Having to wait for payment on government contracts impacts your business’s cash flow and ability to conduct business. Government contract factoring lets companies turn their unpaid invoices from government contracts into immediate cash. Also known as accounts receivable factoring, government contract factoring doesn’t require taking out a loan and doesn’t burden your business with debt that needs to be repaid. Instead, existing account receivables are turned into cash by selling them at a discount.
How to Start Factoring Government Receivables
The process of factoring government contracts gets your business cash quickly. Once you submit the information about your unpaid invoices, your company gets up to 90 percent of the invoice balance in as little as 24 hours. The government receivables factoring company handles the process of collecting the full balance and sends you the remaining amount minus their fee once the invoice is paid.
Getting started with government receivables factoring is simple. It generally takes less than a week to complete paperwork and get set up with a factoring company. Minimal documentation is required, there’s no dependency on your company’s credit score, and there’s no collateral needed—just the unpaid invoices that haven’t been pledged to another company. The funds are paid to you via either wire transfer or direct deposit to your business bank account.
Why You Should Use Government Invoice Factoring
There’s tremendous flexibility in the accounts receivable factoring process. There is no minimum or maximum amount, or commitment to submit invoices regularly. Your business submits invoices for factoring only when needed, only as much as needed. As your business grows and you get new invoices, your access to funds automatically increases.
Factoring government contracts offers several benefits besides just immediate access to cash. Because the factor handles collections from the agency, you can redirect your business staff from tracking invoice payments to winning new business. You might be able to be more flexible with the payment terms you offer customers, also helping you win additional business. Factoring also lets you take advantage of your own vendors’ early payment offers.
Many kinds of government services are eligible for factoring, but because government contracts can be for large dollar amounts, not all factoring companies are able to provide this service. EZ Factoring Companies works with a large network of factors and can help find the factor that will be able to work with your business and your government or agency client to solve your business cash flow problems.