Helping Small Businesses Grow Is What We Do

Every day at Federal National Commercial Credit we help small businesses grow. I recently had the good fortune of seeing this first hand when I attended a ceremony during which our client, who is the owner of a government contracting firm, was named the U.S. Small Business Association’s Small Business Person of the Year.

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Working Capital Financing for Companies with Government Contracts

For many government contractors, there are two key times when they start to worry about how they are going to get the working capital needed to support their contract:

1)   Once the celebration concludes from winning the latest government contract.
2)   When you are getting ready to bid on the next big government contract.

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The Financial Personal Guaranty – What It Is and What It’s Not

Most small business lenders, whether they are banks, asset based lenders, or invoice factors, require some form of personal guaranty from the owners and/or executives of the borrowing company.  I find it is one of the most common new borrower objections.  But it is surprising how many borrowers misunderstand the way guaranties work and why so many lenders require them.  Here are some of the important common misunderstandings and some thoughts about them:

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What are UCCs and Do You Have Them?

I am having a bit of fun with the title to this article making UCCs sound like some kind of social disease. Many people regard UCC filings as little better. But UCC filings and the Uniform Commercial Code (“UCC”) that supports them are at the very heart of most financing in our economy and, without them, we would be an economic back-water. Lenders would not be nearly as plentiful, willing and aggressive.

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How to Shop for a Factoring Company

You may have exhausted your options at the banks in town and you could start to lose valuable business if you don't get some financing soon. Maybe you have received bank financing but because you've had a tough year the bank says you no longer fit their lending guidelines. Or maybe you have a good relationship with the bank and you are looking at some strong growth, but the bank has given you all they can. Before you get to this point, it is appropriate to shop for non-bank financing alternatives, such as selecting a factoring company or an asset based lender. Alternative finance is an unregulated industry. Prices, service quality, and reliability vary widely. Pricing may vary from 10 to 40 percentage points above the Prime Rate (nominally, the rate banks offer their most creditworthy customers) so the savings to be gained from smart, old-fashioned comparison shopping can be considerable.

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What does the Federal Assignment of Claims Act do?

The Federal Assignment of Claims Act, or “FACA” as it is often known, establishes the way lenders may arrange for payments under federal contracts to be irrevocably paid to them in support of loans made to the contractor. In short, if the borrower’s primary collateral is accounts receivable under a federal contract, this is the only way under the law for the lender to control the collateral. The Federal Assignment of Claims Act first became law in 1937 and established a road map for federal contractors to finance their activities under federal contracts.

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5 Ways of Financing Your Growth

Let's talk about five ways of financing your growth along with opportunities and challenges for government contractors when winning a new contract award. The good news is there are effective strategies and techniques for financing new and/or rapidly growing businesses. Each with it's own merits and appropriate role, common features, and prevailing pricing. When you examine these factors you can efficiently evaluate your government contract funding needs, identify worthy providers, win sizeable line commitments, and command the best rates.

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Understanding the Federal Assignment of Claims

When researching government contract funding, it is key to pick a lender that knows government processes well, including the Assignment of Claims. The Federal Assignment of Claims Act created the process by which a “Financing Institution” may collaborate with a government contractor to have the contractor’s payments under prime contracts paid by the government customer directly to the Financing Institution.

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Government Contractor Factoring is Mainstream

Nearly every newcomer to commercial or government contract factoring as well as to asset based lending services worries whether or not their business will be stigmatized because it is using these specialty finance services. Quite the opposite is true. These are such commonly used forms of financing that a professionally delivered specialty finance service rarely draws much notice from customers. Ironically, the bigger and more sophisticated the customers are, the less likely they are to care or even notice that a supplier’s invoices are assigned to a finance company. It just gets routinely handled in accounts payable.

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How Government Contract Funding is Different

As a government contractor, it is sometimes tempting to think it is OK to enter into a borrowing relationship with a financing company that doesn't seem to understand or doesn't understand federal government contracting well. After all, "Why should it matter as long as you get your money?"

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