Even when you have the skills necessary to complete a project, not having the money to do so can ruin your chances of winning the contract. In most cases, you’ll be paid after all work is completed or at preset milestones throughout the project. Therefore, you’ll need to front some of your own money to get started. If you don’t have the money, you might want to consider looking into contract financing.
How Does it Work?
While a portion of the process starts before you start the project, such as proving to the customer that you will be able to complete the project, the funding doesn’t occur until after the contract is awarded. Of course, the lender will need to see financial statements, reference letters, a company profile, and bank statements in order to determine if you have the credibility to handle the contract.
How is Contract Financing Dispensed?
Once your company has the contract, it’s time to receive the funds and get started. In order to determine how much to provide, the lender will need to analyze the contract. The way the funds are dispensed depend upon your company profile and will be one of the following three ways:
Purchase order financing
Your company controls the money
You watch over the money
Terms of Contract Financing
Once the structure is determined, you’ll need to think about the fees that will be charged by the lender. There are four terms of contract lending you should know:
Advance amount is the total amount
Factor fee similar to interest rate
Advance percentage is the amount requested from the customer to pay the invoice
Advance term is the amount of time payment is withheld after invoice received
Where to Get Contract Financing
Typically, banks do not get involved with contract financing because it’s not really a loan. The funding is often provided by private companies that deal with factoring and can be found online. You’ll just need to complete your application and wait for them to call you. If you do receive contract financing, you’ll want to carefully review the terms to know what you’re getting yourself into. Call Bold Growth Solutions today to help you with your contract financing needs.