Government Contracting 101

The United States government has hundreds of federal agencies and each of these use contractors to provide various services and goods. This gives thousands of companies the opportunity to bid on these jobs and work for the federal government. Many businesses find these contracts very advantageous because the government is very likely to pay for any job they contract out.

Because many businesses would love the chance to win work with the federal government, securing contracts can be very competitive. Companies see these contracts as secure income and go after them feverishly.

It is important for businesses seeking government contracts to be able to determine which agencies might need their services. Finding out when those jobs are available and then knowing how to go about successfully getting them is paramount in order for companies to be successful.

While there are a number of huge positives related to fulfilling government contracts, there is a down side, especially for smaller businesses that do not have a lot of extra capital. The down side is that government contracts tend to be pretty big and can be expensive to finance. Operating costs can be very high. For example, there might be a $1 million project available that costs $700,000 to finance. If a company puts all of their resources into the government contract job they may have few dollars left over to cover day-to-day expenses and to fund future work and projects. This can prevent growth and daily operations, discouraging some companies from even going after government contracts, even though they can be very beneficial.

What some of these businesses don’t know is that there is a way to get the money they need to hold them over until they are actually paid by the government. This can be done through invoice factoring.

Invoice factoring for government contracts involves a business getting an advance payment on what the government owes them from a factor. By selling their accounts receivables at a discount, they can get money right away without having to wait to collect it themselves. In exchange, the factor, is able to make money on the invoices by charging the company a discount fee for their services. This gives companies the opportunity to get the money they need very fast so that there are few delays in their day-to-day operations.

There are factoring companies that specialize in government contracts. These factors will typically be larger and more established because they deal with advancing money for government contracts, which typically are much bigger then average accounts. A company looking to sell their invoices should look for factoring companies that specialize in this industry. They should have the money and expertise to deal effectively with the Federal government.