The Assignment of Claims Act, Explained
The federal law that lets government contractors finance their receivables — what it is, how the Notice of Assignment works, and why it makes factoring possible.
What the Assignment of Claims Act is
The Assignment of Claims Act (31 U.S.C. 3727 and 41 U.S.C. 6305, implemented in FAR Subpart 32.8) is the federal law that allows a government contractor to assign the right to be paid under a contract to a financing institution — typically a bank or a factoring company.
Without this law, payments under a federal contract generally can't be transferred to a third party. With it, a contractor can pledge its receivables to a funding partner, which is precisely what makes invoice factoring and accounts-receivable financing possible in the government space.
How the Notice of Assignment works
To assign a claim, the financing partner files a Notice of Assignment with the relevant parties — usually the contracting officer, the disbursing (payment) office, and the surety if there is one. The notice tells the government to direct payment to the assignee (the financing partner) instead of the contractor.
Once the notice is acknowledged, the government pays the financing partner directly when the invoice comes due. This three-party arrangement — contractor, government, financing partner — is what protects everyone and keeps the funding compliant with federal rules.
Why this matters for your cash flow
Because the Assignment of Claims Act is well-established and built into the FAR, financing your federal receivables is a routine, compliant transaction — not a workaround. A specialized GovCon funding partner handles the Notice of Assignment paperwork for you.
The practical result: you can convert your earned-but-unpaid government invoices into working capital without waiting on the federal payment cycle, all within a legal framework Congress created specifically for this purpose.
Stop waiting on government payments
Encore advances up to 90% of your approved invoice value — often within 48 hours. No equity, no fixed monthly payment.
Apply for FundingFrequently asked questions
What is the Assignment of Claims Act?
A federal law (31 U.S.C. 3727, 41 U.S.C. 6305, FAR Subpart 32.8) that lets a government contractor assign its right to payment under a contract to a financing institution. It's the legal basis for government invoice factoring.
What is a Notice of Assignment?
A formal notice the financing partner files with the contracting officer, disbursing office, and any surety, directing the government to pay the financing partner instead of the contractor once the invoice is due.
Do I have to notify the contracting officer to factor an invoice?
Yes. Under the Assignment of Claims Act, the assignment is perfected by filing a Notice of Assignment with the appropriate government offices. A specialized funding partner handles this paperwork for you.
Is assigning my contract payments risky?
No — it's a standard, FAR-sanctioned transaction. The law was written specifically to let contractors finance federal receivables, and the three-party notice process protects the contractor, the government, and the financing partner.
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