Government contractors who land a contract frequently use a factoring company to help with the ongoing cash flow. Using the invoices from finished work, the contractor can immediately get paid and use the capital for labor and expenses.
But when using a factoring company to finance your U.S. government contracts, be aware of the NOTICE OF ASSIGNMENT. If you are the PRIME contractor (billing the government directly) and have an FAR (Federal Acquisition Regulation) contract then you need to have the contract amended to put the NOS in place. Contract regulations require that in order for payments to be made to a third party – the lender, there must be an assignment in place that sets the proceeds of the contract to that third party(the factoring company). This does not include Sub-contractors who bill their commercial customer who then bills the government. It also does not include city and state government contracts.
The NOA is typical paperwork and factors can prepare them, but you should let your contract officer know right away that your plans will involve securing outside financing. The contract officer has to sign off on the NOA and by giving them a heads up you won’t get bogged down waiting for the paperwork to go through proper channels. The actual content of the NOA is standard so there are no legal hurdles to jump.
Remember the Notice of Assignment, and deal with it as soon as possible.