Government contractors are companies that provide services or products to a government entity and can be very successful. Government agencies — local, state, or federal – can develop into long-term and reliable customers. However, government offices usually take at least a month or two to pay invoices, due to various approval processes. Some of these companies working on government contracts do not have cash on hand to pay staff, rent, taxes, insurance, and other bills while they wait for payment.
Many government contractors rely on factoring companies to help them bridge that gap between paying their own bills that are due and getting paid for the work they have completed. Factoring can help those businesses keep up with expenses while they work to fulfill the contract.
Some companies might consider taking a traditional bank loan for their working capital, but having additional loans can put them further into debt. With factoring, they incur no debt and they are receiving the cash advance based on their current accounts receivable, not based on future work that may or may not be forthcoming. In addition, factoring companies evaluate your application to factor based on the credit history of your clients, not your own credit report or collateral. Government agencies are more creditworthy than many private companies, so factoring can be a fast and easy source of debt-free revenue for you.
Factoring Tips for Government Contractors
Not all factoring companies will work with government contractors. Look for one that has experience in this area and employs factoring professionals who are knowledgeable about how private companies work with their governmental customers.