Why Invoice Factoring for Government Contractors?

Factoring in government contracting refers to the practice where businesses that have contracts with government agencies sell their invoices to get paid immediately. This financial arrangement allows businesses to maintain liquidity and cover operational costs without having to wait for 30 to 90 days for payment.

A factoring contract outlines the terms and conditions of the factoring relationship between a business (the seller) and the factoring company (the factor). These contracts determine how the factoring process will be executed, the responsibilities of each party, and the fees that need to be paid.

Invoicing, also referred to as invoice financing, allows you to borrow money against your outstanding invoices. With factoring, you’re selling your invoices to a factoring company at a discount.

Government contracting factoring companies typically charge fees between 1% and 3% of the invoice value. As these charges can differ across companies and can come with different added benefits, it's best to find a trustworthy factoring company that provides a reasonable rate for you.

Invoice factoring for government contracting offloads debt collection duties, allows contractors to bid on more significant contracts, and makes it easier to navigate complex government payment systems.