Considering a Specialty Lender?

A veterinarian startup needed to get a loan to get going. Six banks turned down the loan application before a seventh one approved the loan request. This bank stood out because it specialized in the veterinarian industry.

Working with Lenders Specializing in the Oil and Gas Industry

You know the oilfield industry differs from other industries in terms of how business works especially its volatility. A lender that knows the oil and gas industry will understand your financing and cash flow needs, revenue potential and the market. The lender can also help you with growth plans and spot issues with the business plan. Their experience in working in oilfield services allows them to identify potential financial management problems.

Banks with a specialty have a downside. Because of the banks' focus on one or two industries, regulators watch them more closely. This requires the specialty banks to be stricter with giving out loans. This and other regulations often discourage banks from adopting specialties or keeping them.

Private lenders don't run into the same regulations that banks do. Hence, you may want to consider looking beyond banks for lenders focused on oil and gas.

Government Stimulus Loans

With no borrower fees and government reimbursement up to 75 percent of a defaulted loan, a government stimulus-backed loan looks attractive. (Lenders didn't feel compelled to take the loan with a 75 percent guarantee, so the guarantee went up to 90 percent.)

But borrowers found themselves in a sticky situation thanks to the start and stop of stimulus funding. One business owner, for example, had everything approved for a government stimulus loan including backing from the SBA. The timing worked well with the loan closing around the time the owner's lease expired.

Then came the paperwork, which delayed the loan for two months. When the loan came through, the stimulus money was gone. The owner could either pay over $40K worth of fees he wasn't covered for under the stimulus package, or wait for the next round of stimulus money.

To make the situation more painful, another stimulus package came out within a few days after the owner closed the loan. The start and stop periods have no set dates. They stimulus depends on when it runs out and when congress approves another round of funding. Businesses struggle with the stimulus funding especially when dealing with leases and other deadlines.

Investigating Government and Oil Field Services Specialty Lenders

While the stimulus package presents an attractive option, the start and stop issue can lead to penalties or expensive delays when they don't mesh with an oil and gas business' timeline.

If you find a lender specializing in oil and gas, you'll also gain a great resource that can help in areas that most lenders can't. Banks and private financial organizations specializing in oilfield services exist. Ask around for possibilities and then ask these financial services questions so you can make the best decision for your company.