Government agencies are the most creditworthy debtors in the factoring market — and Net-30/60/90 payment cycles are the most common reason new acquisition owners hit a cash wall. Calculate your exact factoring cost, compare it against SBA Working Capital, and see what you actually receive on Day 1.
Face value of your accepted government invoice
Government agencies are premium debtors — expect 85–92%
Total cost to access funds early vs. waiting
MCA shown for reference only. Daily ACH debits from an MCA compete directly with your SBA acquisition loan payment — almost universally a worse outcome than factoring or WCP for buyers carrying SBA debt.
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Government invoice factoring follows the same structure as commercial AR factoring, with one critical legal difference: the Assignment of Claims Act requires written notice to the contracting officer before the factor has any legal security interest in your payment.
Complete your work and submit a proper invoice via the agency's system (IPP, Wide Area Workflow, or agency-specific portal). Confirm the invoice is accepted and in processing before approaching a factor.
Your factoring company sends written notice to the contracting officer, the agency head, and any surety. This is a federal legal requirement. Without it, the agency can pay you directly and the factor has no recourse against the agency.
The factor wires your advance — typically 85–92% of the invoice face value — within 24–48 hours of notice confirmation. Government AR commands the highest advance rates in the factoring market.
The contracting agency pays the factor directly. The factor releases your reserve (remaining percentage) minus the factoring fee. You receive the balance, typically the same week the agency payment clears.
Multiply the invoice amount by the factoring rate (as a decimal) and then by the number of 30-day periods in your payment terms. For an $80,000 invoice at 2.5% per 30 days on Net-60 terms: $80,000 × 0.025 × 2 = $4,000 total factoring fee. The Day-1 advance is the invoice amount times the advance rate (typically 85–92% for government AR).
The Assignment of Claims Act (31 U.S.C. § 3727) requires written notice to the contracting officer before a factoring company has any legal security interest in your government invoice. Without it, the agency can legally pay you directly even after the factor has advanced funds — leaving the factor with no recourse. Most government-specialized factors handle the notice, but confirm this before signing any factoring agreement.
Yes. Government agencies are among the most creditworthy debtors in the factoring market. Factors treat government AR as low default-risk, which typically means higher advance rates (85–92% vs. 70–85% for private AR) and lower factoring rates (1.5–3.0% vs. 2–5% for private). The only additional step unique to government AR is the Assignment of Claims Act notice requirement.
Factoring sells the invoice at a discount — you receive the advance upfront and the factor collects directly from the agency. The SBA Working Capital Pilot (WCP) is a revolving credit line secured by your contract and AR. The WCP is typically cheaper (prime + 3% APR vs. 18–40% APR equivalent for factoring), but requires a pre-existing SBA lender relationship and 3–7 business days to activate. Factoring funds in 24–48 hours and requires no prior lender relationship.
No. Factoring requires an existing invoice — a specific amount for work already completed and billed to the contracting officer. Some arrangements allow progress-billing advances tied to accepted milestones, but the underlying invoice must exist. Pre-contract advances are a different product (purchase order financing or contract-based LOC) with different cost structures.
Rarely, in practice. Federal agencies are familiar with assignment of claims — it is a standard commercial transaction. The contracting officer is notified as part of the legal process but has no veto on a standard commercial contract. Classified contracts and certain defense contracts have additional restrictions; confirm with your contracting officer before factoring any contract with security requirements.