Factoring for Government Providers
Are you selling goods or services to the government? While working with the government can be great for sales, many government invoices get paid in 30 to 60 days. This can create a working capital problem for contractors that are not well capitalized - or for contractors that have suppliers who demand immediate payments. However, solving this cash flow problem is critical because it can enhance your company's ability to handle larger contracts. Depending on your line of business, we offer two solutions that can help you:
- If you are a product reseller (or use 3rd party manufacturing) we can provide purchase order financing
- If you are a service provider or a manufacturing company, we can provide factoring financing
Factoring rates as low as 1.5%. Advances as high as 85%
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(subject to monthly volume and industry).
What is factoring?
Factoring is a financial solution that allows you to deal with slow paying government invoices. Most government entities pay their invoices in 30 to 60 days. However, most suppliers and contractors can't afford to wait that long for payment. Factoring allows you to capitalize your existing invoices and provides a cash infusion to your company. You can use these funds to cover business expenses - or to work on new contracts.
How does it work?
Factoring is relatively simple to setup and can be integrated to most government contracts and bids. Each government entity has slightly different rules regarding how they handle invoice financing, but the following steps show the general process:
- You name the factoring company as your financial partner. This is usually done when submitting a bid but can also be done later through a notification
- You deliver the goods or services to the government/state entity
- You generate an invoice
- You get your 1st installment of 80% on your invoice
- The government pays the invoice
- You provide the remaining 20%, less a service fee
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This type of funding offers a number of benefits to government contractors. The obvious benefit is that you get better and predictable cash flow. Other benefits include:
- Flexible financing that automatically grows with your sales
- Pre-approval for most government orders
- Easy to obtain
- Fast turnaround
Qualifying for factoring is relatively easy, especially for government contractors. Here are the most important qualification criteria:
- You must be a registered government supplier/provider
- Your sales must have gross margins of at least 15% (there is flexibility on this point)
- Your company must be free of major legal/tax problems
- Your company must not be bonded
You can get additional information at our Factoring Resource Center or by reading these articles: