Factoring Government Receivables the Right Way
Some businesses receive work in the form of contracts from the U.S. government. Ordinarily, these businesses have to go to extensive measures to prove that they are the best choice for the job. However, the rewards are usuallyworthwhile, because these contract assignments are lucrative and very prestigious.
They can also be fairly long term, which means these businesses can count on stable and prolonged work for some time. You might be asking, what’s the catch? Well, there are a few disadvantages to working for the government. The most prominent is the fact that, like a lot of other businesses transactions, these contracts are performed first and reimbursed later.
In other words, a business must fund the contract work, while also making sure that the rest of its operations remain functional. It is common for transactions like these to include a 30-60 day processing period, after the invoice has been sent to the government. Clearly, this lengthy wait could end up being very tricky for a lot of companies.
Why Factoring Government Receivables?
Essentially, factoring government receivables works in the same way as factoring any kind of invoice. The service is the same whether you are looking to get hold of cash from a regular customer or as part of a government contract. To access money from goods sold as quickly as possible, a business agrees to sell the invoice to a third party.
This third party (the factoring company) takes a small percentage in exchange for the service. This means that the invoice sum is not paid in full. However, the terms of these agreements do vary among factoring agents, so there is usually a degree of compromise and flexibility within an arrangement of this type.
Either way, the percentage lost (paid to the factoring firm) needs to be a number agreed upon by the agent and the lead business. It cannot be changed, after the agreement has been made, unless the business has given its consent. If you enter into a factoring contract, you must approve all alterations to the original terms.
The larger the invoice sum, the bigger the reserve (percentage) will be. For example, imagine that Company A performs a contracted service for the government, at cost of $100,000. If the factoring company has agreed on a reserve percentage of 15%, it will pay Company A this amount of money. However, it will then receive the full $100,000 from the government.
Picking the Right Factoring Company
At Capital Funding Solutions, we handle factoring receivables of all shapes and sizes. If you choose to work with us, we guarantee a smooth and stress free invoicing process. Just ask any of our happy customers in Florida, Texas, New York, Georgia, Michigan, Virginia, and beyond. Plus, we have experience of dealing with precisely this kind of government contract.
This is an important thing to remember. If you are looking to set up a factoring agreement to deal with mostly government invoices, it is a good idea to work with an agent that is comfortable and skilled enough with this aspect of financing.
Factoring Government Receivables in Florida, Texas, New York, Georgia, Michigan, Virginia…