Why a signed contract is not the same as cash
Government customers are reliable but slow. You deliver the work, submit an invoice and then wait for review and payment.
Payment timelines vary by agency and contract. Federal rules set a general standard for prompt payment, but approval steps, missing paperwork or a change order can add weeks. A small contractor with a large contract may need to fund two or more months of labor and materials before the first check.
Check your contract for payment terms, invoicing requirements and any retainage held back until completion, because retained amounts are money you will not see for a while.
Plan for the paperwork too. A missing certification, wrong invoice code or incomplete timesheet can send an invoice back to the start of the review line, so a checklist before submitting each invoice is worth the time.
Costs contractors typically need to cover
Common needs are payroll, subcontractor payments, materials, bonding and insurance, and mobilization to the job site.
- Payroll and subcontractors: workers expect pay weekly or every two weeks, regardless of agency timing.
- Materials and equipment: purchased before delivery or installation.
- Bonds and insurance: many public contracts require them, and premiums are due upfront.
- Proposal costs: time and sometimes consultants spent on bids that may not win.
These needs fit working capital or a business line of credit. For trades work on public jobs, see construction trades funding.
Bid costs deserve their own line in your budget. If you bid on ten contracts and win two, the cost of all ten has to be recovered by the two. Track hours spent per bid and your win rate, then decide how much proposal work is sensible.
Example: bridging the first 60 days
Add up the payroll, subcontractors and materials you will pay before the first invoice clears. That total is your bridge.
This is an illustrative example. A contractor wins a $300,000 one-year services contract, billed monthly at $25,000.
- Monthly costs: $19,000 for labor, materials and overhead.
- Payment arrives 45 days after invoice, so the first check lands about 75 days after work begins.
- Cash needed before the first payment: roughly $19,000 x 2.5, or about $47,500.
Once payments start, cash flow steadies, and the contract earns about $6,000 a month in margin. A bridge sized near $50,000 and repaid over several months fits the math. Compare options using our total cost worksheet.
What funders review
Funders look at your business bank statements, time in business and revenue level, not the contract by itself.
ROI Funder considers 500+ FICO, 6 or more months in business and $20,000 or more in monthly revenue. If your revenue is just starting because a contract has not paid yet, funders may not have enough deposit history to work with. Bring existing revenue history and be ready to share contract documents if asked.
Keep tax filings, registrations and licenses up to date. Lapsed registration can delay payments from agencies, which is a cash flow problem of its own.
Picking among products
Lines of credit suit repeated bridge needs, term loans suit equipment and larger purchases, and SBA loans offer lower cost if you can wait.
A line of credit lets you draw when you pay staff and repay when the agency pays. A term loan has fixed payments and suits a vehicle or equipment purchase tied to a multi-year contract. SBA loans take longer, but their cost is typically lower, so they can suit contractors with a stable pipeline and time to plan. Invoice factoring is separate and not placed by ROI Funder.
Do not pick a product by the first number you see. Compare total repayment, how long you will actually hold the money and what happens if the agency pays early or late.
Subcontractors and flow-down terms
If you hire subcontractors, you may owe them even when the agency has not paid you. Plan for it.
Prime contractors often have to pay subs on a schedule set by the subcontract, and some states have prompt-pay laws for them. Check your contract and local rules, and ask an attorney if needed. Avoid agreeing to pay-when-paid terms you cannot support with a bridge.
Pipeline risk
Government work can end at a renewal date. Size payments to your secured contracts, not hoped-for ones.
Keep an eye on option years and recompete dates. If a contract that drives most of your revenue ends in twelve months, avoid a repayment longer than that unless you have other work. Spreading across several agencies or a mix of public and private work reduces the risk.
When a major contract nears its end, start the next pipeline conversation early, because new awards can take many months to finalize.
Frequently asked questions
Can I get funding with a new government contract?
Funders review your existing business bank statements. A contract helps explain future revenue but does not replace deposit history.
Is a line of credit better than a loan for slow-paying agencies?
Often yes for a recurring wait, because you draw and repay as needed. A term loan suits a one-time purchase.
How fast is funding?
On a complete file, working capital can reach your account the same business day. Lines of credit take 24 to 72 hours.
Do you provide bid bonds or surety bonds?
No. Bonds come from surety companies. We can help with cash for premiums as part of working capital.
What happens if the agency pays late?
Your payments to the funder usually continue on schedule, so keep a cash reserve or an open line of credit to cover delays.