The factoring company keeps the amount that it advanced plus a small processing fee. The factoring company then collects the payment directly from the government. The business gets that money immediately and can use it as they wish. The factoring company advances a percentage of the outstanding invoice balance, often 80 to 90 percent. In a standard factoring solution, a business enters into an agreement with a factoring company to provide funding for an unpaid invoice. Government invoice factoring is a funding solution that helps businesses resolve their cash flow challenges. How Government Contractor Factoring Works One effective solution is government contract factoring, which allows you to get cash upfront for your government contract so you can pay your vendors and your employees. If you threaten to withhold work until they pay, they’ll likely take their business elsewhere.įortunately, you have options available. Similarly, you’ll find that you don’t have much leverage when you ask the federal or local government to pay your invoice. The government can choose from any number of other suppliers, so they’re not likely to meet your demands for any portion of upfront payment. Also, don’t expect to get an advance from the government before you start the work. It’s not unusual for the government to take 60 or even 90 days to pay a bill. The government agency is in no hurry to pay your invoice. If you just earned your first government contract, you’ll learn about this issue soon enough. If you have experience with government contracts, you probably know this challenge all too well. There is one big challenge that can come with a government contract, though. Whether you manufacture products or provide a service, getting a contract from the government usually means consistent work and stable, recurring revenue. Federal, state, and local government agencies contract out a significant portion of its work to private companies. Getting a government contract can be a game changer for any business. Financing (Purchase Order Financing) for Government Contracts. Note: We offer factoring services (we purchase receivables issued to government agencies) but DO NOT offer P.O. Factoring Government Receivables with Gateway Commercial Finance