So, you just landed a government contract. Congrats.
But now the real question hits: How the hell are you going to fund it?
We’ve worked with hundreds of businesses—veteran-owned, minority-owned, and fresh off their first contract win and let me tell you something: not having funding lined up is the fastest way to choke your momentum.
Government contracts don’t pay upfront. Uncle Sam takes his sweet time. So if you’re banking on that first check to fund your labor, equipment, or materials. You’re already behind.
Let’s break down exactly how to solve that problem before it buries you.
Why You Need Funding for Government Contracts
If you’re sitting on a $500,000 contract and have $7,000 in the bank… you’re not scaling, you’re surviving.
Here’s what’s working against you:
Delayed Payments: The government might pay in 30–60–90 days after services are rendered.
Upfront Costs: Labor, materials, equipment, insurance—it all hits before you see a dime.
Fast Execution: Most contracts come with performance milestones and delivery dates that don’t wait for your cash flow to catch up.
I had a client land a Department of Transportation contract. Great margins, strong terms—but he didn’t get paid for 45 days. Meanwhile, his payroll hit every Friday. Without capital, he would’ve defaulted. We got him funded within 72 hours using AR factoring and a $150K mobilization loan.
The Most Common Government Contract Funding Options
Let’s talk strategy. There are a handful of killer tools to help you stay liquid and locked in.
1. Mobilization Funding
If you just won the contract and need startup capital, this is for you.
Mobilization funding gives you the money to get boots on the ground, hire your crew, buy supplies, and get moving.
✅ Best For: Construction, defense, or energy contractors who need to scale up fast
⚠️ Watch Out For: High-interest rates if you’re not presenting clean financials
Pro tip: Mobilization lenders love contracts with milestone payouts—structure your contract that way and you're golden.
2. Accounts Receivable (AR) Factoring
You do the work, send the invoice, and instead of waiting 60 days for the government to pay, a factoring company pays you 80–90% of that invoice immediately.
✅ Best For: Businesses with active government billing cycles
⚠️ Watch Out For: The factoring company owns your invoice—make sure it’s non-recourse or you could be on the hook if the agency stalls.
We used this for a client supplying IT equipment to a federal agency. We factored his $80K invoice, and wired $72K in 48 hours. That money let him close two more contracts before the original even paid out.
3. Purchase Order Financing
If the government sends a PO for products and you don’t have the capital to fulfill it—this is your move. PO financing pays your supplier directly, so you can deliver without ever touching the capital upfront.
✅ Best For: Product-based government contracts
⚠️ Watch Out For: They often want proof the order is legit (contract + PO + payment schedule)
4. SBA Loans for Government Contractors
SBA 7(a) loans are great if you’re looking for long-term, low-interest capital backed by the Small Business Administration. These work well when your contract can be used as collateral or you have a history of performance.
✅ Best For: Established contractors with multiple contracts
⚠️ Watch Out For: It can take 30–60 days to close. Not ideal for emergency cash.
One of our clients used their 7(a) loan to secure bonding, fund two contracts, and then reinvest the margin into marketing. That one decision grew their company by 300% in 12 months.
5. Bank Lines of Credit (Secured by Contract)
This one’s for the big players. If your business has assets, recurring contracts, or financial statements that don’t look like a horror movie—you can get a line of credit using the contract as collateral.
✅ Best For: Growth-stage companies with government backlog
⚠️ Watch Out For: Banks move slower than molasses. Have a Plan B.
6. Private Lenders & FinTech Platforms
These are becoming the new go-to. They move fast, understand government work, and don’t make you jump through 14 hoops just to get an answer.
✅ Best For: Fast funding, flexible underwriting
⚠️ Watch Out For: Always read the fine print. Some lenders hide fees like it’s a magic trick.
Match the Funding to the Type of Contract
Construction Contracts
You need serious upfront cash for labor, materials, and equipment.
Best combo: Mobilization + AR factoring—two powerful Government Contract Funding Options that keep projects moving.
Service-Based Contracts
Payroll’s your enemy. And guess what? It shows up every week.
Best combo: AR factoring + line of credit
Product or Supply Contracts
If you can’t buy, you can’t fulfill.
Best combo: Purchase order financing + short-term capital
Lender Tips: How to Maximize Your Funding Strategy
Here’s what I tell every single client:
Forecast your cash before you touch that contract. Know when payments drop and when expenses spike.
Negotiate milestone payouts in your contracts whenever possible. Don’t wait 90 days for a lump check.
Track every expense. Some lenders will ask for project-level cost breakdowns to release funds.
Avoid stacking loans unless you absolutely need to. Don’t become a short-term debt junkie.
Mistakes That’ll Wreck Your Cash Flow
Let’s keep it real. I’ve seen businesses flame out after winning million-dollar contracts because they made rookie mistakes.
❌ Delaying your application for Government Contract Funding Options can stall your entire project before it even starts.
❌ Overlooking payment terms in your contract? That’s how surprises—and cash crunches—happen.
❌ Blending project funds with general operating cash is a recipe for financial confusion and missed margins.
❌ Using personal credit cards to front a government job instead of exploring real Government Contract Funding Options? We’ve seen it firsthand—it’s a fast track to burnout and debt.
Ready to fund your government contract and take on more deals without cash flow stress?
Speak with a funding specialist today and get a personalized strategy to keep your business moving forward—before the first invoice hits.
