There are a number of pros as well as a few cons to having the federal government as your customer. The big pro of course is that you know the government has money to pay its bills. The con is that the massive-sized federal government is a bureaucracy that can sometimes make collecting what is owed a hassle.
Because of the potential of a late-to-pay situation, many small businesses choose government factoring as a way to sell their receivables and get paid for it right away. When the check comes in from the government, it can go straight to the invoice factoring company. As with many things related to working with the government, there’s more to government contract financing than you might initially think.
Factoring Company Speaks the Government’s Language
For one, government contract factoring is different – in that it has its own unique forms and paperwork to fill out. Failure to complete such paperwork correctly could result in delay of payment, and factoring companies that work with the government should be aware of such requirements. For instance, in lieu of the fairly straightforward Uniform Commercial Code, the federal government requires the completion of forms and notarized paperwork related to the Assignment of Claims Act. Financial institutions that provide government contract funding must closely adhere these guidelines or risk having their claims declared invalid.
Another consideration having to do with government financing is understanding the alphabet-soup language and terminology that comes with having the government as a client. Those entities that provide government contract factoring should be familiar with such terminology in order to sound professional and informed when interacting with the government client.
Government Contract Financing Is Not Immune to Problems
As with any commercial undertaking, things can happen that are completely out of your control. Consider the recent government shutdown, which negatively affected contractors as well as payment timetables. So just because you’ve secured the federal government as a client doesn’t mean all your financial problems are solved. Working with an invoice factoring company that understands the nuances of government factoring can provide great peace of mind.