Should I Apply For Government Contracts Factoring?

Government contracts provide a big boost to a company’s work and revenue. The contracts help the company to grow both professionally and financially. But, the contracts put the company in a very difficult cash flow situation. 

Asa company owner, you need to pay workers and contractors to do the work and complete the job as soon as possible. And the important thing is you have to pay them at market wages while waiting up to 90 days for government invoice payments. Other than this, you need to pay for materials and overhead. This is fine as well as important because no one will work without a salary and completing the contract without materials is impossible. The problem is the delayed payment from the government. It takes 90+ days to receive government payments after completion of the work and submittal of invoice. And without funds, nothing is possible. 

No business can afford to wait for payment from the government to start and end the job. Business owners are actually in a rush to complete the project and get the full payment. So, the only way to finance yourself for government contracts is factoring. It’s considered a steady, long-term solution for a variety of industries that take government contracts or serve government clients. 

Government Contracts Factoring

With government contracts factoring, you get an advance on your unpaid local or federal government receivables, especially if you depend on cash flow to grow your business or you cannot qualify for a loan or line of credit. It’s considered the last hope to complete government contracts. 

How does government contracts factoring work?

The process of government contract factoring is very simple. The factoring company will fund you and get the payment from the government or another Prime contractor – if you are a subcontractor to the Prime.

In this process, the factoring company will advance a percentage of the outstanding invoice balance to your business. The percentage ranges between 80and 90. You will get the money immediately that you can use as per your wish, anytime and in any way. But, the use of money should be limited to the government contract for which you raised the amount. 

Later, the factoring company will collect the payment directly from the government. To complete the process, some factoring companies charge a small processing fee. There is no standard processing fee so you will know about the same only after connecting with a factoring company. Some factoring companies charge nothing for the service. 

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What are the attractive aspects of government contracts factoring?

There are several attractive aspects of government contracts factoring:

• Helps you cover your overheads such as payroll and avoids cash flow gaps.
• Helps you to continue bidding while waiting for the receivables to get paid. The amount in the account gives the confidence to bid for other projects and start working on them without worrying about delayed payments from the government. 
• Compared to a loan or line of credit, it’s easy to get approved for government contract factoring. The process is simple and short with no such strict     eligibility criteria. Most importantly, factoring doesn’t impact your credit scores.
• Helps you get instant funds for your government contracts, preventing any downtime. It’s possible because of the simple application process.
• A simple application process with no strict eligibility criteria ensures a fast turnaround. Invoice processing and calculation of the funding limit are completed in as little as one business day. 
• Helps you to overcome cash flow challenges, meaning you don’t need to stop or drop government contracts because of a lack of funds. Avoids the negative     impact of a slow-paying government on the contract with immediate cash flow. 
• Helps you to collect all your unpaid invoices, making the process smooth and easy. Government contracts factoring is like outsourcing the collection     process. 

What are the non-attractive aspects of government contracts factoring?

• Compared to other types of government financing, the government contracts factoring is cost 1-1.5% per month in fees of total invoice amount financed with average fees of 3% over 90 day period.
• The invoice should often be max 90 day term to qualify for the factoring amount 
• The application process requires the submission of paperwork showing the value of invoices and other business documents. Sometimes, verification of these documents also takes time initially during account setup.

Who qualifies for government contracts factoring?

No matter which factoring company you connect with, the eligibility criteria will be the same. The list of eligibility criteria will increase but will never be less. The common criteria to qualify for government contracts factoring are:

• The business should be operating and serving government clients.
• The submitted invoice should be for a completed and final service or the delivered product, not to buy products or services.
• The invoice shouldn’t be guaranteed as collateral.
• The business shouldn’t have an unsolved bankruptcy or other judgment that impedes accounts receivables. 

Which is the best government contracts factoring company?

Government contracts factoring is more challenging to secure compared to factoring in other industries. So, you should be very wise when looking for a factoring company. 

The first and most important point to keep in mind is that all factoring companies don’t take on the government. The factoring companies are different based on fee structure, specialties, programs, contract terms, and approval process. The deal might seem easy at first but actually, it’s not. 

Contact Royale Capital for Government Contracts Factoring 

With Royale Capital, you will get your invoices financed within 24 to 48 hours instead of the typical 30 to 60 days of waiting. We have significant lending expertise in the industry. 

We will offer personalized solutions because we know the challenges of government contracts and upfront as well as ongoing expenses. We will help you structure your finances in a way that will make sense for your business. 

We will be your trusted partner for government contracts factoring because we have extensive experience in this sector and make our decisions quickly. With us by your side, you will know whom to contact when you have questions.