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Factoring Government Receivables- Checkmate |
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Written by Gregg Elberg
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Tuesday, 25 September 2007 |
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Word Count: 783 In the game of chess, the term checkmate, according to MS Encarta means:
1) winning chess position: in chess, a condition or position in which a player’s
king cannot escape check and the other player wins the game.
2) Chess move that ends game: in chess, a move that produces checkmate, or a
game that ends in checkmate.
3) Complete defeat: a situation of defeat or deadlock.
As used in this article the analogy of the game of chess is meant to convey two
different ideas: A) the idea that the government, and the government contract
you are competing for, is the king. You and your competitors are in a real life
game to win the contract. A checkmate is a complete defeat of your competitors;
and B) the word “mate” is commonly used to refer to a skilled person’s worker,
friend, as a term to address somebody. The idea is if you want to win the
government contract it is wise to check (mate) and recheck (mate) the government
specifications, and last but not least, have the financing in place pay for the
labor and material required to deliver the product or services required.
Here is a real life example: The owner of a factory manufactured plastic and
cloth protection cups for construction workers that were designed to protect
elbows and knees from harm. The Federal Government announced a Request for
Proposals for the manufacture of protective elbow pads and knee pads for the
armed forces that were very similar to the owner’s product. With minor
modifications to the design specifications for the pads the factory was capable
of making the military products.
There were two major problems. The quantity of pads required to meet the
performance specifications would require the factory to triple production and
run three shifts twenty four hours a day. Since the government would not pay for
the product for 30 to 60 days after receipt and inspection, how could the owner
have sufficient cash flow to pay for labor and materials immediately at a level
three times above the current cash flow?
The solution was to factor the government receivables to a commercial finance
company. Pursuant to the Assignment of Claims Act of 1986 companies can have
access to unlimited capital by selling individual invoices based on the credit
of the U.S. government. Factoring government invoices allowed the company to be
paid in days rather than to wait months. The contract to factor government
receivables to a commercial finance company helps your company win a government
Request for Proposal because it substantiates the functional specification that
the work will be performed on a timely basis. In other words, a commercial
financing contract helps to prove that the manufacturer has the financial
wherewithal to perform on a timely basis. This is the financial part of how to
checkmate your competitors.
A typical finance company contract should state: ABC finance company agrees to
purchase obligations of which are of the United States of America, including
without limitation the General Services Administration, the Departments of
Education, and the Obligor: is (a) the United States of America or an executive,
legislative, judicial, regulatory or administrative agency, authority or
instrumentality, Health and Human Services, Housing and Urban Development, and
Transportation, or (b) a State, or (c) local government entity.
Here are a few tips on how to check “mate” and make sure you get paid after you
have won the contract. Pay close attention to administrative and billing
instructions. Always submit your invoice to the stated paying government office
and invoice promptly. If there are modifications, work with the commercial
finance company for funding increases if necessary or if there are changes in
payment instructions. Keep a log of all communications. Maintain complete
records of the entire project. Use the governments order number for tracking for
all parties, your company, the finance company and the ordering government
agency. Be aware that the US government fiscal year is from October 1st through
the end of September.
The bottom line: if you want your business to grow exponentially and win in he
game of government contracting it may be wise to factor government receivables
to checkmate your competition.
Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com
Mr. Elberg is a licensed attorney and licensed real estate broker. Gregg
Financial Services is a full service brokerage for commercial finance companies
and banks that fund B2B businesses. Mr. Elberg arranges funding from $25,000 to
$50 million per month at competitive pricing, and works to reduce your financing
costs as your company grows. For more information about GFS, please call
888-482-9221 or visit our website:
http://www.greggfinancialservices.com
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