4 ways to use factoring for government contracts
Once (preferably before) the champagne has been popped because you have been awarded a government contract, you should think about using factoring as a way to finance the fulfillment of the contract.
Government agencies large and small are mandated to support small to medium business enterprises. They also need almost every service and product imaginable. This is a huge boon to companies like yours who are looking to grow. But when it comes to the red tape of getting your invoices submitted, approved, and paid, the cashflow interval can be nerve-wracking.
Use factoring when needing government contract financing
A factoring company buys the financial rights to your invoices in exchange for immediate payment. Some ways you can use factoring when needing government contract financing are:
- Access funds quickly. Qualifying for an invoice factoring program is relatively easy, especially if you are a government contractor, and usually takes a week or two to set up.
- Protect your cash flow. Government customers can take four to eight weeks to pay which is difficult for companies without a large cash reserve. Do not let this lag drain your financial resources. Factoring gives you a way to pay your suppliers, staff, and so on time.
- Grow your business. There is an old saying that “you need to have money to make money.” To expand as a government contractor, you need access to capital. Factoring brings in the money from accounts receivable so that you can grow without having to wait until the slow payments are made.
- Fulfill government contract requirements. It sometimes happens, especially in high-value contracts, that you have to prove that you can fund the costs of the project. When you need assurances for your customers that lack of funding will not stall or delay the project, you can request a letter of intent to fund from your factoring company.