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Companies are preparing to seize new opportunities for growth in the energy sector. Are you ready to join them?

For small to mid-sized companies in the energy, oil and gas sector looking for opportunities to take their businesses to the next level, the last couple of years have proven to be anything but easy – but with the industry poised for growth in 2023, putting yourself in a position to be able to take advantage of new projects is paramount.

Although a potential recession is on the minds of many small and medium-sized business owners heading into 2023, growth in the energy sector is set to continue.

Continued recovery after volatility

Helped by factors including tailwinds from the completion of the Trans Mountain Expansion pipeline and the Coastal GasLink natural gas project next year, the Canadian Association of Energy Contractors (CAODC) is projecting a 15% increase in the number of wells drilled in 2023, as well as more than 5,400 direct and indirect jobs created in the sector.

This is a far cry from the situation the sector faced only a couple of years ago.

The first year of the pandemic was volatile for all players in the oil and gas space, with demand for energy products falling – and the industry experiencing historic low oil prices and drilling activity, says the Canadian Association of Energy Contractors (CAODC.)

Following the challenges of 2020, oil and gas extraction industry revenue grew in 2021 thanks to a rebound in economic activity, rising oil and natural gas prices and increased production volume as demand for energy products climbed, says StatsCan.

This year, recovery has continued for the sector as energy prices reached record highs — although oil prices have eased off since the summer peak, they are still well above the levels seen during the early part of the pandemic.

On the ground, cash flow challenges continue

In spite of improving conditions for many oil and gas companies, small and mid-sized energy firms still face challenges when it comes to cash flow and getting invoices paid on time.

Although many smaller producers are building relationships with large, reputable customers in the oil and gas sector and have agreements in place for their invoices to be paid at net 30 days, payment often gets extended to net 45 or 60 days.

In many cases, customers in the sector are stretching out payment terms even as far as net 90 days, because of the realities of their own cash flow cycles. When combined with small margins, many energy companies find it hard to take advantage of opportunities to grow.

How alternative funding helps energy companies succeed

As Deloitte notes, more than 90% of oil and gas executives are positive about the industry in the coming year. With the chance to take advantage of new business in the sector, having quick, reliable access to working capital is essential. In this economy, however, banks are tightening their lending criteria and re-evaluating lending risk as interest rates rise.

An alternative funding solution like invoice factoring can help ensure you’re in a position to hire new employees, meet payroll and confidently say yes to taking on new projects.

Whether you are in exploration, extraction, refining or another part of the upstream or midstream oil and gas industry, an alternative lending partner with the expertise in helping companies in this sector grow is not only a source of working capital – but will see the potential in your business, go deeper into your story and be a valuable source of advice as you navigate your next steps.

With large, credit worthy customers in the sector, small and mid-sized oil and gas companies are perfectly positioned to take advantage of invoice factoring. This flexible solution will help accelerate your cash cycle, quickly replacing your near-current assets — or invoices — with cash. 

With an invoice factoring solution, your business will receive up to 85% of the value of your invoices and the factor collects payment from your customers on your behalf. The process can also be customized to meet your needs, so you won’t be locked into a long-term contract.

Asset-based lending is another flexible funding option that allows you to secure a line of credit against all your valuable assets, including accounts receivable, inventory, equipment and real estate. With borrowing amounts typically calculated weekly, the ability to borrow can increase more quickly for companies in a strong growth cycle.

Looking to the future

With demand in the energy sector set to continue in 2023, forward-thinking energy companies are looking to agile, flexible funding solutions to ensure they’re positioned to take advantage of opportunities to build relationships and grow their market share.

Are you or your client looking to access flexible funding for your energy company? Contact a Liquid Capital Funding Expert today to learn how our alternative funding solutions can help you be ready for anything.

Leaders need to foster and embrace innovation in their companies to unlock long-term organizational success. 

For businesses in most sectors, continuing to adapt, focus on and embrace innovation is critical when it comes to standing out from competitors and overcoming oversaturated markets — ultimately cementing your long-term success.

In fact, according to one study eight out of 10 digitally maturing companies say innovation is a strength of their organization, as they report constantly driving toward digital improvement and investing more in innovation than less mature organizations.

But as Deloitte’s 2021 Innovation Study found, for some companies, innovation has become both a business-critical concept and a buzzword that means nothing at all.

To avoid simply paying lip service to the broad concept of ‘innovation,’ which can result in missed opportunities and put you at risk of falling behind the curve, leaders need to nurture an environment where productive, valuable ideas can genuinely flourish.

For many, the key to success means zeroing in on the ideas and processes that offer the greatest value and exploring how best to encourage creativity across your entire team.

Here’s how you can shift towards a management approach that fosters innovation:

Move away from hierarchical management structures

Although most of a company’s business knowledge required for innovation comes from non-management employees, says the Harvard Business Review (HBR) — many consider innovation outside of their remit. Others may be discouraged from participating in the process by cultural norms or organizational barriers like authority bias. As a result, allowing bottom-up innovation to thrive requires a move towards cultural flatness.

As McKinsey explains, flattening and unstructuring your company can unlock a great deal of long-term value. When you minimize management layers and ‘decentralize’ the innovation process, your company can gain  greater speed and agility to move at the pace of change.

As an example, Google takes a decentralized approach to innovation, where different product groups are encouraged to work independently of one another.

This approach will help you empower the front line of your organization to make decisions and enable those closest to customers, clients and products to have a voice and collaborate – allowing for more rapid innovation and effective decision-making.

Focus on offering value to the human experience via technological advances

Making moves to integrate more artificial intelligence (AI) into the workplace can help employees find better, more efficient ways of doing certain tasks, freeing them up to think more creatively.

As HBR notes, automating processes by using smart technology can make workplaces “more fulfilling and less exhausting” for employees. However, it’s important to note that employees should still be responsible  for tasks that require empathy and intuition.

Essentially, smart tech can take over the more mundane tasks, leading to a more manageable employee workload and reduced stress, allowing people to focus on other activities like problem solving and intuitive decision making.

For example, time-saving software, such as online collaboration or project management tools, can take basic processes out of employee hands and add valuable time to their schedules, so they can take on more innovative tasks.

Develop a system to identify where innovations may arise

As an absolute necessity to the long-term growth and success of your business, innovation and potential innovation needs a metric. Just like sales and marketing initiatives, you need to know where you should be directing your attention – and your funding.

As CEO World magazine explains, while it is a creative process, innovation is also about discipline, so it can be measured – as long as your company is clear on what you mean by innovation. For example, is innovation something new and disruptive in your industry, or simply an improvement to your existing products or services?

Implementing a system to take stock of where innovation is happening in your business is not always easy, according to the Mack Institute for Innovation Management at Wharton. For example, while some companies look at financial metrics like percentage of sales from new products or revenue growth, it’s hard to link this data exclusively to certain innovations or processes.

Instead, consider process effectiveness metrics when measuring innovation, says the Mack Institute, such as the percent of projects that are major improvements, number of new products launched, average time to market, cost/investment and patenting activity.

If your company is ready to unlock the tremendous value of fostering innovation, you need to have a solid plan with concrete steps to analyze and support your company’s journey. That includes having the working capital you need to achieve your goals.

Need a reboot to your cash flow strategy to support your growth plans? Contact a Liquid Capital Funding Expert today to learn how our alternative funding solutions can help you be ready for anything.

As business owners face a recession, the time has come to find the right funding partner to support them as they face new challenges and opportunities.

Just as companies are finally moving past the challenges the last few years brought, more economic woes are waiting in the wings. As interest rates rise in both the U.S. and Canada – with promises of further increases — and inflationary pressures persist, the threat of recession is now on the minds of almost every business leader and entrepreneur.

As one recent survey noted, nine out of 10 U.S. small business owners say economic trends such as inflation, supply chain issues and workforce challenges are having a negative effect on their businesses. Some 93% of U.S. businesses are also worried about the economy experiencing a recession in the next year.

Their worries may be well founded. According to the World Bank, the trend of central banks around the world raising interest rates simultaneously in response to inflation is likely to continue well into 2023, edging the world towards a recession.

For most sectors, rising rates, inflationary pressures and a looming recession are linked to a number of challenges. This includes pricing and contract-related concerns, higher borrowing and input costs along with supply chain slowdowns and staffing shortages. 

Businesses in industries heavily affected by fluctuations in cost, supply chain pressures and changes in business and consumer confidence are particularly vulnerable. According to data from the Canadian Association of Insolvency and Restructuring Professionals, this is most prevalent in the construction, transportation and warehousing sectors, with insolvencies increasing this year for many companies.

For many small and medium-sized companies, successfully navigating this part of the economic cycle will mean having the agility and availability of capital to pay employees and meet demand from customers.

With rising costs affecting inputs, even those experiencing high growth will need access to funding quickly to take advantage of opportunities in their market.

Recession and traditional funding challenges go hand-in-hand

Unfortunately, just when cash flow is paramount, gaining access to it via traditional means has become more challenging as rising rates are causing banks to re-evaluate their lending risk.

In the second quarter of 2022, U.S. bank lenders began to tighten lending standards for commercial and industrial (C&I) loans to businesses of all sizes, according to the Federal Reserve’s Senior Loan Officer Opinion Survey. This tightening is expected to continue for the rest of 2022, as businesses are faced with an expected deterioration in debt-servicing capacity due to inflation, an expected deterioration in collateral values and an expected increase in the exposure to interest rate risk.

Finding an entrepreneurial partner

For many companies, the ability to thrive when a recession hits will mean having quick access to funding via a lender that looks beyond the data and takes the time to really understand your business.

In this climate, leveraging the close-knit relationship that develops between an alternative lender and small business will allow you to weather the cash flow challenges that a recession can bring. You’ll be prepared for working capital interruptions and – perhaps even more importantly – they’ll give you the tools required to take advantage of opportunities when they strike.

Looking at business through an entrepreneurial lens, established and partnership-oriented invoice factoring companies take a hands-on approach to client relationships. They take the time to dive deep into the data and seek to understand a company’s purpose and goals. 

They empathize with the financial and emotional impacts facing businesses during times like this, and are ready to discuss potential problems and solutions and aim to collaborate and grow with their clients.

Ultimately, with the unpredictability of the changes that can emerge during a recession, it is important that a lender also has the flexibility to pivot and react, provide predictability and transparency, and give business owners the tools they need to proceed with confidence.

Alternative lenders are nimble and respond quickly to challenges

At Liquid Capital, our clients are just a call or click away from a funding decision, following the initial underwriting process. This can be tremendously helpful in an economic environment where opportunities and challenges arise quickly, and often, unexpected.

It’s common for financial institutions to be slower at approving requests for funding. They can potentially be required to wait for a company’s fiscal year-end or the results of an audit before distributing funds. Operating on a quarter-by-quarter basis, traditional banks also often have little incentive to issue loans with a high cost of administration, especially in the current environment, and consider companies with exponential growth to be higher risk.

One small business recently had the opportunity to scale significantly after landing a large contract to sell their product with a major U.S. retailer. However, the fact that the contract would represent 85 percent of their sales was considered by a bank lender to be too concentrated.

The company instead pursued an invoice factoring solution. Liquid Capital built a relationship with the large retailer’s accounts payable team and was able to notify and verify the receivables. This allowed the client to access the financing to buy the inputs to meet the sales demand – eliminating the need for the company to consider other options, such as prematurely selling equity in the business.

At the centre of the alternative business lending philosophy is a simple concept: a company that is not traditionally bankable can still be a high-growth business.

Finding a funding partner who takes the time to understand your company is one way to guard against the impact of a recession. Keep reading for more tips on how you can prepare your business for the new economic reality.

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