Government Contracts Receivable Financing

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Government contracts that a business has secured may be converted into immediate capital to enable one to concentrate on marketing and expanding his or her business. In short, clients who would prefer not to receive incremental monthly payments for one to three or even up to five years on their government contracts may instead elect to "cash out" or use receivable financing.

Because the business is selling government contracts through a form of factoring, one is not borrowing. Participants in factoring transactions can utilize newly acquired capital to eliminate bad debt, or to stop offering early payment discounts to their customers, or to leverage off their customers' credit.

When a business chooses to factor its government contracts, one is positioning himself or herself to keep pace with growth, increase production and sales, meet payroll, pay payroll taxes or receive cash discounts because the business now has more cash on hand.

Selling government contracts thereby enhance a business's overall cash flow position, improve its credit rating, the business owner will then be able to develop new products or services, or launch new advertising campaigns. Unlike business to business contracts and business to consumer contracts, there is a very few companies that provide government contracts receivable financing or that will purchase government contracts or government receivables.

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