Funding Government Contracts
Funding Government Contracts – a method for a contractor of financing a government related project. If you haven’t heard – the government is spending!
There are many businesses that want to pursue obtaining a contract with a government agency or provide a service where the government agency is the payor. However, government contracts may provide a business some cash flow issues, so before the federal government will award a contract, they are required under the Federal Acquisition Regulations (FAR – Subpart 9.1) to make certain that the potential contractor has the financial ability to fulfill the contract. Fortunately, there are a number of funding sources who are willing to assist the contractor by funding government contracts.
The Federal Assignment of Claims Act (FACA) allows the contractor to assign accounts receivables and provides an avenue for funders to obtain an irrevocable payment tool – and the reason business finance companies are funding government contracts. FACA is similar to a UCC filing for business to business contracts. Government Contract Funders advance money based on the contract. The account receivables are the collateral. The receivables are paid by the federal government making this type of financing attractive to lenders.
In addition to an Assignment of Claims, a Contract Modification may need to be obtained as well. However, once the details are in place, the funding process can be taken care of fairly quick.
Government contracts are a major source of revenue for both companies and financial consultants. Businesses need to perform their research and determine what government projects they can pursue. Consultants need to talk with their network of funding sources, determine what funding is available for targeting specific niches, and then pursue businesses working in those niches that will need their government related projects funded.
Tips for Funding Government Contracts
1. For business to find government projects, or for Consultants to understand what projects are available and therefore, what companies to pursue for funding services, search the Internet using keywords such as: Government, State, Federal, Fed, City, County, Provincial, Parish, or District. Plus – both singular and plural words such as: Contract, Bid, Vendor, Procurement, Construction, Courthouse, Commissioners, Clerk, Assessor, Commission, Request for proposal, Zoning, Vendor Selection, Infrastructure, Highways, Bridges, Offices, Agencies. There could be many other keywords words to research.
2. Get a financing commitment letter from your lender to ensure compliance with Federal Acquisition Regulations.
3. Federal Assignment of Claims Act offers a streamlined process to accomplish the notice of assignment – one page, a couple of key phrases, and proof of delivery.
4. There are a number of statutes and regulations that guide the particulars of government contracts. Government agencies have the resources to audit and investigate contractors. Clawbacks of funds along with civil or criminal penalties are something a business does not want to be faced with – so do things right.
To Your Capital Success,
Specialist in Targeted Acquisitions, Business Funding, and Growth Strategies.