Financing options for oil and gas companies
The oil and gas industry is a diverse – and expensive – business to embark on. While these companies are tasked with finding solutions to climate change and discovering new sources of energy, all of this exploration comes at a price. Read on to learn more about oil and gas financing.
Whether you are involved in excavation, hydraulic fracturing, pipeline construction, oilfield services, or other roles in the energy industry, you will need capital to start your business and help it grow. grow over time.
How Financing Can Help Your Oil and Gas Business
Oil and gas projects can be long and paying bills can take months or even years. This can have a negative impact on cash flow.
Financing for oil and gas companies can help you cover a number of expenses, from ensuring you meet regulatory approval requirements, to drilling, to paying for the equipment you need, whether you are in the oil industry. downstream, intermediate or upstream.
It can also help you with simple overheads like payroll and office supplies. Bottom Line: Funding ensures that you have the capital you need to run your business and keep it running.
Types of financing options for oil and gas companies
Now let’s explore your financing options. Each has its own advantages and disadvantages. The higher your credit score, the better the interest rate you will qualify for.
The Small Business Administration offers what are generally the lowest interest rates of all financing options. Its 7 (a) loan program can be used for working capital, commercial real estate, and equipment, among others.
Banks, credit unions, and some online lenders are another great place to get low interest rates on oil and gas finance. Be aware that most of these lenders require that you have been in business for at least two years and have a good credit history.
Sometimes you need cash now and later, and this is where a business line of credit comes in handy. You can borrow from your line of credit, pay it off, and borrow it again.
If you need to purchase oil rigs or other types of equipment for your oil and gas business, an equipment loan could come in handy. The equipment you buy serves as collateral and you may be able to get good interest rates.
Factoring or invoice financing
Another option for accessing cash is invoice financing or factoring. With invoice financing, you are loaned funds based on the value of the unpaid debts. Once you receive payment for these bills, you pay off the loan plus fees. With factoring, you sell your invoices, and the factoring company is responsible for paying the invoice.
Using business credit cards can help you make purchases for businesses, such as office supplies or gasoline for company vehicles. There are many cards that offer rewards programs that allow you to earn points for purchases that you can then redeem for travel, cash back, and other perks. Be aware that many credit cards charge high interest rates.
Short term loan
If you have bad credit, you can still get financing with short term loans. These lenders look at other factors besides credit scores, like annual income or unpaid bills. However, these usually have short repayment periods and high rates.
When to get financing for your oil and gas company
While it may seem counterintuitive, the best time to get financing for your oil or gas company is before you need it. Waiting until you have a backlog of gas projects and no working capital available can prevent you from getting a loan.
Also, if your credit isn’t good, consider waiting to apply for financing and spend some time increasing your credit. This could allow you to benefit from better prices and pay lower interest rates.
Whether your credit scores are great or poor, plan ahead for your financing needs so that you don’t wait to be desperate for money and have fewer options available to you.
How to qualify for oil and gas financing
Whether you are in the renewable energy business or building pipelines, lenders will look at the same requirements for loans.
The first is how long you’ve been in business. Lenders don’t want to give money to a start-up business that hasn’t had time to prove its stability. Most will require you to be in business for at least two years, although some short-term lenders may accept less.
Another important factor in qualifying is your credit. Your personal and business credit can be examined to determine whether your business is eligible for financing or not. The higher your scores, the lower the rates you can qualify for.
Your business may not have its own credit history, and if it does, spend some time learning how to build business credit.
How to Apply for Oil and Gas Financing
Some loan applications can be completed in minutes while others, especially those from banks, credit unions or the SBA, can take longer and require more paperwork.
You will be asked for details about your business, including company name, address, seniority, and annual income. You may also be asked for personal information such as your contact details and your social security number.
The loan application will also ask how much you want to borrow and what you plan to do with the funds.
When approving credit, you will be presented with your loan options, including the repayment period and the interest rate. Review the loan terms and sign the loan agreement. The funds should be deposited into your bank account within a few days.
How Nav can help you
Small business loans can help energy companies like yours weather the volatility of the ebb and flow of the market. Nav can help you find financing solutions tailored to your needs. Visit our Marketplace to get started.
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