Up Front Capital Is Not Factoring

There is a problem some business owners have about getting capital for an upcoming contract. It comes from assuming that a purchase order or contract award for a product or service will allow the company to get cash in order to perform on the contract. This is not invoice factoring. Accounts receivable factoring relies on an invoice that means work has been completed, at least up to a point of billing. Looking for financing to get a contract up and running is called “mobilization” capital. Unfortunately factoring companies cannot offer pre-billing capital. Mobilization funding is only available to companies with some positive financial history and have other assets available to pledge. There are other methods of securing this up front capital such as getting extended terms from suppliers and selling parts of the company to raise equity investment or finding someone to offer a short term business promissory note. But for factoring companies to get involved with a new contract, the company has to be able to jump start the work themselves.