Government Contractor Financing
Working capital for federal, state, and local contractors, built around agency payment cycles.
GovCon Funding
Government contractors apply with GovCon Funding.
Our GovCon Funding division handles federal, state, and local contract financing, with specialists who work only on government awards. Start your application with their team.
Apply with GovCon FundingWhat is government contractor financing?
Government contractor financing, including government invoice financing, advances cash against what an agency or prime contractor owes you, or against the award itself, so payroll, subcontractors, and mobilization are covered before the first payment. The structures are specialized, which is why our GovCon Funding division handles them.
The cash flow challenge for government contractors.
Government contracts pay on the terms written into the contract, while payroll, mobilization, and materials costs are due right away. Financing bridges that gap so a contract award doesn’t strain the business it was supposed to grow.
How receivables financing works for government contractors.
- You win an award or task order and begin performing the work, while payroll, subcontractors, and materials come due right away.
- You invoice the agency, or the prime contractor if you are a subcontractor. Payment terms only start when you invoice, and you invoice after you perform.
- Financing advances against the invoice or the award, depending on the structure, so costs are covered while the government's payment process runs.
- Once the agency or prime pays, the financing is settled and any remaining balance is released to you, less fees.
Who pays you, and when.
Prime contracts typically pay on net 30 terms, and subcontracts on net 45. Terms only start when you invoice, and you invoice after you perform, so billing monthly on net 30 means about 60 days of costs before the first payment, and about 75 on net 45. That assumes you bill on time and bill correctly, and a late or returned invoice pushes it out further.
The credit question also works differently on government work. It starts with the government rather than your financial history, which is why a newer contractor with a fresh award can often be financed when a bank would hesitate. The specialized part is the structure: contract-based underwriting, Assignment of Claims, mobilization costs, and bid-stage financial letters, which is the work of our GovCon Funding division.
Common pressure points.
Payment terms only start when you invoice, and your payroll and vendor obligations do not wait for them.
Mobilization costs, staffing, equipment, and site setup are due before the first invoice.
A larger award than your last one can strain working capital more than it grows the business.
What the funding pays for.
- Payroll for staff hired to perform the award
- Mobilization costs such as equipment, insurance, travel, and site setup
- Subcontractors and vendors who expect payment before the agency pays you
- Materials and supplies for the work
- Carrying the business through the gap before the first payment arrives
Choosing between factoring, a line of credit, and payroll funding.
A contract line of credit is built around the award itself, so availability tracks the work you have been awarded instead of your financial history.
Payroll funding for government contractors pays your team while you wait on the agency, and mobilization funding covers the cost of starting work before the first invoice exists.
Government invoice factoring, also called government invoice financing, converts an approved invoice to cash, and financial capability letters are proof of capital to support a bid, before an award is in hand. A letter is not a commitment to lend.
What to have ready.
- Your contract, award, or task order documents
- Invoices, or the billing schedule the contract sets
- If you are a subcontractor, your subcontract with the prime
- A list of the costs due before the first payment, such as payroll, mobilization, and subcontractors
- Basic business and ownership information
Further reading.
- FAR Subpart 32.9: Prompt PaymentThe federal rules on when agencies must pay a proper invoice.
- FAR Subpart 32.8: Assignment of ClaimsThe federal rules that let a contractor assign payments to a financing institution.
Government contract financing, handled by GovCon Funding.
Government financing has its own rules, documents, and timelines. Our sister division, GovCon Funding, works only on federal, state, and local contracts, and these are the pages we send contractors to first.
- GovCon Funding
Our dedicated division for government contract financing.
- Government Contract Financing Guide
The full overview of how contract financing works, from bid to final payment.
- Government Contract Line of Credit
Revolving capital built around the award rather than your financial history.
- Payroll Funding for Government Contractors
Cover payroll while you wait on agency payment.
- Mobilization Funding for Government Contracts
Fund the start-up costs of a new award before the first invoice.
- Government Invoice Factoring
Turn approved government invoices into cash.
- Financial Capability Letters for Government Bids
Proof of capital to support a bid. Not a commitment to lend.
- The Assignment of Claims Act Explained
How a contractor assigns payments to a financing institution.
- How to Finance a Government Contract After Award
The first steps once the award is in hand.
- How to Make Payroll While Waiting on Government Payment
Options for covering payroll before the agency pays.
- Apply with GovCon Funding
Start an application with the team that handles government contracts.
Government contractor financing questions, answered.
Is this the same as your GovCon Funding division?
Contract-based underwriting, Assignment of Claims, mobilization funding, and financial capability letters for bids are handled by our dedicated GovCon Funding division at gbgovconfunding.com, which specializes exclusively in federal, state, and local contract financing. This page covers the basics; contractors with active or upcoming awards are better served starting there.
Do I need to be a prime contractor to qualify?
No. Both prime contractors and subcontractors can be financed, but the structure differs: primes are paid by the agency and subcontractors by the prime, which affects payment terms and how the financing is set up. GovCon Funding structures each accordingly.
Should I apply here or through GovCon Funding?
If you hold or are bidding on a federal, state, or local contract, start with GovCon Funding at gbgovconfunding.com. Their team handles the contract-specific underwriting and compliance requirements that general working capital financing does not cover.
Can I finance invoices owed by a government agency?
Yes. Government invoice financing advances cash against an invoice that an agency, or the prime contractor above you, owes you, so payroll and vendors are paid while the payment process runs. For federal contracts the structure follows federal payment rules, and state and local contracts have their own, which is why GovCon Funding handles it. Its government invoice factoring page walks through how it works.
What is the Assignment of Claims Act?
It is a federal law that lets a contractor assign the money owed under a government contract to a bank or other financing institution, so that payments flow to the lender. GovCon Funding explains the rules and process in its guide to the Assignment of Claims Act.
How much of an invoice is typically advanced?
On government invoices, advance rates typically run 85 to 90 percent, commonly 90 percent for prime contractors and 85 percent for subcontractors, with the remaining balance released once the agency or prime pays, less fees.
Can I get financing before I start work on an award?
Costs that come before the first invoice, such as equipment, travel, insurance, and hiring, are what mobilization funding is for. GovCon Funding structures it around the award.
How long does it typically take to get paid on a government contract?
Prime contracts typically pay on net 30 terms and subcontracts on net 45, but terms only start at invoice. Billing monthly on net 30 means about 60 days of costs before the first payment, and about 75 on net 45, assuming you bill on time and bill correctly.
How quickly can government contractors get funded?
Timing depends on how the financing is structured around your award and on having the contract documents in hand, so the fastest first step is to talk to GovCon Funding.
Businesses with similar cash flow patterns.
Other industries we finance.
- Transportation & Trucking
- Manufacturing
- Wholesale & Distribution
- Staffing & Recruiting
- Printing & Packaging
- Business & Professional Services
- Technology & IT Services
- Security Services
- Janitorial & Facility Services
- Oilfield & Energy Services
- Healthcare & Medical Staffing
- Food & Beverage
- Import & Export
- Telecommunications
- Logistics & Freight Brokerage
- Warehousing & Fulfillment
- Marketing & Advertising
Ready to fund your business?
Tell us about your company and we'll get in contact with you to discuss next steps. There is no cost or obligation to get started.