Complete Guide to Government Factoring

Streamlined government invoice factoring.

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WHAT'S IN THIS GUIDE

1. What is Government Contract Factoring?
2. What are the Benefits of Government Invoice Factoring?
3. Are There Limitations to Government Invoice Factoring?
4. How Does Invoice Factoring Work for Government Contracts?
5. What Businesses Should Consider Government Factoring?
6. Can Government Subcontractors Use Invoice Factoring?
7. How Do You Find the Best Government Invoice Factoring?
8. How Do You Qualify for Government Receivables Factoring?

Winning government projects and contracts is a killer way to grow your company. But as a small business, you can’t afford to wait for payment on your gov. contracts. As your partner, FundThrough automates the government invoice factoring process, so you have the working capital to pay your bills and fund all other operational costs without discounting invoices or taking a loss on your receivables. Factoring is a steady, long term solution for a variety of industries that serve government clients.

What is Government Contract Factoring?

If you supply goods or services to the government, payment on your invoices can take months. Your business may not have the time or liquid assets to wait.
Government Contract Factoring allows you to get an advance on your unpaid local or federal gov. receivables.

A type of accounts receivable financing, factoring invoices for small businesses can be especially helpful if you depend on cash flow to grow your business or you can’t qualify for a loan or line of credit.

What are the Benefits of Government Invoice Factoring?

  • Cover your overhead. FundThrough invoice factoring helps you meet payroll, cash flow gaps, and keeps the doors open until  new revenue, or another contract comes through.
  • Continue to bid. You can simultaneously bid on contracts while you wait for your receivables to get paid.
  • Get approved. For many small businesses, qualifying for invoice factoring can be much easier than qualifying for a loan or line of credit. Applying will not affect your credit score.
  • Simple application process. You get an instant quote upfront and see the credit terms before you choose which invoices to fund
  • Fast turnaround. It’s possible to be provided with a funding limit and have your invoices processed in as little as one business day.
  • Immediate cash flow. No waiting for a slow-paying government contract invoices to fully settle. Factoring gives you the cash flow challenges to help you back to growing your business.
  • Outsourcing the collection process. It’s not easy collecting on your unpaid invoices. Factoring facilitates the process.

What are the Limitations of Government Invoice Factoring?

  • Can be pricey. Although it’s often easier to qualify, factoring can be expensive compared to some other types of government financing.
  • Not all invoices qualify. They must be less than 90 days old to be eligible for funding.
  • Relatively long application process. You’ll be required to submit paperwork showing the value of your invoices and other business documents.

How Invoice Factoring Works for Government Contracts

Invoice factoring works differently for government contracts that with other industries in that the Federal Acquisition Regulations (FAR) determines contract payment terms.1 But how fast you receive payment depends on several factors—the govt agency, the size of your company and the contract, the urgency, and other criteria.

Factoring government contracts involves selling your gov. invoices to a factoring company. By learning about your company and using our industry knowledge and expertise, FundThrough extends an advance on your invoices, minus a factoring fee, once you have fulfilled your contract.

You get cash-in-bank and selected receivables removed from your balance sheet.

What Businesses Should Consider Government Factoring?

The government buys more goods and services than any other industry worldwide, spending nearly a half-trillion dollars annually.2 If your business relies on government contracts, you can benefit from govt factoring.
  • Small businesses
  • Manufacturers
  • Security companies
  • Staffing services
  • IT Specialists
  • Medical services
  • Technology companies
  • Product distributors
  • Consultants
  • Oil and gas companies
  • Service-based companies
  • Home health-care providers
  • Wholesale companies
  • Landscape and construction companies
  • Commercial foodservice
  • Transportation and Logistics firms
  • Education providers
  • …and more.

Run Veggie partnered with FundThrough to accelerate its cash flow, making it possible for Run Veggie to prepare 10,600 meals for the Washington D.C. police force that provided security for U.S. President Joe Biden’s Inauguration.

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Can Government Subcontractors use Invoice Factoring?

Sorry, no government subcontractors cannot use invoice factoring. That’s because the local or federal government isn’t a direct client.

How to Find the Best Government Invoice Factoring

Government invoice factoring is different from factoring in other industries because it can be more challenging to secure gov. contracts, and payment on receivables is often delayed. That makes finding the best factoring company no small task.

Not all invoice factoring companies take on the government. They may also differ in fee structures, specialties, programs, and contract terms, or they have a complicated approval process. Some have generous contact terms and flexibility, but charge extra fees. What may seem like a great deal at first might fall short over time.

Fortunately, when your small business is growing fast, but cash flow is tight, FundThrough offers the best factoring solution to fit your funding needs.

How to Qualify for Government Receivables Factoring

Qualifying for gov. receivables factoring doesn’t rely on your credit score. It doesn’t matter if you are a small business just starting up or if you’ve been in business for years. But you must qualify in other ways.

  1. You must operate a business and serve gov. clients.
  2. Invoices must be for a completed service or delivered product.
  3. Your invoice must not be guaranteed as collateral.
  4. Generally, you can’t have an unsolved bankruptcy or other judgment that impedes accounts receivables.

Government Invoice Factoring FAQs

Your questions answered.

If your business relies on working capital, invoice financing (or accounts receivable financing) allows a portion of your outstanding invoices (usually 80% to 90%) paid from a loan or line of credit.

Invoice factoring leverages a factoring company’s expertise that advances you a percentage of your total outstanding invoices upfront and then collects the full amount from the gov. agency on your behalf.

Technically factoring is not a loan. It is the purchase of future receivables.

Although uncommon, some banks do offer invoice factoring. However, because many gov. contracts are lengthy, large-scale projects with very high accounts receivable amounts, banks consider these contracts too risky to take on.

Sources: • 1. https://www.acquisition.gov/far-smart-matrix • 2. https://www.usaspending.gov/

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