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Factoring Government Receivables

Government contracts can be very lucrative. Those fortunate enough to win such jobs often appreciate the amount of steady and generous income these jobs can generate. However, while the money is often good because of the government’s deep pockets, financing these jobs, and then waiting for payment can put a strain on a company financially. Fortunately, there is a way to alleviate this strain without getting into more debt. It involves factoring government receivables.

Factoring government receivables is a pretty simple process. A business will sell the invoices for their government contract to a factoring company. This factoring company will purchase them at a discounted rate. This allows the business to raise the capital they need to fund the government project or cover any expenses that they have. Being able to get the money they need can be a huge relief and will need to enable them to cover the costs of fulfilling the government contract or whatever expenses they have.

Government contracts are ideal for factoring. This is because the factor will only consider the creditworthiness of the holder of the invoice. They don’t care much about the credit score of the business that owns the invoices. Their concern is that they are repaid the money they have lent out. Since they will be collecting from the person billed on the invoice, they’re only concerned with their ability to pay. Because the government has a history of paying their independent contractors, a factor will have full faith that they will be able to recoup the money they paid the invoices.

After the factoring firm buys the invoices, they will then begin collecting on them. Once they have collected the outstanding debt, they will return these monies to the company who sold them the invoices minus their fees. These fees will differ based on the factoring firm and will take into account some things. This includes, but is not limited to, how long the debt is outstanding and the creditworthiness of the invoices holders.

Choosing the right factor is incredibly important. If a company fails to, they may find themselves begin paid far less than they should or may be charged an excessive amount of fees. Either scenario will create a ton of frustration and can be costly. To avoid this, look for factoring companies that have an excellent reputation and have been in business for a decent amount of time. Expertise, a great reputation, and high payouts for invoices are all things that you should be looking for in a factor. Don’t settle. Keep looking into you find a factoring firm that has all of these things.

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