Oil & Gas – Term & Accounts Receivable Loans

$4.7 Million Oil Field Equipment Loan

Client is a Texas-founded oil field service company whose income and expenses relate to the rental of oil field industry tools to major oil companies and independents. The owners were located in Houston, Texas. SOT simply needed a refinanced term loan and an accounts receivable loan to help free up cash for daily operations.

Transaction Summary: The company is seeking $1,300,000 to allow for the purchase of equipment for rental offshore and a revolving line of credit.

Deciding Loan Approval Factors

  • Management Experience: Historical performance demonstrates management’s ability to run the company successfully.
  • Proposed Use: Funds to be used over a period of several months. Funds were to be used to purchase equipment for renting out within the oil drilling business locally.
  • Purchase of equipment: $1,000,000
  • RLOC: $300,000
  • Total Funds: $1,300,000
  • Source of Funds: Term Loan and an Accounts Receivable Loan. Initially, a 12% rate was all that was available, but 2 years later we were able to broker a 5.25% rate.

Problem

Due to the client’s special circumstances, a favorable rate was extremely difficult to broker in their case.

Our Solution

Initially, we were able to get the loan refinanced at a 12% rate –that was all that was available to this particular client, given their unique situation, and luckily all they needed for the time being. Additionally, we got them the RLOC based on their accounts receivables used as collateral.

End Result

Client received what they needed on the refinance and the RLOC, however 2 years later we were able to again broker a refinance at a much more favorable 5.25% rate, in part due to interest savings on our initial refinance of the original loan.

Comments

Factoring invoices to obtain credit to fund daily operations is a useful tactic to keep cash-flow strong for many businesses, including the Oil & Gas adjacent industries, as this case study readily demonstrates. Term loan refinancing and an accounts receivable loan were the tools used in this case, however, there are often many such tools at a broker’s disposal, and every borrower’s situation is unique.

Contact us to discover what options exist in your organization’s own particular situation.

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