The Many Benefits of Purchase Order Funding For Government Contracts
Many companies, especially smaller ones, shy away from going after government contracts because they believe that they are out-of-reach financially. The money that is necessary to perhaps purchase materials required to complete a government job, pay personnel and meet any ongoing financial obligations, may not be available to many companies and so they don’t even try. Others will try to put themselves in a position to compete for such contracts by attempting to take out a loan. Sometimes it works but often times it does not. Because very good credit, at least, is required and an organization must have been in business for a certain amount of time, a loan can be difficult to qualify for. In today’s economic climate, it has become increasingly so. Purchase order financing is one way for them to fulfill a government contract even if they don’t have any money of their own to purchase materials needed to do so.
If a government contract requires the manufacture of some sort of product, PO funding provides businesses with a way to secure the materials they need, without them using any monies of their own. This works especially well for companies doing business with the government. Many banks and accounts receivable funders specifically exclude Government Receivables from availability. Paragon Financial understands the Federal Acquisition Regulation (FAR) and the culture of dealing with and getting paid by the Government. In addition, Paragon Financial knows one of the best ways to grow your business is through sales to Government entities and Paragon wants to be there for your company’s working capital needs.
A Factor plays a major role in the purchase order funding process. They purchase the materials a company needs to fulfill their government contract. Once the business has what they need to manufacture the product they have been contracted to, and are paid, they share a portion of proceeds with the Factor. This is a win-win for all parties involved. The government gets the work they require done, the Factor gets paid and the company looking to fulfill the contract gets the materials they need to do so, at no upfront cost. The latter allows companies, even those without a lot of cash on hand, to compete with larger companies that have bigger budgets, for government contracts.
Purchase order funding is ideal for companies looking to work with the government, especially those that are not particularly liquid or have a lot of money. Instead of them having to borrow cash, or forgo going after lucrative contracts, they can compete because they have the funding to do so. A third party will be able to purchase the materials they need so that they can service any government contract they are fortunate enough to secure. The best thing about this arrangement is that they are able to repay them in-full from the profits they generate selling the said product or merchandise. This allows them to forgo taking on new, costly and long term debt. PO funding is thus, a great option and a good alternative for companies interesting in working with the government. It gives them the opportunity to do so without traditional, commercial financing.