A great way to grow a government contracting company is to use commercial financing, particularly receivables factoring. It is the for sure fastest easiest access to working capital there is available. If you choose the right factoring company you will have flexible terms that will allow you to graduate to institutional banking in a smooth transition.
But like everything else with government contracting, the use of financing must conform to FAR (Federal Acquisition Regulation) contract regulations. The Assignment of Claims Act allows the proceeds, or payments, to be made to a third party. Built into FAR is the ability to borrow against future payments that are made from a government agency to its contractor. This is a widely used vehicle to obtain working capital for an ongoing contract. It helps to cash flow payroll, taxes, and materials when fulfilling an awarded contract.
In order to satisfy the regulations, the prime contractor must present a Notice of Assignment to their contract officer. This form, usually prepared by the Factor, must be signed and notarized. It is actually an amendment to the contract authorizing the government to pay the registered third party. Without the “NOA,†the agency cannot repay the capital source who has made advances on contract payments.
Using the NOA is SOP and should be acknowledged by the CO. Your take away is to be pro-active in notifying the agency you will be using invoice factoring and to expect the NOA. This will save valuable time getting a new contract underway. Knowing you have working capital secured sends a strong statement presenting your company as ready to do business with the government.