Redcapital Partners

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Government Contract Financing For Small Businesses

In this article, we’ll discuss the different types of government contract financing available, including Mobilization...

In this article, we’ll discuss the different types of government contract financing available, including Mobilization funding and Invoice factoring. In addition, we’ll cover Fixed-price government contract financing, which can be a particularly good option for small businesses. The process is simple and straightforward, and can help you reduce your overall cost of doing business. To get started, complete our online application form. In just a few minutes, you’ll have a clear understanding of how to proceed.

Invoice factoring

Invoice factoring for government contracts can be a beneficial option for a variety of reasons. First, it can provide quicker access to capital. Additionally, this type of funding is debt-free, and does not require the business to have a credit score. Invoice factoring is ideal for government contract financing because it can help businesses meet immediate cash needs without affecting their credit score. The application process is easy and can be completed in as little as a business day.

The application process for government invoice factoring can be lengthy, but once approved, companies can access funds in seven to ten days. To get approved, companies must provide proof of the value of their invoices and other documents that support the business case. Invoice factoring for government contract financing is best suited for mid-sized manufacturing companies and distributors with purchase orders from the government. These businesses can benefit from this financing option, and they can receive up to 90% of their outstanding invoices within one to three weeks.

Getting government contracts is a lucrative opportunity for small businesses, especially new ones. But the process of establishing funds can be a time-consuming and stressful task. Without invoice factoring, many small businesses have to turn down these opportunities. Thankfully, it is possible to take on these large projects with ease using invoice factoring. The benefits of this financing option are numerous. Invoice factoring allows businesses to access funds without having to wait to make payments to employees and suppliers.

Government contract factoring works by selling invoices to a factoring company at a discount, or at close to full value. For example, a federal government agency may owe a company $100,000 for a job that took three months to complete. The factoring government contracts & SBIR Grant company advances 80% to 90% of the invoice value and pays the remaining balance after the government pays the invoice. This solution is especially convenient for small businesses that rely on their invoices to stay afloat.

Mobilization funding

Small businesses often find access to capital to be a barrier. Mobilization funding from SouthStar Capital, a government contract lending institution, can bridge the cash flow gap for direct payroll and expense expenses. This type of financing converts to an Accounts Receivable facility to advance up to 90% of invoices. Essentially, the small business owner is assuming a significant risk in order to obtain the capital needed to grow their business.

Mobilization funding for government contract financing is a type of Invoice Financing product that lenders provide to contractors for new government projects. While some Government contracts include mobilization funding modules, most contractors must obtain additional Mobilization Financing options to get the necessary funds to start performing on a newly awarded contract. With these funds, contractors can start performing on newly awarded projects and grow their businesses. These financing options have become a critical part of the contracting process for government agencies.

The purpose of contract financing is to release working capital for a business. Many government agencies require contractors to have access to capital for mobilization efforts, which often requires large purchases of equipment and supplies. In addition, contractors need to hire staff to complete projects. Contract financing can help them meet these requirements, since they will be paid either when they raise an invoice or upon receipt of the final payment. Because contract financing is secured by the end-customer’s credit, the creditworthiness of the contractor is of less concern.

Government Contract Financing For Small Businesses

Fixed-price government contract financing

The fixed-price government contract financing method allows a contractor to obtain funding for a portion of the project. This method is largely self-liquidating and serves as an additional source of fixed assets and working capital. The FAR recognizes two “customary” methods of contract financing: advance payments and loan guarantees. In addition to the two “customary” methods, the government may also make partial payments. However, these partial payments do not constitute financing because they depend on whether or not the contractor completes the project.

PBPs are the preferred method of fixed-price government contract financing. PBPs align government and private sector interests, decrease oversight costs, and increase the pool of contractors by encouraging non-traditional companies to enter the defense marketplace. Of course, it will not happen overnight. Many contracting officers have spent their entire careers administering progress payments. The PBPs are not for every contractor, and they require time and effort.

Although fixed-price contracts are often easier to manage, they come with their own risks. The seller assumes all of the risks associated with unforeseen obstacles, which can require more resources and time than originally planned. Even so, a seller must still meet the contract terms to avoid dipping into their budgeted profits. In order to reduce risks, many sellers choose to price their goods and services higher than they would with cost-plus contracts.

The fixed-price process begins with the principal investigator submitting a Notice of Intent through PARS. The Associate Director of ORA is then authorized to approve the proposal and negotiate contracts. The principal investigator is not authorized to negotiate a fixed-price contract on behalf of the University. If the project is approved, it will go through the University’s approval process. So, the University must carefully consider whether this type of funding model is right for the University.

A request for advanced payments must be made in writing to the CO with reference to the solicitation and cash flow forecast, total amount of advance payments requested, and name of the financial institution that will hold the payments. Additionally, an applicant may also wish to include additional information regarding its financial condition, ability to perform the contract, and financial safeguards. This document must be submitted to the CO at the request of the agency financing office or by the interested agency.

Leonid (previously Endeavour) is a financial services firm specializing in Government Contracts and Small Business Innovation Research (SBIR) Grant Financing. We support government contractors that are start-ups and small-sized businesses who are working with all sectors of the government (Education, Health, Agriculture, Cybersecurity, Defense etc…). We offer Government Accounts Receivable, Government Invoice Factoring, and SBIR STTR Award Financing. All our services are non-dilutive funding with no long-term contracts.


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