Government Contracting
The federal government provides great opportunities for small businesses. Each year, our federal government spends billions of dollars for services and supplies. Whether you have a large or small-scale businesses, government contracts can be a lucrative source of revenue.
Businesses that provide contracting or procurement services for the government often need help with working capital. They can seek help from a number of companies that specialize in government contract financing. These government finance companies can provide great assistance for funding operating expenses when working with the government.
Government Payments
Although many businesses enjoy government contract revenues, they also realize the payment process can be lengthy. Once a company has performed services or sold goods that are billable, they send an invoice to the appropriate government agency. The invoice is a critical element in the whole process, so great care is needed when preparing the document. It’s important to provide accurate and thorough information so the invoice doesn’t get rejected.
It’s normal for the government to take time to pay their invoices. Small businesses that work on government contracts can suffer from slow invoice payments. Often, the payment process can take many weeks or months while businesses must continue with ongoing services and sales. Businesses can get short on cash and experience cash flow issues if payments aren’t received on time. Fortunately, government contract factoring is a service that can help with the problems of government payments.
Government Contract Factoring
Businesses that deal in government contracts realize the issues that this line of work can bring. With no cash on hand, their business can suffer, and it might become impossible for them to carry out their daily operations efficiently. Businesses that are suffering from these payment issues can use government contract factoring services. All they need to do is get in touch with a factoring company that can help.
The factoring company buys the invoice at a discounted rate and provides the business with the funds they need to ensure a smooth running operation. On most occasions, the businesses get 80 to 90% of the invoice amount in advance, and the remainder is held in a reserve until the invoice is paid in full by the government. The invoice factoring company will subtract their fees from the reserve and hand over the reserve, once the invoice is paid.
The advantage of factoring the slow paying invoice is that the factoring company can provide you with an immediate advance for your government contract work performed or product delivered. They pay you the majority of the amount of your government contract invoice, so you don’t have to wait 30 or more days for payment.
The Assignment of Claims Act (ACA) allows businesses to assign their government invoices to third party financial institutions. The finance company can advance funds to the government contractor and collect payment from the government. The process is easy, and most factoring companies accept government claims because the government is an excellent payer. The federal government has never defaulted on its commitments due to insolvency.
Businesses can easily qualify for government contract factoring, especially if they have been in business for a while. Factoring companies can approve your application and request for funds in a matter of days. It’s much easier than getting a bank loan.
Conclusion
Although government contracts are a great source of revenue for small businesses, slow payments can cause issues. Cash flow problems can be mitigated with government contract factoring. Businesses that use government contract factoring can get their payments within days and use the funds to keep running their business smoothly.
If your business is having cash flow issues, contact Mazon Associates at (972) 554-6967 for help.
