Government Contractor Financing

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Financing for Government Contractors

The federal government awards about 23% of all government contracts to small business owners. On an annual basis the federal government commits approximately $500 billion in government contracts for research and development, goods, and services. This means that around $115 billion of government contracts are awarded annually to small business owners. SMB Compass has the ability to provide government contract financing for federal, state, and local government contracts. Our programs are also designed for both prime contractors and sub-contractors. Make sure to work with a company that understand the federal assignment of claims process!

Government contracts come with a varying degree of capital needs. Small businesses incur both upfront and ongoing expenses that can be financed through government contract financing programs. A government contractor loan can be structured in many ways, but the details are important to make sure it supports all the financing needs. At SMB Compass we specialize in government contract financing and have the ability to provide support to different contract types. We can provide mobilization funding, support letters to help strengthen bids for new contracts, and can provide government contract funding for earned but unbilled invoices.

Multi-year government contracts enable small businesses to accurately project future revenues. With accurate projections and budgets small business owners are able to secure government contract financing through a variety of structures.

Loans for Government Contractors

Asset-Based Loans for Government Contractors

Government contractors all have assets that can be leveraged when looking for government contract financing. Whether it be accounts receivable, inventory, or equipment, government contractors have assets. Asset based loans for government contractors use all the assets of the business to provide a revolving line of credit or a term loan. Service based contractors that do not use equipment or inventory have government receivables that can be used as collateral. Asset based loans for government contractors can use just the accounts receivables to provide a receivables line of credit. For government contractors that have machinery and equipment, inventory, and receivables, an asset-based loan for government contracts is a perfect solution. Below are some of the ways to use an government contractor asset based loan.

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Purchase inventory

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Refinance equipment

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Hire new employees

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Accelerate payment on invoices

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Increase operating cashflow

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New contract bidding

Factoring for Government Contractors

Government contract factoring is one of the most common forms of financing for government contractors. Federal and state government contracts commonly pay on net 30-day terms. This means that many government contractors are have cash tied up in receivables. In addition to the receivables, there’s often a component of earned but unbilled invoices. Factoring for government contracts allows for invoices and earned but unbilled invoices to get paid as work is completed, rather than waiting 30-60 days for payment. Below are some of the ways that you can use factoring for government contractors.

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Purchase inventory

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Payroll

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Accelerate payment on invoices

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Increase operating cashflow

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New contract bidding

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Hire new employees

Earned but Unbilled Factoring for Government Contractors

When work is in progress there are expenses that are incurred that cannot be billed yet. These expenses include inventory, materials, equipment, and labor. Factoring for government contractors doesn’t always provide the liquidity and ongoing cashflow that’s needed. When this is the case, we can look at earned but unbilled invoices to provide additional operating cashflow. By using earned but unbilled factoring government contractors can unlock cashflow that is trapped in both invoices and work in progress. Below are some of the ways to use earned but unbilled factoring for government contracts.

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Increase operating cashflow

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Hire new employees

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Purchase materials

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Unlock cash

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Increase operating cashflow

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New contract bidding

SBA Loans for Government Contractors

Government contractors have access to revolving credit programs but can also borrow capital over a long term by using government contractor SBA programs. The SBA 7(a) program is the most common SBA loan program for government contractors. SBA loan for government contractors amortize anywhere from 10 years to 25 years, depending on what type of collateral is available. The term for government loans using machinery and equipment, inventory, and accounts receivables as collateral is 10 years. When a government contractor uses commercial real estate as collateral the term can stretch out to 25 years. Below are some of the ways to use government contractor SBA loans.

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Refinance existing debt

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Business acquisitions

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Purchasing new equipment

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Increasing operating cashflow

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New contract bidding

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Purchase or refinance real estate

Bridge Loans for Government Contractors

Revolving credit is not always available when opportunities arise and there are new contracts to bid on. When there is a quick capital need for contract writers, equipment, inventory, or general working capital the best option is bridge loans for government contractors. Bridge loan programs for government contractors can be closed quickly with an easy application process. The biggest benefit of bridge loans for government contractors is the limited distraction from day to day operations. Some of the ways to use bridge loans programs for government contractors are below.

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Hire contract writers

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Purchase materials

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Increase operating capital

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Bid on new projects

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Buy new equipment

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Payroll

Business Line of Credit for Government Contractors

The most flexible loan program for government contractors is a business line of credit. Government contractors have ongoing capital needs and having an operating line for standby capital is essential. Business line of credit programs for government contractors are flexible, cost effective, and provide the cash cushion that’s needed. Using a combination of an SBA loan program for government contractors and a business line of credit will result in low monthly debt payments and standby capital for when needs arise. Here are a handful of ways to use a business line of credit for government contractors.

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Purchase inventory

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Hire new employees

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Bid on new contracts

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Purchase equipment

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Make payroll

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Refinance debt

Mobilization Funding for Government Contractors

Upfront capital is needed when a new government contract is awarded. In some cases, the government contract will have a mobilization funding component, but in most situation government contractors turn to mobilization financing programs. Mobilization funding for government contractors can be a crucial part of being able to perform on a newly awarded contract. Rather than turning down new contracts, look towards a mobilization financing program to get started. Below are some of the ways mobilization financing for government contractors can be used.

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Upfront contract expenses

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Purchasing materials

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Buying essential equipment

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Hiring employees

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Making payroll

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Operating cashflow

Term Loans for Government Contractors

Government financing programs can be structured as revolving credit lines or term loans. Lines of credit for government contractors are typically used for operating cashflow needs, while term loans for government contractors are used for one-time purchases. Government contractor term loans provide an immediate injection of cash that amortize over multiple years. Term loan programs can be structured as an equipment loan, a multi-year term loan, or an SBA loan program for government contractors. There are many ways to use a government contractor term loan program.

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New equipment

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Buy materials

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Purchase inventory

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Refinance equipment

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Operating cash injection

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Purchase real estate

Equipment Financing for Government Contractors

Equipment is an essential part of performing on many government contracts. There are times when equipment is provided by the government, sometimes it is granted, and other times it is the responsibility of the government contractor. Instead of paying with cash many turn to equipment financing programs for government contractors. Equipment financing programs can be structured as a loan or a lease and amortize over one to five years. The more essential the machinery and equipment is, the most attractive the terms of the government equipment financing. Below are some of the ways to used equipment financing for government contractors.

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Purchase new equipment

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Refinance existing equipment

Types of Government Contracts We Finance

government contract financing
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Federal Government Contract Financing

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State Government Contract Financing

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Time and Materials Contracts

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Fixed-Price Contracts

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Cost-Reimbursement Contracts

Interested in learning about your financing options?
Speak with a Lending Advisor today!