Defense Contractor Goes On the Offense
Invoice Factoring Defense Contractor Goes On the Offense
Author: Casey Marie Long
Date posted: 03.20.24

In the middle of 2020 in Northern Virginia, a small defense contractor landed its first lucrative government contract. With a seven-figure payday on the line, the owner knew she had to move quickly to locate the staff necessary to fulfill her contract. Based on the type of work and the hours involved, she was unable to pay her workers as independent contractors and was required to have them on payroll.

Payroll regulations posed a problem as they required her to pay employees before receiving her first contract payment. Despite having a stellar personal credit score, she hesitated to take on more debt through a loan. After researching alternatives, she proactively chose to pursue invoice factoring. The first invoice on her contract amounted to $100,000 and was due in 45 days. Faced with over $60,000 in payroll costs before the invoice payment, she took action and entered into a factoring agreement for the first several invoices. This move allowed her to build up her cash reserves sufficiently to cover payroll.

 

Defense Contractor Goes On the Offense

Because her customer was the United States government, which is considered a respectable customer, her contract and outstanding invoices easily qualified for factoring. She initially only wanted to sell a single invoice in a spot factoring contract. However, she realized that it would take several invoices before she had enough cash on hand. After entering into the agreement, she received 85% of the invoiced amount within 48 hours.

By having cash on hand, she could focus on her work instead of worrying about her cash flow. Moreover, with funds available for payroll, she could build a better team and avoid cutting corners when hiring.

Within a year, the business owner had secured a second contract with the U.S. government. She no longer needed to use factoring to fund her business operations. She was grateful that factoring had been an option when she needed it.

Defense Contractor Goes On the Offense
About The Author | Casey Marie Long

Casey has 12 years of technical writing experience. She is also a CPA and bookkeeper. Casey graduated from the University of St. Thomas (Minnesota) with a B.A. in mathematics and currently resides in San Diego, CA.

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