Last Updated January 30, 2026
Intense competition in the American oil and gas industry leads to low prices, meaning you don’t have a large profit margin. It’s made worse by customers taking weeks or even months to pay, resulting in cash crunches that create a frustrating cycle of negative cash flow and increasing debt.
To keep growing your oil company and stay competitive, you need cash to make payments and build good relationships with business partners. Fortunately, factoring for the oil and gas industry can help your company regain a healthy cash flow, even when customers delay payment.
In this article, we discuss how invoice factoring works for service providers in the oil and gas industry, its benefits, and how it stacks up against other financing options. Read on to see how factoring for oil and gas can improve your cash flow.
What Is Oilfield Factoring?
Oilfield factoring is when your business sells invoices to a third party company in exchange for a cash advance. Oilfield factoring is generally used to improve cash flow when customers like E&P operators and government entities take a long time to pay and can be an excellent way to bridge the cash flow gap between services rendered and payment.
How Does Oilfield Factoring Work?
Factoring for oil and gas companies through altLINE works by selling your unpaid invoices at a discount to receive a cash advance. Below is a quick overview of the process step-by-step:
- Submit Your Unpaid Invoices: altLINE accepts all kinds of customer invoices in the oil and gas industry, including those from E&P operators, government entities, and midstream companies. If your invoice turnover time is between 30 and 90 days, your receivables are well-positioned for factoring.
- altLINE Advances 80% – 90% of the Invoice Face Value: Advance rates vary depending on the business, but altLINE offers same-day funding so that you spend less time waiting and more time growing your business.
- altLINE Helps Collect Payment of Your Outstanding Invoices: Your dedicated account manager will help you monitor and collect payments for the factored invoices.
- altLINE Pays Sends Your the Remaining Invoice Value: After deducting our factoring fees (typically 1% – 5% of the invoice face value), we will transfer the remaining balance to your business account.
Benefits of Invoice Factoring for the Oil and Gas Industry
Whether you’re in the business of drilling, welding, providing roustabout crews, or another sector of the oil and gas industry, factoring can provide you with the working capital you need to pay down expenses while waiting for invoices to get paid. Here are some of the advantages of factoring oilfield businesses can expect:
- Access cash before invoices are paid
- Spend less time waiting on debtors
- More confidently bid on contracts
- Avoid giving up business equity or taking on debt
- Get approved more easily than for a bank loan or line of credit
- Receive financing, even as a startup or a business with less-than-ideal credit
- Create predictable and stabilized cash flow
- Be better prepared for market fluctuations
- Receive a dedicated account manager who supports invoice collection
- Get complimentary credit checks on current and future debtors
Need Cash Quickly?
Uses For Your Cash Advance
Receiving cash advances from altLINE’s oilfield factoring service means you can fund your business without waiting on customer payments. Instead, you can unlock growth capital sooner and dodge long payment cycles to accelerate business development. Here are some things you can do with the cash advance:
- Make Payroll: Paying your oilfield workers should always be a priority, but slow customer payments can make it difficult to make payroll on time. Getting a cash advance from factoring helps prevent late payroll, keeping morale high and your company financially sound.
- Land More Contracts: You shouldn’t have to turn down new projects or decide not to bid them because of late customer payments and slow payment cycles. Invoice factoring for oil and gas companies can provide the cash you need to take on new business and expand into new territories without sacrificing equity.
- Pay for Fuel: Fuel is critical to keeping rigs, trucks, and equipment running, but it often has to be paid upfront while customer invoices can take 30 – 90 days to settle. Factoring gives you immediate access to the funds needed to cover fuel costs, keeping your operations moving without delays.
- Cover Compliance Costs: Staying compliant with insurance, bonding, and permitting requirements is critical before work even begins. Factoring gives you quick access to cash to cover these costs so that you can operate safely and legally without waiting on slow payments.
- Outfit Your Crew and Job Sites: Your crews can’t work without the right tools, parts, and equipment, but purchasing them often comes before customer invoices are paid. You can use your cash advance to buy the materials you need immediately, keeping projects on schedule and avoiding costly delays.
Businesses in the Oil & Gas Industry that We Fund And Finance
We factor all sorts of oil and gas businesses, including:
- Welding and fabrication
- Drilling
- Well servicing
- Oilfield staffing and roustabout crews
- Oilfield trucking and logistics (see our freight factoring page to learn more)
- Pad rentals
- Cattle guard and fence installation
- Waste hauling
- Pipeline services
- Coil tubing
- Tank cleaners
- Demo teams
- Rig operators and movers
Invoice Factoring for Oil And Gas vs. Other Funding Options
In addition to invoice financing for oilfield contractors, you have a few other options to enhance business cash flow. In this section, we compare alternative oil and gas business financing options against invoice factoring.
Oil And Gas Factoring vs. Bank Line Of Credit
Most companies seek a bank line of credit to improve cash flow before considering other alternatives. While many oil and gas companies can qualify for a line of credit, the funds may not be enough to grow their businesses.
Banks typically look to your fixed assets to determine whether you qualify for a line of credit. As an oil and gas company, you likely have a lot of fixed assets to make approval easier. However, if you are a new company, you may find qualifying for a line of credit harder.
Invoice factoring is the better option if you are a new company with only a few fixed assets because factoring companies look at your customers, instead of your assets, to determine your funding eligibility. If you work with an established and creditworthy customer base, factoring companies are likely to give you the working capital that banks cannot.
Oil And Gas Factoring vs. ACH/MCA Loans
ACH (automated clearing house) or MCA (merchant cash advance) loans are popular because their lenders determine qualification just by reviewing your bank statements. Moreover, ACH or MCA loans only take one or two business days to pay out, which makes them a great option if you need fast cash.
However, the main drawback of ACH and MCA loans is their high fees, which can reach up to 60% of your initial loan. ACH and MCA lenders also like to suggest loan renewals that may land you in even deeper financial trouble.
Oilfield factoring gives you more peace of mind than ACH and MCA loans because rather than taking out a loan with high fees, you receive a cash advance based on your customers’ likelihood to pay their invoices. Instead of scrambling to repay mounting debts, you can receive a cash advance based on your customers’ creditworthiness with invoice factoring.
Typical Oil & Gas Factoring Rates
Factoring companies determine your fees based on how much you plan to factor and how long customers take to pay. Factoring more amounts and getting customers to pay faster usually lead to lower rates. Factoring companies also consider criteria like how many years you have been in business, customer base diversity, and customer credit quality.
Oil and gas factoring companies charge two types of fees:
- Initial fee: This fee covers the factoring process and a certain number of days that an invoice can be outstanding (typically the first 30 days). Initial fees usually cost between 0.9% and 3.5% of your invoice’s face value.
- Incremental fees: These periodic fees kick in after the factored invoice has remained outstanding beyond the time covered by the initial fee. Incremental fees typically cost between 0.25% and 1.5% of the invoice’s face value and increase the longer an invoice is outstanding.
Related: Invoice Factoring Rates
Requirements to Apply for Oilfield Factoring
Before using altLINE’s oil and gas factoring services, you will have to go through the application process. If you have the necessary documents and information ready to go, the process can go much faster, which will get you factoring your invoices sooner. Below are some of the items you will need when applying:
- List of existing customers
- Business ownership identification
- Personal identification
- Employer Identification Number
- Articles of incorporation and other relevant corporate paperwork
- Copies of customer invoices
Frequently Asked Questions About Factoring for the Oil and Gas Industry
Do you still have some questions about oilfield factoring? Here, we answer some common questions on the topic:
Do you need to run a credit check before getting started?
altLINE runs a credit and background check on all oilfield company owners. However, there are no minimum credit thresholds for approval. Background checks are reviewed for financial-related crimes or felonies.
In the event a borrower has a spotty background, approval with altLINE may be in question. If the borrower is disqualified, altLINE will often work with the borrower to identify an oilfield factor that is willing to help.
Do you require UCC filings when factoring oilfield invoices?
Upon executing a term sheet, altLINE will file a UCC on the client’s business. This UCC filing allows altLINE to properly secure the collateral (i.e. the invoices) it plans to advance against when the factoring facility is in place. UCC filings are an integral part of any form of lending.
Is oilfield factoring a debt or loan?
Oilfield factoring is neither debt nor a loan. Invoice factoring is the sale of your invoices to a third party. The money advanced against these invoices will be repaid by your customers. However, altLINE is a recourse factor, so you may need to pay the cash advance back if your customer fails to pay their invoice.
Do you offer non-recourse oilfield factoring?
altLINE only offers recourse factoring for the oil and gas industry. While you must repay the cash advance if your customer fails to pay their invoice, recourse factoring structures often allow for factors to extend lower rates and larger advances to clients. See our page on recourse vs. non-recourse factoring for more information.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.
