What the Federal Assignment of Claims Act Means for Government Contractors

The Federal Assignment of Claims Act defines how lenders or factoring companies can arrange for payments when federal contracts are part of the accounts receivable or loans made to the contractor. Essentially, if the borrower (the contractor) uses the business's accounts receivable as collateral, then the Federal Assignment of Claims Act guides how the lender may control the collateral.

The Federal Assignment of Claims Act has been a law since the late 1930s, and it was designed to provide a roadmap for contractors working with the government to finance their projects when working on federal or government contracts. Further guiding the assignment process is the Uniform Commercial Code (UCC), which is a set of standards adopted by most of the United States.

A business which purchases goods or services may be required to send payments to a factoring company if the factoring company sends out a notice that the business’s accounts have been sold to the factoring company.  Interestingly, a business may receive a Notice of Assignment form a factoring company with which the business had no prior financial relationship.

How Factoring Helps Contractors Bid on Government Contracts

Government contracts represent a competitive arena where making the right bid can make all the difference in securing a contract or being passed over for another company. A contractor must research the costs of the project and ensure that his or her business can complete the project with the amount of money offered for the project's bid.

With the assistance of a government contract receivables financing company, virtually any government contracting company may bid with confidence on a project. Contractors who provide goods or services for fleet vehicles, disposable goods, and legal assistance may benefit as well as companies that provide technical assistance or which are involved in the transport of goods.

When a business must work under federal regulations and the Federal Assignment of Claims Act, there are a variety of benefits offered by government contract receivables financing. Some of those benefits include AR financing, spot factoring, and bridge financing. A contractor may also seek out same-day funding or PO financing, and enjoy industry low rates and a quick invoice process.

Obtaining a Lucrative Government ContractThe Ultimate Small Business Bookkeeping Checklist

One of the reasons a contractor may seek out work with the government is the excellent pay and the reliability of a steady working relationship with the government. The federal government and the local governments around the country represent the largest employer in the United States, and companies that can secure successive government contracts may enjoy a lucrative income with the federal government as their only client.

In addition to providing the necessary funds to begin work on a government contract, the cash from government contract receivables financing may allow a company to hire additional employees for the project, expand the business, and take on additional contracts. The contractor can also buy additional equipment and ensure all invoices are paid on time.

Government Contractor Financing Solutions

Becoming a government contractor can mean that payment isn't always right around the corner. It's common for the government to offer lengthy payment cycles. A contract that requires a lengthy wait for payment may mean a contractor cannot bid on the project because of a lack of current operating cash. Government contract receivables can eliminate this problem.

Security Business Capital can help you work through all of your government contracting financing needs. Contact us today for a quote!