Every year, the
US federal government awards billions worth of contracts to private companies
in the country. Acquiring government contracts is a great opportunity for small
business owners to generate more revenue and expand business operations. But
fulfilling these contracts can be a huge responsibility and if it isn’t managed
properly, it can cripple your finances. Government contract financing is a
great option for companies that are looking to fund operational costs incurred
in fulfilling government contracts.
contract financing can help small businesses that are struggling to
complete assigned jobs, especially if you’re funding other projects along with
the government contract. Working capital problems can happen and you may not
have enough money to cover business expenses. One way to ensure that you have
all the cash you need is to apply for any of the following government contract
Purchase Order Financing
owners often work with suppliers that require payment before they give out the
supplies. However, this can be a problem if you don’t have enough working
capital to cover the payment. If this is the case, you might want to consider
purchase order financing.
financing provides business owners with the working capital needed to pay
suppliers upfront for purchase orders. In this way, you’ll be able to acquire
the goods to fulfill the order. The PO company will pay your suppliers so they
can manufacture and deliver the products to your customers. The transaction is
completed once the government receives the products and pays for their order to
the PO company. The purchase order company deducts their fees before giving you
the remaining balance.
Keep in mind
that you can only apply for purchase order financing if your business resells
finished products. This means that companies that manufacture their own
products cannot qualify for PO financing.
SBA Microloans and 7(a) Loans
Business Administration created a number of financing programs called SBA loans
to help small business owners qualify for bank-rate financing. A microloan is
perfect for business owners that need $50,000 or less. It’s usually best for
startups that are looking to fund business growth. However, only a small
percentage of government contractors benefit from microloans. Instead, they combine
microloans with another method of financing to help fulfill government
contracts. For larger business needs, you may want to apply for SBA 7(a) loans.
They have a higher loan limit ($5 million) compared to microloans.
factoring is a simple and convenient way to solve cash flow issues caused by
pending invoices. Instead of waiting for 30, 60, or 90 days, invoice financing
enables you to sell those invoices in exchange for immediate funding. The
government will pay their dues to the factoring company, and then the factoring
company will give you the payment, minus a small transaction fee.
of claims act allows business owners to finance government invoices because
even though the government is an excellent client, they can be slow payers.
It’s easy to qualify for invoice factoring and it’s especially easier if you’re
a government contractor.
lending allows business owners to leverage company assets like accounts
receivable, commercial real estate, equipment and machinery, inventory, and
even intellectual property in order to secure funding. It’s a great option if
you can’t qualify for traditional loans.
The terms of
your asset-based loan depend heavily on your collateral (the asset being
financed). An asset-based loan can be structured in two ways: like a line of
credit or like term loans. If your assets are accounts receivables and
inventory, the loan can be structured like a line of credit. On the other hand,
machinery, real estate, and other assets function like a term loan.
Apply for Government Contract Financing Today!
to ensure that you’ll have enough working capital to keep your business afloat
while fulfilling business obligations. Don’t wait until your business runs out
of working capital! SMB Compass offers government contract financing for
government contractors in the United States. Aside from the ones mentioned
above, we also offer the following:
- Equipment Financing
- Term Loans
- Mobilization Funding
- Line of Credit
- Bridge Loans
If you’re not
sure which loan product works best for your company, our financial advisors are
ready to help. Simply call us today at (888) 893-8922 or email us at firstname.lastname@example.org for more information.