Government Contract Factoring

Government contract factoring, also called government invoice factoring or government invoice financing, converts approved receivables on federal contracts into immediate cash. You assign the invoice to a funding partner, receive most of its value now, and the agency pays the funding partner on its normal schedule. When it does, you receive the remaining balance, less the fee.

It works because the Assignment of Claims Act lets contractors direct federal contract payments to a financing institution. For the full explanation, see government invoice factoring, explained.

• Apply. Share your contracts and an accounts-receivable aging report. You'll hear back with pricing within 24 hours.
• Onboard. Encore reviews your contracts and SAM.gov record and files the Notice of Assignment. Most clients onboard in two to three weeks.
• Invoice as usual. Submit through PIEE/WAWF, IPP or your agency's portal, then send the invoice to Encore.
• Get funded. Once your account is active, each approved invoice is funded the same or next day at 80 to 90% of its value.
• The agency pays Encore. Encore releases your remaining balance, less the fee quoted up front, with full reporting.

As a prime, you invoice the agency directly, so the payment is a claim against the United States and the assignment runs through FAR Subpart 32.8. Check that your contract includes FAR 52.232-23 (Assignment of Claims) rather than 52.232-24, which prohibits it.

As a subcontractor, you invoice the prime, so the payer is a company rather than the government. The Assignment of Claims Act doesn't apply; the funding partner verifies the receivable with the prime and looks at the prime's payment terms and history. Primes on federal construction must pay subcontractors within 7 days of receiving payment (FAR 52.232-27), and primes that receive accelerated payments must pass them on to small business subs where practicable (FAR 52.232-40).

• Federal prime contracts and task or delivery orders under IDIQ, GSA Schedule and other vehicles, where assignment isn't prohibited.
• Subcontract invoices to established prime contractors.
• Services billed periodically (staffing, IT, professional services) and construction progress billings.
• Invoices for work performed and accepted, or billable under the contract terms. Invoices for work not yet performed don't qualify; see mobilization funding for startup costs on a new award.

You pay a fee on each invoice funded, quoted up front. What drives it: your monthly volume, how quickly the agency or prime typically pays, the contract type and the terms you choose. Government receivables generally price better than commercial receivables because the government is the payer.

To compare providers fairly, ask each for the all-in cost on the same invoice at 30, 60 and 90 days. The factoring calculator shows how the advance, reserve and fee work on a sample invoice, and the buyer's guide lists what else to compare.

Compared with a bank line, factoring has no fixed ceiling and doesn't depend only on your financial statements (factoring vs. a line of credit). Compared with an SBA loan, it is available in weeks rather than months and grows with your contracts (factoring vs. SBA loans). And unlike a merchant cash advance, it advances revenue you have already earned (factoring vs. MCAs).