Selling products to the government can be rewarding for businesses—especially considering the $300,000,000,000+ (spds.gov) in government contracts allotted to small business annually. Providing opportunities to small companies can help spur business growth, but at the same time can put organizations in a financial bind.
Small companies often lack working capital to deliver on large purchase orders—which is typically the case when working with government agencies. Winning a bid that can’t be fulfilled can hamper the success of any organization. And turning to traditional business loans for fast cash has its downfalls.
Smarter Funding for Government Purchase Orders
Purchase Order Funding is a type of financing that allows businesses to fill orders and avoid the risk of late delivery or losing a government contract altogether. A great tool to finance large purchase orders, companies can secure financing for the purchase of goods to fill a government contract. If goods are being created in-house, STAR Funding also considers Work-In-Process funding to cover the costs of components.
Finding the right government purchase order financing company will allow you to bid on opportunities you otherwise would not have due to capital constraints. Once you understand the financing limitations of your lender you will be able to bid on whatever opportunities you can fill logistically.
Advantages of Purchase Order Funding for Government Contracts
- Permits companies to bid on large government contracts by providing up to 100% funding for a transaction.
- Can be deployed within a few days, providing greater availability than standard business loans, if supported by a solid purchase order.
- Does not rely on personal credit; instead, it relies on the credit of the end-customer.
- Is extremely flexible and loan sizes vary depending on business cycles and opportunities.
Finished Goods Financing
Funding a PO for finished goods is the most common type of purchase order financing. Less risky, it involves the purchase of goods for resale that don’t require any assembly or customization prior to reselling.
Finished Goods Financing is highly preferable to typical short-term loans, as it typically comes with a much more favorable interest rate and turnaround time. This is our most popular type of funding for our manufacturing clients.
Work in Process (WIP) Financing
PO Funding for WIP involves purchasing components or raw materials that must be assembled prior to selling to the end customer. Much more complex than finished goods financing, the risk is much higher. Additionally, the standard costs of work in process PO funding is greater.
However, work in process may not require 100% funding of raw materials, so the costs associated to the invoice may be significantly less than funding 100% of the finished product cost.
Applying for Funding is Easy with STAR Funding
When working with a lender it’s important to find one experienced in funding government contracts. Familiarity with the Assignment of Claims Act and mechanics of various contracting agencies is crucial. If guidelines are not followed you risk payment delays.
Providing financing to businesses, the knowledgeable team at STAR Funding has years of experience helping companies secure government contracts. Regardless of the PO funding option you need, we review and deploy funds in just a few days and provide up to 100% funding for a transaction. Contact us today and discover how we can help you win more business.