Five Ways to Finance a Federal Government Contract

4 years ago

Government contract financing may be the last thing you think about in the excitement of preparing and submitting your bid. Yet so many small to medium-sized enterprises learn the hard way that it needs to be addressed right at the beginning of the process.

When looking at financing your government contracts, you want a solution that offers:

Dependable cash flow and liquidity.

Responsive turnaround and scalability.

Covenant-free management of your business

Proof of your competence.

1. Factoring

Firstly, factoring accounts receivable assists you in solving cash flow problems caused by slow-paying invoices. An invoice factoring program specializing in government receivables can increase the liquidity of your business to cover operating costs.

If you need a fast turnaround time and flexibility to scale as the revenue from your government projects increases, then accounts receivable factoring is an excellent alternative for government contractors.

2. Asset-Based Lending

Secondly, asset-based lending is ideal for companies that have a decent track record. Asset-based lending lets you leverage your existing assets—accounts receivable, inventory, and equipment. This helps to create additional liquidity for the business.

3. Purchase Order Financing

Thirdly, purchase order financing lets you pay for the supplier costs pertaining to a specific government purchase order. This is exclusively for wholesalers who resell products.

4. Supplier Financing

Fourthly, you can explore supplier financing. This is if you are an established but small to mid-sized manufacturer or product distributor. This type of supply chain financing enhances your existing financing by using a supply chain financing company as an intermediary between you and your suppliers.

5. Small Business Administration

Lastly, the Small Business Administration (SBA) connects entrepreneurs with lenders and funding. While it does not lend money directly, the SAB supports three loan programs, two of which are suitable for financing a federal government contract:

The 7(a) Loan Program includes four CAPLine options that help small businesses meet their short-term and cyclical working-capital needs up to an amount of $5 million.

The microloan program provides loans up to $50,000.

Kore Capital Corporation provides short-term working capital and specializes in financing government contractors. Contact us to find out about our government contract financing solutions.