Velocity celebrates 5 years of invoice factoring
In 2019, Velocity Financial tapped an ancient form offinancing — invoice factoring — to help oilfield service companies finance operations. The company has just celebrated its fifth anniversary.
The company was founded by oilfield veteran Tripp Wommack when he saw service companies having trouble accessing bank capital, even during good times. Son Wright serves as chief executive officer and Irene Hinojos as president.
“It’s been interesting with all the consolidation,” Wright told the Reporter-Telegram in a telephone interview. While Permian Basin-focused Velocity serves companies of all sizes, he said there hasbeen some shakeups among clients. One benefit ofconsolidation is business has been steadier, he said.
But there remain opportunities.
“There’s still hesitancy among banks to lend, and that’s the gap we try to fill. People can pick and choose when to use invoice factoring. It maybe they don’t want to use a bank, or they’re a start-up company and not ready for bank financing,” he said.
It would be nice to see more bank capital invested in the industry, he said.
Invoice factoring involves companies purchasing invoices directly from their clients. In the Permian Basin, this is frequently used by service companies so they don’t wait 60 to 90 days to get paid and Wommack said clients like that flexibility.
Velocity currently serves 40 clients, 80% of whom are in the oil and gas industry.
The company looks at deals up to $5 million a month but can do bigger, he said. One thing that differentiates Velocity from other factoring companies is its simple fee structure, transparency and lack of exit fees.
Coming out ofthe pandemic, he said business grew quite a bit and has been steady in the last year.
“We’re seeing more business, more start-ups, more activity,” he said. Clients range from staffing companies to transportation companies to manufacturers as well as service firms.
“That’s the great thing about the Permian Basin — there’s no shortage of entrepreneurs,” he said.
He credits his father’s entrepreneurial spirit with seeing the need for Velocity and for building a great factoring team.
“Our goal is to become the best factoring company in the Permian Basin and I feel we have the team for that,” he said. “We plan to continue doing what we’ve been doing, building a great business.”
