Financing Your Government Contracts with Factoring Financing

Are you doing business with the city, county, state or federal government? Can't wait up to 45 days to get paid? Consider financing your government receivables.

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invoice factoring, government contract factoring, factoring company

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Are you selling products or services to the federal government? Every year, city, county, state and the federal government buy billions of dollars in goods and services from business of all types.

Although doing business with the government is great and financially rewarding, it can also be hard on your cash flow. Why? Government agencies take, on average, about 40 days to pay their invoices. In the meantime, you have to cover all your recurring expenses such as payroll, rent and supplier payments.

This is not a problem if you have 60 days worth of operating capital in your bank account. But what if you don’t? In that case, many business owners will try to get a business loan. Although that may help, business loans are tough to get and take a long time to set up. Also, business loans have set limits.

What business owners need, is a product that provides financing solely based on the business opportunity – on sales possibilities. This product exists and is called invoice factoring. There are many factoring companies that specialize in factoring government contractors and vendors.

Factoring accelerates your government payments, and enables you to get paid in days rather than months. It’s a form of financing where the factoring company advances you money against your government receivables. You get to use the funds immediately, while waiting to get paid. Once the government pays, the transaction is settled.

If you are reselling products to the government, you should also consider purchase order financing. In this case, the factoring company provides you with financing to pay your suppliers, enabling you to make the sale. Purchase order financing works well with invoice factoring and can also help you grow your company – exponentially.

So, if you own a business that sells to the government, be sure to look into factoring and purchase order financing.

Fixed Price Contracts For First Time Customers

Fixed price contracts are the best and safest method when working with a customer for the first time. You put clients at ease, you reduce your risk, and you establish willingness and ability to pay buy using fixed price contracts.

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Fixed Price Contract

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Fixed price contracts are the best and safest method when working with a customer for the first time. This puts the customer as ease and it reduces your risk of not being paid at all. With this first fixed price contract your main objective is to establish the willingness and ability to pay. After that you can build the relationship.

It's important to note that when you establish a fixed price contract you do that with a customer - not a client. Until a customer has proven that they'll be with you through the duration they are a transaction related customer. They are not a long-term client yet. When you first start out with somebody if you set up a price fixed contract the customer will be a lot more receptive because they perceive lower risk.

This perception may mean a lower margin for you because your fixed price contract is less per hour than you normally charge. Don't worry about this. The more important objective here is to turn this customer into a client after you have established the willingness and ability to pay.

Fixed Price Contract Conditions

Doing price fixed contract work is only viable if you have very a defined project. It is very difficult to do with an emergency service call. You don't know what you're walking into. Keep that in mind. Don't do foolish things like committing yourself to spend three days on a server rebuild for a fixed rice contract of $250.

Include in every fixed price contract two or three sentences that explain that it is subject to credit approval. If you grant credit, always leave yourself an out if they refuse to give you a credit application or the credit application is incomplete. This first fixed price contract is the riskiest. Because of this you want to do things that are in your own best interests.

The Bottom Line on Fixed Price Contracts

The key thing to remember with fixed price contracts is that you are more likely to get stuck with the first bill with a new customer than anywhere else. Use fixed price contracts as way to entice new customers and to lower your risk of nonpayment. Your goal is to turn these fixed price contract customers into long term clients but first you need to know how willing and able they are to pay their bills.

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Getting Started on Commercial Contracts

Basic tips on entering into contracts in business

Keywords:

contracts, contract law, binding contract, legal agreements, legally binding agreements contracts, contract law, binding contract, legal agreements, legally binding agreements

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A legally binding contract will exist between two people or companies where one agrees to do or sell something in exchange for something else (usually money). With very few exceptions, it does not have to be in writing but the reason why they should put in writing is that otherwise it may be one person's word against another either as to whether the contract exists or as to its exact terms. Even if it is in writing, the meaning must be clear and not capable of misinterpretation - therefore, you need to make sure it is as simple and "to-the-point" as possible.

Obviously, you are in effect entering into contracts all the time (e.g. buying a newspaper, going into a car park, buying a drink) and you cannot put everything in writing. You will therefore have to exercise some degree of discretion as to when to put something in writing - if in doubt, ask your solicitor. Some contracts have to be in writing (e.g. for interests in land or for finance) - soon electronic contracts will be sufficient for these purposes.

You may need general "terms & conditions" depending on your business needs and you should discuss whether or not you do in fact need them with your solicitor. If you already have standard terms & conditions, you need to make sure that:

they are not just copied from someone else - the terms may be inappropriate if they were copied from someone operating slightly differently from you and they may be out of date and/or defective (plus it is a technical breach of copyright too).
they are drawn to the other person's/company's attention before the contract is entered into as otherwise they will not usually be binding on them.
A good practice is to get a copy of your contract letter or standard terms & conditions signed by them - do not rely on the terms being printed on the back of invoices. Try and avoid conflict between your terms and those of your supplier or customer by agreeing whose terms are to apply. Also make sure that agreed terms between your and a supplier are not at odds with your own terms with your customers (e.g. so that your supplier will not accept faulty goods after one week from delivery whereas yours specify two weeks).


Some common clauses include:

Price, date payment is due and method of payment
Delivery details and non-liability of seller for delay beyond its control
Seller retaining ownership till goods are paid for but requiring buyer to carry risk for them and to insure them
Limitation on seller's liability
Some important points relating to terms & conditions

no matter what a contract says, certain rights are implied by law or by statute (always seek proper legal advice on such matters) e.g. the goods must be "fit for the purpose" for which they are sold and be of "suitable quality". Goods must match samples (unless "tolerances" are specified) or descriptions in promotional literature, so it is important samples are truly representative and brochure claims are realistic. If the goods are not suitable for the intended use but the buyer insists on buying them despite that, confirm your warning in writing immediately. The same broadly applies to on-line selling.
if you deal with private consumers as your customers or clients (including as a landlord) any standard terms (whether in a letter or in a printed contract) are subject to the European Directive on Unfair Contract Terms and as such they must be "fair", otherwise they will be of no legal effect whatsoever. Bear in mind that with consumer sales in the EU, no matter what your terms say, local consumer laws will override any contrary terms in your contracts. See our article on the new jurisdiction rules for electronic consumer contracts.
if you print terms on the back of something, make sure that on the front you refer to their presence on the back (e.g. "See over for our standard terms of trading").
trading on the Internet brings special considerations - terms need to be sufficiently prominent and well-placed to be effective. Effectiveness will depend upon individual circumstances - in some cases it will be necessary to make the terms appear in a "pop-up" window then force customers to scroll down before having to expressly click an acceptance button.
if you sell goods or services on the Internet or by telephone or mail order, the Consumer Protection (Distance Selling) Regulations 2000 will apply. See our lay overview of the Regulations or our detailed technical briefing.
from January 16th the EU Ecommerce Directive is supposed to be effective and contracts and web sites must be constructed with this in mind as its requirements are strict: see our article on the Directive



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Contracts For Your Customers, Ink It On Paper

When you're dealing with customers, sometimes things can go wrong. It might be your fault, it might be their fault or it might be no-one's fault -- but if you didn't make a contract, then you'll all suffer.

Why Do I Need Contracts?

A contract gives you a sound legal base for your business, and some guarantee that you're going to get paid for your work without you having to ask the customer for payment in advance. In the event of a dispute, the contract lays down what th...

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When you're dealing with customers, sometimes things can go wrong. It might be your fault, it might be their fault or it might be no-one's fault -- but if you didn't make a contract, then you'll all suffer.

Why Do I Need Contracts?

A contract gives you a sound legal base for your business, and some guarantee that you're going to get paid for your work without you having to ask the customer for payment in advance. In the event of a dispute, the contract lays down what the agreement was so that you can point to it and say what was agreed. If you ever end up having to go to court (let's hope you won't), the contract is what the judge's decision will be based on.

Without a contract, you leave yourself vulnerable and open to exploitation. Someone could claim that the terms they agreed with you were different to what you say they were, or that they never signed up for anything at all and so they won't pay. It's especially common to see big businesses mistreat small ones, thinking that they won't have the knowledge or the money to do anything about it. Essentially, contracts take away your customers' ability to hold non-payment over your head, and give you the ability to hold it over theirs instead.

Written and Verbal Contracts.

It is important to point out the distinction in the law between a verbal (spoken) contract and a proper, written one. A verbal contract is binding in theory, but in practice can be very hard to prove. A written contract, on the other hand, is rock-solid proof of what you're saying.

You might think that you're never going to get into a dispute with your customers, but it's all too common to find yourself in a little disagreement. They will often want to get you to do some 'small' amount of extra work to finish the job or make it better, not realising that doing so would completely obliterate your profit margin.

For this reason, you should be very wary of doing anything with nothing but a verbal contract. On the other hand, if you were incautious or too trusting and only got a verbal contract, it could still go some way towards helping you, especially if there were witnesses.

Won't It Be Expensive?

Written contracts don't necessarily need to be formal contracts, which are drawn up by a lawyer with 'contract' written at the top and signed by both parties. These kinds of contracts are the most effective, but can be expensive to have produced, not to mention intimidating to customers.

The most common kind of written contract, oddly enough, is a simple letter. If you send a customer a letter (or, indeed, an email) laying out your agreement before you start work, and they write back to agree to it, that is enough to qualify as a written contract, with most of the protections it affords.

If you are doing high-value work for some clients, though, it could be worth the time and trouble of having your lawyer write a formal contract, or at least of doing it yourself and getting a lawyer to look it over. Formal contracts will give you more protection if the worst happens, and there's nothing to stop you from making it a one-off expense only by re-using the same contract for multiple customers.

Contracts for Small Purchases: the Terms and Conditions.

Obviously it would be silly to expect everyone who buys some $10 thing from you to sign a contract, or write back indicating their agreement to your terms. In this situation, you should have a statement of the 'terms and conditions' that your customer is agreeing to by buying from you, and they should have to tick some kind of box indicating their agreement before you send anything.

Luckily, it isn't usually so necessary to be paranoid about contract law with small purchases anyway, since customers will be paying you first and receiving the goods or services afterwards, not the other way around. If you plan to offer any kind of payment plan or other long-term agreement, of course, this should always be backed up with a signed contract.