Financing a Construction Company That Takes on a Large Government Contract

You have landed the big contract your construction company was working hard to close and get ahead. Management is buzzing and the company is prime and ready to get started on the large government project. The five year old company provides roofing and repairs to distressed properties through a program developed by local and county agencies to clean up cities in Florida. Previously a general contractor, the company was awarded a contract by the city and continues to receive more contracts from the local government. Due to the nature of the contracts, the construction company does not get paid until the very end of the job. If a house qualified for the program, the construction company would do the repairs, wait for the county underwriter to inspect the job to ensure work was completed according to local codes and guidelines, get the proper approvals, then submit a stack of paperwork and the invoice. Having to pay for labor and materials up front, the company faced a shortage in working capital, putting them in a cash crunch. Without financing, they would not have been able to take on the additional contracts. The real financial impact of putting the resources together in order to fulfill the contract sets in. Not getting paid until the end of the job puts real financial strain on the companies ability to increase their business and stay ahead. Banks aren’t nearly as willing to lend anymore and it’s not easy to land the financing needed to complete the job. The company was aware of a financing alternative called accounts receivable financing. Accounts receivable financing allows a company to leverage their receivables as cash. The closing period can be as short as a few days, which translates into receiving the cash the company needs in a very short time. They weren’t sure who to reach out for this type of financing until they did an Internet search. They looked for a factoring company with a broad range of industry expertise and knowledge of government contracts, permits and local planning processes. The factor’s expertise in working with government entities made the process smoother for their client. They also developed relationships with the right people to turn approvals around quickly for each area involved. The receivable financing facility quickly provided the construction company with the cash flow they needed, when they needed it, so they could take advantage of new contracts and continue to grow. The company now has the potential to increase their business significantly with the accounts receivable facility in place.