Why this industry needs working capital
Service companies pay crews, fuel and repairs weekly but may wait 30 to 90 days for payment from operators or larger contractors.
A hauling, roustabout, inspection or equipment-rental company often works under master service agreements with long payment terms. In the meantime, crews must be paid and trucks must run. The gap between work done and cash received is where most cash strain appears.
Activity also follows commodity prices and drilling schedules, so revenue can swing sharply from one quarter to the next. Plan for that volatility in every funding decision.
One practical step is aging your receivables each month. If invoices are drifting past 60 days, call the operator's payables team early rather than waiting for a cash crunch.
What oil and gas service owners finance
Typical uses are heavy equipment and trucks, tools and safety gear, payroll between payments, insurance and bonding costs, and mobilizing to a new field.
- Heavy trucks and trailers: hauling, vacuum, water and equipment transport.
- Specialty equipment: pumps, tanks, generators, inspection tools.
- Payroll and fuel: the cost of running crews before invoices are paid.
- Safety, insurance and compliance: certifications and coverage required by operators.
Machinery fits equipment financing. Payroll and mobilization fit working capital.
Example: funding a truck to win a contract
A new truck pays back when the contract revenue it enables exceeds the payment, driver cost, fuel and insurance.
This is an illustrative example. A service company wins a contract that needs one additional water truck costing $90,000.
- Contract revenue: $26,000 a month.
- Driver, fuel, insurance and maintenance: about $15,000 a month.
- Contribution: about $11,000 a month.
If the financing payment is $2,800 a month, the contract covers it well. The question is how long the contract runs. If it has a 6-month term and the payment runs for 36, you carry the truck without revenue for 30 months unless you win more work. Always compare the payment period with the contract period. Our total cost worksheet helps compare offers.
What funders look at
Funders look at deposits, revenue level and time in business. Lumpy deposits from large invoices are common and should be explained.
ROI Funder considers 500+ FICO, 6 or more months in business and $20,000 or more in monthly revenue. Provide three months of business bank statements. If one customer is a large share of your revenue, expect the funder to notice. A short note about contract terms and expected work helps.
Do not assume the industry is excluded. Each funder in our 100+ funder network has its own appetite, and matching the file to the right one is our job.
Choosing between products
Use equipment financing for assets, a line of credit for slow payment cycles, and revenue-based financing if your revenue swings with activity.
A business line of credit lets you draw when invoices are outstanding and repay when they clear. Revenue-based financing adjusts with sales, which can help when drilling slows, but check the total repayment. Invoice factoring is a separate product that we do not place. It sells your invoices for cash, and it can fit if your customers are large and slow, so compare it honestly against a line of credit.
Cycle risk and how to plan for it
Size any payment to a slow quarter, not a busy one, and keep several weeks of fixed costs in reserve.
Rig counts and operator budgets can change quickly. If a single customer pulls back, your revenue may fall in weeks. Avoid payments that need peak activity to be affordable. Walk through the downside case using our guide to stress-testing payments.
Diversify customers where you can. A second or third operator reduces the risk that one contract change empties your schedule.
Safety records and operator requirements
Many operators require safety ratings, insurance limits and approved-vendor status before they will hire you.
Costs for safety training, audits and insurance can be large for small service firms, yet they open the door to work. Think of them as an investment in access to contracts. If winning a new operator requires $30,000 of upfront compliance spending, compare that cost with the contract revenue you expect, and make sure cash is available before you bid.
Seasonality and field-to-field mobilization
Moving crews and equipment to a new field costs money before the first invoice, so plan the cash for the move.
Mobilization includes fuel, lodging, per-diem pay and sometimes temporary equipment rentals. Weather and road restrictions can also pause work. Work out how many weeks of costs you can cover before the first payment arrives, and size a line of credit or working capital to that number rather than guessing.
Frequently asked questions
Does ROI Funder fund oil and gas service companies?
Many do qualify, depending on the file. We match each file to funders that fit it, and we cannot promise a result in advance.
Can I get funded while waiting on a large unpaid invoice?
A line of credit or working capital can cover costs while you wait. Approval depends on your recent bank deposits and credit.
How fast is equipment financing?
Equipment financing usually takes 2 to 7 days. Working capital on a complete file can arrive the same business day.
Do you offer invoice factoring?
No. We place working capital, revenue-based financing, term loans, lines of credit, equipment financing and SBA loans.
How does customer concentration affect funding?
Funders may look more closely if one customer supplies most of your revenue. Explaining contract terms helps.