:
Some factoring companies require you to factor a set number of invoices each month.
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Administrative Add-Ons:
You may face charges for credit checks, invoice processing, or wire transfers.
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Long-Term Contracts:
Many providers push multi-year agreements that lock you in with limited flexibility.
Practical Tips To Avoid Hidden Fees
To ensure your factoring arrangement supports operations without eating into profitability:
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Clarify Fees in Writing:
Ask for a complete fee schedule, including all administrative costs and potential penalties, before signing.
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Choose a Partner With Oil and Gas Experience:
A factor familiar with energy contracts will typically offer more transparent pricing and terms that reflect the realities of the sector.
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Stay Proactive With Invoice Tracking:
Monitor how invoices are submitted, verified, and paid. This helps you avoid unnecessary costs and ensures reserves are released promptly.
Why Your Oil and Gas Business Needs Factoring
Eliminate Cash Flow Gaps That Stall Operations
Oil and gas operations demand significant upfront investment to stay productive. From acquiring specialized equipment and securing permits to covering transportation and labor, costs accumulate rapidly, often before the first payment is received.
Unfortunately, revenue delays force contractors, logistics providers, and service companies to absorb the cost of operations while they wait for payment. As expenses grow and projects scale, maintaining steady cash flow becomes increasingly difficult, especially for businesses handling multiple contracts or navigating seasonal slowdowns.
Oilfield invoice factoring services offer a way to regain control. Instead of waiting weeks or months for payment, you can convert outstanding invoices into working capital. With up to 96% of the invoice value advanced upfront, an oilfield factoring company can give you access to the cash you’ve already earned. This helps you stay operational through market shifts, payment delays, and high-cost cycles.
Business Factors & Finance delivers oil and gas financing solutions built specifically for the pace and complexity of the energy sector. With over two decades of experience, flexible non-recourse options, and proprietary payment tracking technology, we support field-driven businesses with the tools they need to move quickly, manage risk, and scale with confidence.
Industries That Benefit From Oil and Gas Financing
Tailored Funding for High-Demand, High-Cost Operations
Every link in the oil and gas sector, from logistics firms to well service providers, depends on consistent working capital. Oilfield factoring companies give you the flexibility to fund payroll, fuel, equipment, and materials without waiting for client payments to arrive.
Oilfield Service Companies
Water Haulers and Logistics Firms
Pipeline Construction and Maintenance
Equipment Rental Providers
Drilling Contractors
Refineries and Downstream Operators
Which Model Fits Your Business Needs?
For oilfield service providers, factoring and asset-based lending represent two distinct approaches to unlocking working capital. The decision between the two comes down to your tolerance for debt obligations versus preference for balance-sheet flexibility.
Factoring
Asset-Based Lending (ABL)
Factoring involves selling your unpaid invoices to a third-party factor at a discount. The factor advances most of the invoice value upfront, holds a reserve, and releases the balance (minus fees) once your customer pays.
Benefits of Factoring
- Receive funds in days, not months, to cover payroll, equipment, or fuel.
- There are no monthly repayments or loan obligations.
- Your eligibility depends on the creditworthiness of your clients, not your company’s balance sheet.
Risks of Factoring
- Fees are generally higher than traditional loans or ABL.
- Charges for minimum volumes, processing, or early termination can erode profits if not monitored.
- If the factor manages collections directly, your client relationships may be impacted.
Instead of selling invoices, you borrow against the value of your receivables, equipment, or inventory. ABL facilities are usually revolving lines of credit, allowing you to draw funds as needed, with the borrowing base recalculated regularly.
Benefits of ABL
- Interest rates are often lower than factoring fees.
- Access to higher limits as your company grows and accumulates more assets.
- Leverage multiple asset classes, not just receivables, for stronger borrowing power.
Risks of ABL
- Most lenders require at least six months in business and $1 million or more in eligible assets.
- Detailed reporting and audits are common, which can be resource-intensive for smaller firms.
- The borrowing base is recalculated frequently, meaning available funds can shrink if receivables or asset values decline.
Fuel Your Operations With Steady Oilfield Funding
Cash Flow Solutions Built for Energy Demands
Waiting for payments doesn’t have to stall your business growth. Let’s keep your rigs and cash flow running with oilfield factoring from Business Factors & Finance and get fast, flexible working capital without taking on debt.
FAQs
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What are the requirements to qualify for oil and gas factoring?
Approval is based more on the credit strength of your customers than your company’s financials. Most factors ask for an accounts receivable aging report and proof of insurance, such as workers’ compensation. This makes factoring accessible for both small oilfield contractors and larger service providers.
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Can I factor invoices tied to milestones or progress payments in energy projects?
Milestone-based invoices can be factored, but they may require additional verification since clients sometimes dispute the percentage of work completed. Some providers request client sign-offs or acceptance letters before advancing funds. Standard invoices with clear net terms are typically faster and easier to finance.
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What types of oil and gas businesses use factoring?
Factoring is commonly used by drilling contractors, water haulers, pipeline construction and maintenance crews, equipment rental companies, and logistics providers. Any business facing extended payment cycles but needing upfront cash for labor, fuel, or materials can benefit from factoring solutions.