Accounts Receivable Factoring, Cash Flow

Government Contract Financing

Posted by Factor Funding Co. on April 10, 2012
Government Contract Financing
Do you work on government contracts? If so, you may find that your business can be extremely profitable when you finally receive your payments. Generally, government contract work may take a very long time to be paid and invoices you send out may take several months to be cleared. In the meantime, you still need to pay your business expenses. How can you get cash to meet your needs while you're waiting to be paid? Government contract factoring offers an easy way for you to increase your cash flow.

How Government Contract Work Operates

Most government contract workers have to bid on a project and then produce it without being provided any upfront cash at all. As they're working on the project, they're continually spending money on supplies, labor and payroll until the job is completed. After the work is done, these workers usually submit an invoice, requesting payment for their services. However, the government can take as long as it wishes to pay this invoice sometimes up to as much as 90 days.

About Government Contract Factoring

When you use government contract factoring you can simply submit a copy of your approved invoice to a factoring company. The company will send you an advance on the funds, usually up to 80 percent of the total invoice. Once you get the money you can use it in whatever business capacity you need. After the government pays the invoice in full the factoring company receives the funds and submits you the remainder of the invoice, minus its fee for the factoring.

Advantages of Using Factoring

Using government contract factoring has many advantages. Since factoring is not a loan you won't have to pass a credit check to get it. This can be quite convenient if you've run into trouble trying to secure traditional lending from a financial institution. Instead, the government's creditworthiness of paying its bills serves as your credit to help you qualify for the factoring arrangement. Another benefit of factoring is the fact that you can get your cash very quickly, within a few business days. This can help you cover the necessary expenses of your business while you begin bidding on additional projects.

Working with government contracts can be a difficult business if you need to get paid right away. By using government contract factoring you'll be able to get the cash you need for your company without having to wait several months for your invoices to be settled.

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