Government contractor firms that are awarded federal contract frequently use a receivable factoring company to help with the working capital. Using the accounts receivable from completed work, the contractor may immediately get paid and use the capital to continue to pay for labor & expenses.
Some of the benefits to either the prime contractor or a sub-contractor are;
1. Easy to set up a factoring account as long as the accounts receivable are clear of any pre-existing debt obligations
2. Funding based on contract agency or prime, not the financial viability of the contractor
3. Very little paperwork required to prepare for funding
4. Funds wired into contractor bank account right after verifying invoice to agency
5. The funds availability grows with the contractor, no credit limit ceiling
6. Factoring company will provide approval letter for a solicitation package
7. No loss of equity, or ownership control issues
8. The contractor chooses which accounts to finance, at least with us
9. The result of no net term liability is a stronger balance sheet
So an invoice factoring company can deliver the absolute quickest, easiest access to capital without a looming debt obligation allowing a government contractor in a growth spurt to concentrate on working instead of trying to find cash flow to keep the contract going. This could mean the difference in affording to take on a new contract vehicle.