Invoice Financing for Government Contractors and Subcontractors

Author: Rieva Lesonsky | January 15, 2017

Is your small business involved in government contracting? Whether you are a government contractor yourself or subcontracted by other companies to fulfill government contracts, you know that receiving payment on time is often a struggle. One way to solve this problem is using invoice financing.

Government Contracting: The Good, the Bad, and the Ugly

There are plenty of great things about government contracting. Whether you’re contracting with local, state, or federal governments, these contracts are often quite lucrative. Because they’re not easy to get, landing a government contract can really bolster your small business’s reputation with other prospective clients. In addition, because government contracting is a relatively small world, positive word-of-mouth from one government client can easily lead to additional contracts. For many entrepreneurs, government contracting serves as a staircase to success—and rapid business growth.

If you’re not ready to directly fulfill government contracts, subcontracting is an another way to get a foot in the door. Many large corporations that contract with the government use small companies as subcontractors. In fact, these corporations often have quotas or incentives that require them to use small businesses, women-owned businesses, or minority-owned businesses as subcontractors. If you fall into one of these categories, this can give you an edge in competing for the subcontract.

That’s the positive aspect of government contracting and subcontracting. The downside: Government clients are notoriously slow to pay. Forget net 30: You may wait 90 or even 120 days for an invoice to be paid as it goes through layers of bureaucracy and red tape. A minor mistake on your invoice (like getting a P.O. number wrong) could require you to resubmit it and start the whole process all over again.

Subcontracting isn’t much better: Large corporations often have almost as much red tape as the federal government when it comes to issuing payments. That $10,000 invoice may mean a lot to you, but for a huge multinational company, it’s a drop in the bucket, and bigger invoices or those that are critical to their operations will get paid first.

How Can Invoice Financing Help?

Invoice financing is a method in which the financing company gives a business money in advance on its outstanding invoices. It’s an ideal solution for companies that contract or subcontract with the government. You know your client will pay you…eventually. You just wish you could speed it up. That’s exactly what invoice financing can do.

Invoice financing also ensures you get your money quickly. When you finance your invoices through Fundbox, all you have to do is create an account—which is free, and takes only a few minutes. Once approved, you’ll get your funding in as soon as one business day. Contrast the simplicity of invoice financing with the lengthy process of applying for a business loan from a bank, and you can see the advantages.

While factoring companies do something similar to invoice financing companies, factors typically advance only a portion of your invoice’s value. You have to wait until the client pays in order to receive the rest of the money. However, invoice financing with Fundbox ensures you always receive 100 percent of the value of each invoice.

Repaying your advance on invoices is easy too. You can choose between 12-week or 24-week repayment terms, then just make a weekly payment—a portion of the advance plus a small fee. Of course, if you want to repay the advance early, you can do that without incurring any additional fees.

For small businesses that work with government clients, invoice financing could be the answer to your prayers.

Ready for more?

Apply for funding and find out if you qualify today