Payment for government contracts can take several months, which may not be feasible for businesses lacking liquid assets. This is where government invoice factoring comes to the rescue. Such businesses can use government invoice factoring, which involves partnering with a factoring company to obtain funding for unpaid government invoices.

How do a factoring company work and help businesses with unpaid government invoices?

When a business utilizes government invoice factoring, a factoring company offers them an advance on an outstanding invoice, usually around 80 to 90 percent of the total balance. And thus, the business receives cash up front that it can use as required.

The factoring company then takes over the collection of the invoice from the government and collects the amount that they advanced to the business, plus a small processing fee. Finally, the remaining amount is forwarded to the business.

Truly speaking, the government invoice factoring service helps businesses working on government contracts in every way. Most importantly, invoice factoring maintains a proper cash flow in the businesses, avoiding any financial crisis. But, when there are government shutdowns, they negatively impact government invoice factoring. 

Let’s understand what happens during a government shutdown and how it impacts government invoice factoring. 

What do you understand about government shutdowns?

When a government shutdown happens, non-essential government operations and services are temporarily halted. Halting of operations and services compels government employees may be furloughed or forced to work without pay. 

This leads to delays in government payments to businesses, as well as disruptions in government contracts and projects. For businesses that rely heavily on government contracts, a government shutdown can cause significant financial strain and uncertainty.

What’s the impact of the government shutdown on government invoice factoring?

Delay in government payments

Businesses relying on government invoice factoring experience a significant impact of government shutdowns. The government shutdown causes delays in government payments to businesses. This causes delay in payments to factoring companies, resulting in cash flow issues for them. Because of this, they are unable to provide funding to their clients.

Non-availability of new government contracts and projects

Other than delays in government payments, a government shutdown can also impact the availability of new government contracts and projects. This can make it more difficult for businesses to generate new invoices to sell to factoring companies, which can further impact their cash flow.

Uncertainty and unpredictability of government operations

During shut downs, there is uncertainty and unpredictability in government operations. Due to this, businesses are unable to plan and make informed decisions about their financial futures. This creates a level of anxiety and stress for business owners and employees, who are unsure if they will receive payment for theirwork.

Is there a way to prevent the impact of government shutdowns on your business operations?

Yes, there are ways to prevent the impact of government shutdowns on your business operations. You should take some important steps before and during government shutdowns so that everything goes smoothly. You shouldn’t expect any miracle at the last moment. You might lose the government contract as well as face several problems in your business. 

What should you do to prepare for government shutdowns?

Always have cash reserves in your business: To prepare for a government shutdown, one of the best and popular ways is to build up cash reserves. By having a cushion of cash on hand, businesses can weather the storm of a government shutdown and continue to pay their bills, and maintain their operations.

Have more than one revenue stream: Businesses that rely heavily on government contracts should consider diversifying their revenue streams. By branching out into other industries or sectors, businesses can reduce their dependence on government contracts and make themselves more resilient to government shutdowns.

Keep an eye on your cash flow: It's important for businesses to closely monitor their cash flow during a government shutdown. By keeping a close eye on their expenses and receivables, businesses can identify potential cash flow issues early on and take steps to address them.

Communicate frequently with your factoring company: If you're using a factoring company, it's important to communicate with them regularly during a government shutdown. By keeping your factoring company informed of any delays or issues with government payments, you can work together to find solutions and minimize the impact on your cash flow.

Should you apply for government invoice factoring?

After reading about the impact of government shutdowns on government invoice factoring, you might be doubtful. You might be thinking if applying for government invoice factoring will benefit your company and help it grow or lead to long-term problems due to government shutdowns. 

Just keep in mind that problem comes with every business financing option. So, ignoring them all is not possible. 

If you are working on government contracts, invoice factoring will be helpful for your business. You will get paid for the unpaid government invoices and maintain your business cash flow. There will be no financial issues even if the government delays the payment. The best thing is that you will deliver the work on time with quality and without any financial disruption. 

How can Royale Capital help you?

If you are looking for one of the best government invoice factoring companies, choose Royale Capital. We will handle all your unpaid government invoices and help you complete your project. Our administrative costs are less and we try to cover the maximum percentage of your total balance. 

Even if there is a government shutdown, we will help you overcome it. We will make sure that the shutdown doesn’t leave any negative impact on your business and that your operations go smoothly. Also, we will be available to resolve all your queries whenever you will need us. So, apply for government invoice factoring without worrying about government shutdowns.