Solutions to financing a government contract

There are various ways in which you can overcome this challenge:

The Small Business Administration (SBA) offers various products to assist small to midsize companies.

If you are a wholesaler who resells products at a profit margin of 20% or more, purchase order financing covers the supplier costs linked to a specific government purchase order.

For companies with an established track record and a minimum of three years of operations history, supplier financing uses a finance company to provide credit as a broker between your and your suppliers.

If your business generates above $1,000,000 of monthly revenues, asset-based loans let you finance your company’s main assets such as equipment, inventory, or accounts receivable.

Factoring helps boost the cash flow of companies that have creditworthy, but slow-paying, invoices. This is particularly useful for government receivables as it is a flexible form of financing. It is relatively quick to set up – normally a week or two. Factoring is also known as invoice financing or accounts receivable factoring.

The factoring company buys your invoices and pays for them immediately. This provides you with the cash flow to pay your operating expenses. It makes sense to choose a factoring company that has experience in your industry. But also find one who specializes in government contract financing.

There are two common causes of financial strain when dealing with government contracts. The first is that government agencies pay their invoices in net-30 to 60 days. Combine that with the second – you may have to pay for your costs of sales before delivery – and the potential drain on your cash flow can be catastrophic.