Government Contract Financing & Factoring | Business Factors
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Government Contract Financing

Accelerate Cash Flow Now and Power Your Next Milestone
Turn approved government invoices into immediate working capital to fund your operations and mobilize your growth. We offer flexible financing government contracts that scale with your projects, helping you meet deadlines and deliverables.
Get Paid Without the Wait

Government contract financing helps businesses obtain working capital for contracts won from federal, state, or local government. Factoring government contracts – which is the sale of outstanding invoices to a factoring company or a bank – is one of the ways to fund the project.

Every year, the U.S. and Canadian governments award billions of dollars of contracts to small and medium-sized enterprises (SMEs) to help create jobs and foster long-term economic development.

While working with a government entity may be a lucrative opportunity, many SMEs have to fund upfront costs and other operating expenses before being able to take on a project. They also have to wait for the government to pay invoices, which can take one to two months. Government contract financing helps businesses obtain the working capital they need to successfully put together bids and monetize invoices after the contracts are completed.

With government contractor financing, approval is based on the credit of the government debtor, not on your business’ operating history. Once verified, advances arrive quickly, and the balance is released when the agency pays reliably. This gives you a predictable cash flow cushion from financing government receivables that scales with your awards.

Reach out today and discover the best funding solutions for your business.

How Government Contract Financing Works: The Big Picture

Accelerate Cash Flow With Fast Government Contract Financing

Business Factors turns approved receivables from federal, state, or local agencies into immediate working capital. Instead of waiting up to 60 days, you receive a cash advance based on your invoice value, without taking on term debt or giving up equity.

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Here's how it works:

  • Step

    Get awarded, perform work, and issue an invoice to the agency.

  • Step

    Apply with a lender or government factoring company; submit contracts, invoices, and W-9.

  • Step

    The funder verifies the contract and requests Assignment of Claims approval from the contracting officer.

  • Step

    You receive an advance of 70 to 90% of the invoice upon approval.

  • Step

    The agency pays to the funder’s designated account; your reserve balance is released, minus fees.

  • Step

    Repeat as new invoices are issued; limits typically scale with award size.

Costs and Fees

Know the Fees Before You Factor

At Business Factors & Finance, we offer invoice factoring services tied to real activity. The core cost is a discount fee charged only while the invoice is outstanding. It’s quoted weekly or monthly.

Businesses can finance government contracts through factoring, asset-based lending, or the Small Business Administration (SBA) loans. Contact Business Factors today to find the best alternative for your business.

The best financing option ultimately depends on your business’s unique situation. For instance, if the business needs immediate capital but has minimal assets, factoring can be a good option. If the company has at least $1 million in eligible assets, including inventory and accounts receivable, and these assets are not pledged to another lender, asset-based lending could be a good choice. If your business meets SBA requisites – two or more years in business, sufficient equity, etc.– such a loan or revolving facility may be a good option.

Product
Typical Cost/Rate
Key Factors Involved
Government Invoice Factoring
0.9% to 3.5% per 30 days (often tiered; smaller add-ons for each 10 to 15 days)

Typical Advance/LTV:
80% to 90% of approved invoice
Discount applies only while invoices are outstanding; reserve released at payment minus fees.
Asset-Based Line (ABL)
Base rate (SOFR/Prime) + spread — often +5% – 11% with private credit. Some ranges expressed as Prime + 2% to +10%

Typical Advance/LTV:
Borrowing base tied to eligible A/R (and sometimes inventory/equipment)
Suits asset-heavier firms; covenants and reporting common.
SBA 7(a)
Variable Prime + lender spread (within SBA caps)

Typical Advance/LTV:
N/A (term loan, not tied to specific invoices)
Working capital/CAPLines options; longer underwriting and documentation.
SBA 504
Fixed long-term rate (commonly seen in the mid-single digits)

Typical Advance/LTV:
N/A (fixed-asset financing)
For equipment/real estate; not designed for receivable financing or cash-flow gaps.

How Payroll Factoring Fees Are Structured

Fees are typically charged as a discount on outstanding invoices, calculated in monthly (30-day) or weekly increments. Choosing between monthly and weekly pricing should align with your agency’s average days to pay and cash flow cadence.

Here’s a sample computation:

Invoice: $300,000

Advance rate: 85%, which equals $255,000 upfront and $45,000 in reserve.

Monthly Fee Model

Assume a 3.0% per 30-day discount and a one-time $250 due diligence charge. If the agency pays in 45 days, most providers bill two 30-day periods:

Discount fee: $300,000 × 3% × 2 = $18,000 One-time due diligence: $250 Total cost: $18,250 (plus any pass-through wires/UCC filings)

Weekly Fee Model

Assume 0.75% per week. If the agency pays in 5 weeks:

Weekly fee: $300,000 × 0.75% = $2,250 Total discount over 5 weeks: $2,250 × 5 = $11,250 Add any pass-through charges (e.g., $20 wire) for a precise total.

Hidden Fees and How To Avoid Them

Some offers look cheap until add-ons hit your margin. Here’s what to watch for and how to stay in control:

Here's what to watch for:

  • Early Termination & Auto-Renewals:

    Long terms with steep exit fees or 60 to 120-day notice windows.

  • Monthly Minimums and Volume Requirements:

    Charges if your awards or task orders fluctuate.

  • Bucket Billing:

    Full 30-day fees (or step-ups after 30 to 45 days) instead of daily or weekly proration.

  • Processing and Admin Fees:

    Due diligence, UCC filing, wire/ACH, lockbox, credit checks, annual renewal.

  • Government-Specific Charges:

    Assignment of Claims handling, contract modification re-verification, and lien subordination with your bank.

  • Concentration or “Slow-Pay” Surcharges:

    Extra costs tied to a single agency or longer pay cycles.

Practical Tips To Avoid Hidden Fees

  • Request a written, itemized fee sheet and a sample settlement using your typical pay timeline.

  • Confirm prorated fees, reserve release timing, and all pass-through caps in the agreement.

  • Verify termination terms, notice periods, and any minimums.

  • Choose a government factoring company with transparent pricing and no hidden add-ons.

Get Transparent Factoring

Why Your Business Needs Government Contract Financing

Proven Solutions To Solve Real Cash Flow Challenges

Government contract financing keeps projects on schedule when pay cycles lag. A trusted government factoring company advances cash so you can staff up, buy materials, and cover mobilization, compliance, and vendor commitments. It’s efficient funding for government contracts that scales with your receivables.

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Industries That Benefit From Factoring

Predictable Funding for Government Contractors

Here’s how our government factoring company helps businesses across multiple sectors:

Information Technology And Cybersecurity

Cover upfront labor, software licenses, and hardware for awarded task orders. Bridge long procurement and acceptance cycles, fund cleared talent, and keep milestones on schedule while agencies process invoices and remit payment.

Construction And Engineering

Purchase materials, secure equipment rentals, and manage subcontractor draws without delays. Smooth cash flow across progress billings, change orders, retainage, and inspections so crews stay mobilized and projects meet strict government timelines.

Professional Staffing And Security Services

Align weekly payroll with net-30/60/90 agency terms. Finance surge staffing for new task orders, maintain clearances and coverage across multiple sites, and stabilize operations without straining working capital between reimbursements.

Logistics, Freight, and Last-Mile Delivery

Fund fuel, drivers, compliance, and maintenance for FEMA, DLA, and agency shipments. Keep lanes active during surges while invoices age, ensuring reliable on-time performance without stretching cash between payment cycles.

Manufacturing and Defense Subcontractors

Purchase long-lead components, meet QA requirements, and handle lot testing. Finance production ramps aligned to milestone acceptances so you can confidently scale output for prime and sub awards despite extended government payment timelines.

Facilities Maintenance and Janitorial

Prepay supplies, cover onboarding costs, and staff rotating shifts for multi-site contracts. Stabilize cash flow across recurring invoices, emergency callouts, and seasonal swings while keeping SLAs intact as agencies process payments.

Which Model Fits Your Business Needs?

Both recourse and non-recourse factoring come with different levels of risk. Understand the differences and costs.

Recourse Factoring

Non-Recourse Factoring

Recourse keeps pricing low and approvals fast. However, you remain liable if the agency doesn’t pay for reasons outside the factor’s control, such as disputes, setoffs, and documentation defects.

Pros

  • Lower fees; typically higher advance rates
  • Faster underwriting and simpler covenants
  • Flexible terms for changing task orders
  • Works well with clean docs and predictable pay cycles

Cons

  • Chargebacks if payment is delayed or reduced
  • Absorbing risk from disputes, offsets, or missing Assignment of Claims
  • Cash flow can tighten if acceptance slips or retainage are held
  • Concentration risk (single agency/contract) remains on you

Non-recourse shifts covered the credit risk of the government debtor to the factor after required approvals/acknowledgments, typically not performance or documentation risk.

Pros

  • Reduced exposure to covered credit nonpayment
  • Smoother cash planning with risk transferred to the factor
  • Helpful when agency diversification is limited
  • Extra protection for thin reserves or rapid scaling

Cons

  • Higher fees; sometimes lower advance rates
  • Tighter eligibility (assignment acknowledgments, verification, reporting)
  • Common exclusions: disputes, setoffs, performance or paperwork issues
  • Onboarding can take longer, and more ongoing monitoring is required

A Fast Way To Fund Your Project

When delays aren’t an option for your business, we deliver fast and reliable solutions that give you immediate access to working capital. Protect your business’ financial stability so that you can focus on growth.

Talk to Business Factors specialists and discover a smarter, more dependable way to fund your operations.

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FAQs

  • How fast can I get funded?

    Most contractors receive funds within 24 to 48 hours after setup, the Assignment of Claims acknowledgment, and invoice verification. Subsequent invoices typically fund on the same fast cycle.

  • What do I need to qualify?

    An awarded contract or task order, approved invoices, UEI/SAM (for federal), Assignment of Claims paperwork, and a clear lien position. We underwrite the paying agency’s credit more than your operating history.

  • Recourse vs. non-recourse: what’s the difference?

    Recourse costs less, but you’re liable if payment fails for non-credit reasons. Non-recourse shifts covered credit nonpayment risk to the factor; disputes, performance, and documentation issues are usually excluded. You confirm coverage in writing.

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