All You Need To Know About Invoice Factoring For Government Contractors

Being a government contractor comes with a myriad of benefits. It not only provides a healthy revenue stream for you, but it also exposes you to more business responsibilities. Additionally, government contracts offer more flexibility and are a gateway to getting a permanent position with the government.

However, government contracts come with their fair share of cons. One of the most notorious ones is the lack of finances.

Financing government contracts can cost an arm and a leg. Financial constraints are even more pronounced when you have a contract and your previous invoice has not been paid. When undertaking a government project, a company needs to have enough financial muscle also to meet other private business obligations.

This is where government contract factoring comes in.

What is Government Contract Factoring?

Most governments pay their invoices for between one or two months. As much as this is often a large sum of money, some businesses might not have enough capital to cater to day-to-day business expenses. In such situations, government contract factoring allows these businesses to get their hands on money they can use to expand or finance their business.

What is done is that the contractor company sells their unpaid invoices at reduced prices to a factoring company. The factoring company pays the company the money at atleast24 hours and is left to collect the government's payment.

What are the Benefits of Government Contract Factoring?

Some people may wonder why it is essential to seek invoice factoring for their company.

Allow me to elaborate.

They allow for a steady flow of work

Apart from buying unpaid invoices, government contract factoring companies may give you a cash advance to help facilitate the project's commencement. That allows you to have a steady flow of work as you have the finances. Even if the money is not enough to complete the project, As much as this is often a large sum of money. It helps bridge the financial gap to end the contract.

• Offers peace of mind

Entrepreneurs have a lot on their minds. They have to deal with employees and are continually looking for newer job opportunities. The last thing an entrepreneur wants to do is run around asking for payments for unpaid work. It is not only stressful but time-consuming.

Government invoice factoring companies eliminate these stresses as they pay companies the money (at a discounted rate, of course). That way, people in business can move forward in building their companies and shift their focus to other more sensitive business ventures. They can also rest easy knowing that their company has enough finances to invest further.

• It eliminates the need for loans

Business loans are one of the first things most entrepreneurs opt for when in a financial crisis. However, considering the substantial interest rates banks and other financial institutions charge, loans can drive a company further into debt.

Invoice factoring is not a debt. Companies are funded for their unpaid invoice at a fee. As such, with government invoice factoring, you do not risk tainting your credit score.