This provides you with the cash flow to pay your operating expenses. The factoring company buys your invoices and pays for them immediately. Factoring is also known as invoice financing or accounts receivable factoring. It is relatively quick to set up – normally a week or two. This is particularly useful for government receivables as it is a flexible form of financing.
If your business generates above $1,000,000 of monthly revenues, asset-based loans let you finance your company’s main assets such as equipment, inventory, or accounts receivable.įactoring helps boost the cash flow of companies that have creditworthy, but slow-paying, invoices. If you are a wholesaler who resells products at a profit margin of 20% or more, purchase order financing covers the supplier costs linked to a specific government purchase order.įor companies with an established track record and a minimum of three years of operations history, supplier financing uses a finance company to provide credit as a broker between your and your suppliers. The Small Business Administration (SBA) offers various products to assist small to midsize companies. There are various ways in which you can overcome this challenge: Factoring Solutions to financing a government contract
Combine that with the second – you may have to pay for your costs of sales before delivery – and the potential drain on your cash flow can be catastrophic. The first is that government agencies pay their invoices in net-30 to 60 days. There are two common causes of financial strain when dealing with government contracts. But make sure that you have financing solutions in place so that you can fulfill the contract without it negatively affecting the state of your finances. Having won the bid for a government contract is a reason to celebrate. Have you, as a small business owner, ever considered bidding for government contracts with the help of factoring? Not only are government agencies at all levels – federal and state to county and city – mandated to work with small businesses, they also need just about every type of product or service you can imagine.
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