May 16, 2022
Securing government contracts is easy if you have good or high-level contacts. But, completing them on time is a big struggle. Even if you want, things don’t go as expected. It’s because payment from the government is often delayed. Or, you can say that the payment process of the government is very slow. Even for one installment, the processing takes 30-90 days after invoice is submitted.
Due to the irregular or delayed payments, businesses face regular hardships. You don’t get the necessary capital upfront to scale operations and complete the project in time. The cashflow becomes a serious issue. You are unable to clear outstanding invoices, pay the salary of the workers or manage the operating costs. And thus, the overall government contract performance could gets negatively affected.
Getting a government contract is a strong step towards success. So, you shouldn’t miss it out because of financial issues; instead, you should look for options to secure financing for government invoices.
At Royale Capital, you will get a government contract line of credit easily and at affordable rates. With this, you will give the best service and do justice to the government contracts.
Government contract line of credit- In this, you will get a predetermined amount of capital that you can withdraw as per the project requirements. The government contract line of credit works just like a credit card. The only difference is you get approved for this only if you have a government contract in your hand. The best thing about the line of credit is that it is not heavily monitored by the lender, unlike a typical loan. So, you have the flexibility to utilize the money in the best way. But, make sure enough credit is available to spend.
With the line of credit, you have to pay interest-only payments on the outstanding balance. The principal balance will not be paid down until the line of credit is valid with a set payment schedule. The government contract line of credit is preferable because you can pay the amount with no penalties if you have the cash available to do so. This isn’t possible in other types of government contract financing options.
You can get a line of credit in two ways: one by putting your company’s assets as collateral and another without any collateral. There are different requirements associated with these two ways of funding. If you fulfill the requirements, the amount will be approved for you to complete the government contract. There is no such rule of thumb to get approval.
As the government contract line of credit includes different stages, you should seek help from professionals. Or, you should work with a lender that provides easy approval, like Royale Capital.
The revenue of your company- Lenders often agree to finance the profitable companies. Other than profitability, the lenders agree on the organizations that are large enough to justify the line of credit. This reduces their risks and assures the return of the amount.
The history of your company- Your company’s history informs lots of things to the lenders. So, they check the history before approving the amount. The things that the lenders check are the experience of the company in the industry and the past credit records. If the company is less experienced, the lenders deny or ask for significant collateral.
The credit analysis of your company- Before approving a government contract line of credit, the lenders conduct credit analysis and check the scores. This analysis is done to assess how well-equipped your business is to pay back a debt. The analysis is done on different parameters, which are defined by the lenders themselves.
The personal credit history- Though it’s a professional take, the lenders check the personal credit history of the company owner and other parties involved in the government contract. It helps the lenders to know more about the credit details and secure their approval for the government contract line of credit.
The professional and personal guarantees- Just like other financing options, the line of credit requires a guarantor, both professional and personal. The guarantor takes the responsibility for managing debt repayment if you fail. The professional guarantee includes either a business or individual and the personal guarantee includes the assets of your company. The personal guarantee is asked by the lenders if the company is small.
Many business owners get approved for government contract lines of credit. But, they don’t utilize the money effectively. The money gets unnecessarily wasted and the contract doesn’t get the benefits. To avoid any such problem, you should be very careful and follow a few tips and tricks.
First, you should borrow only if revenue is fixed- Getting approved for the credit amount doesn’t mean you have to use them all. If you receive timely payment from the government for the contract, you should use the same and keep the amount received from the lender for future use. Most importantly, you should borrow or use the amount only if the payment from the government is guaranteed. For this, you should evaluate the contract and read the fine prints carefully.
Second, you should keep personal and professional finances separate- After getting the line of credit, business owners often lose track and end up spending on or funding other projects or personal expenses. You should avoid this, no matter how important the other things are. You should look for alternative solutions for those expenses. Due to this, the credit limit often exceeds, damaging both personal and professional financial standing.
If you think a government contract line of credit is worth it for your organization, contact Royale Capital. We will finance your government contract and help you complete it without any financial worries. You will get approval for a government contract line of credit at low-interest rates and affordable service costs.