Unable to reach an agreed-upon deal, the U.S. federal government announced it will put into place the much discussed sequester, an widely unpopular effort to reduce debt by cutting a number of spending programs from both the defense and other sectors.
The small business community is expressing serious concerns about how it will affect them. It is likely that the sequester, which is set to go into effect in 2014, will hit government contractors and vendors hard. Unfortunately, due to the confusion surrounding it and its cryptic language, no one can really say for sure what the sequester will bring.
It is, however, this uncertainty that will likely negatively impact small business growth, including future hiring and jobs, new projects, budgeting and expansions because it is hard to plan if you don’t know where money is coming from.
Consider Alternative Sources of Financing with Invoice Factoring
With government funding in question, accounts receivables factoring and asset based factoring are additional financing options available to small businesses, particularly those in the government or defense contracting sector. With factoring receivables, a small business uses the value of its invoices to secure money it needs right away. The factoring company pays up to 96% of the total value of the invoices in less than 48 hours and takes on the responsibility of collecting the amount owed from the customer.
Factoring Services Used by Many in Defense & Government Contracting Sector
Many in the manufacturing, construction, defense and government contracting sector like the invoice factoring option because they can get your money right away instead of waiting the 30-, 60- or 90-day period when many gov’t invoices are actually paid. With the sequester sealed, it brings a lot of ambiguity regarding future business financing. Invoice factoring, however, is an in-the-now process where you get your money based on current invoices rather than an unknown future budget. Similarly with asset based factoring, sometimes called equipment financing, you can secure your money today by using your existing assets as your collateral.
So instead of fretting about the government sequester and worrying about next year’s planning and allowable budget, know you have another source of financing available to you with accounts receivables factoring.