Contract Financing – A Look At Factoring For Contract Finance
Is contract financing right for you? Many small and medium sized business owners ask this question when bidding on a lucrative government contract. Winning a contract can put a huge strain on your working capital when increased demands for supplies, payroll, and other expenses accumulate with the new contract. If you’re looking to expand your business by undertaking new or larger contracts, contract financing may be the solution to assist your growth.
Financing contracts can be an easy and straightforward process when utilizing factoring and accounts receivable financing. Contract finance can be put into place in as little as 48 hours, once an application has been approved. The approval process for an application is usually less than 48 hours. The process for funding contracts with factoring begins with an invoice. Once you have provided a service or delivered a product, a copy of your invoice is sent to both your customer and the funding company. The funding company will verify the information on your invoice with your customer to confirm that the job has been completed or the product was delivered. Then, the funding company will deposit a percentage of the invoice to your bank account (typically 70-90% of the invoice amount). Lastly, when your customer pays the invoice, the payment is sent to the funding company and the rest of the percentage is deposited to your account, less the transaction fee for the use of the funds. This process repeats itself as needed.
Contract financing can be a great alternative to a bank loan. Though different than a traditional loan, contract finance can be much more accessible and flexible than what a bank has to offer. Funding contracts through factoring, as opposed to leveraging your business or property, can put you in direct control of the amount you want to fund. Not all of your invoices have to be funded – only the ones necessary for financing the contract. Also, with factoring the focus is on your customer’s credit, not yours so if it’s a government agency your chances of getting approved are greatly increased.
If you’re bidding on a government contract and haven’t given consideration to your funding options, now is the time. Take the time to see what is available to help your business grow and prosper. Contract finance with factoring is just one of the fastest, easily accessible and cost effective ways to assist with funding your contracts.