Financing Government Contracts: How to Fund Your Federal Work

Financing government contracts is essential for contractors who want to grow their business with federal, state, and local agencies. While government work provides stable revenue and reliable payments, the timing gap between performing work and receiving payment creates real cash flow challenges that require specialized financing solutions.

Noble Funding has helped government contractors access the working capital they need for over 20 years. With more than $1 billion funded, an A+ BBB rating, and zero complaints since 2005, we understand how to structure financing that works for contractors in the government space.

The Challenge of Financing Government Contracts

Reliable Payers, Slow Payments

Government agencies are among the most reliable payers in business. Unlike commercial customers that might dispute invoices or go bankrupt, government agencies are backed by public funds and contractual obligations.

However, government payments are notoriously slow:

• The Prompt Payment Act requires federal agencies to pay within 30 days, but actual payment often takes 45-60 days
• State and local agencies may take even longer
• Complex contracts with multiple approval levels can extend payment timelines further
• Invoice rejections for minor errors restart the clock

Cash Requirements Start Immediately

Meanwhile, your cash needs start the day you win the contract:

Labor Costs

• Hiring and onboarding new employees
• Payroll every two weeks
• Benefits, taxes, and insurance
• Training and security clearances

Materials and Equipment

• Inventory and supplies
• Equipment purchases or rentals
• Software and technology
• Vehicles and tools

Overhead and Operations

• Office space and utilities
• Insurance and bonding premiums
• Professional services
• Travel and per diem costs

The math is simple: cash goes out immediately, but revenue comes in 30-90 days later. This is why financing government contracts requires specialized solutions.

Options for Financing Government Contracts

1. Traditional Bank Loans

Banks offer lines of credit and term loans, but they often struggle with government contractor financing:

Pros:

• Lower interest rates
• Established relationship
• Multiple products available

Cons:

• Slow approval process (weeks to months)
• May not understand government contracting
• Often require personal guarantees
• Limited flexibility on terms

2. SBA Loans

The Small Business Administration offers several programs relevant to contractors:

Pros:

• Lower interest rates
• Government-backed
• Larger loan amounts available

Cons:

• Lengthy application and approval process
• Extensive documentation required
• Slow funding timeline
• Requires collateral

3. Invoice Factoring

Factoring companies purchase your outstanding invoices at a discount:

Pros:

• Fast access to cash
• Based on invoice value, not credit
• Grows with your business

Cons:

• Ongoing cost per invoice
• May not work for all contract types
• Customer notification required
• Can be expensive over time

4. Contract Financing

Lenders provide advances based on your contracts:

Pros:

• Tied to specific contracts
• Understands government work
• May not require personal guarantee

Cons:

• Contract-specific limitations
• Requires strong contract terms
• May have funding caps

5. Junior Capital from Noble Funding

Noble Funding provides subordinated debt that works alongside your existing financing:

Pros:

• Fast funding (days, not weeks)
• $300,000 to $10 million
• Works with existing bank financing
• No personal guarantee options
• Flexible terms (12, 15, 18 months)

Cons:

• Higher rates than bank loans
• Best suited for established businesses

How Noble Funding Finances Government Contracts

Noble Funding specializes in providing junior capital to government contractors. Here is what makes our approach effective:

Speed When It Matters

Government contract opportunities do not wait. When you need to mobilize for a new award, Noble Funding can provide $2 to $3 million in just 2-3 business days.

Substantial Capital

We offer $300,000 to $10 million in financing, supporting meaningful contract requirements.

Works With Your Bank

Our junior capital is fully subordinated to any bank or senior secured lender. We complement your existing financing rather than competing with it.

Flexible Structures

Choose 12, 15, or 18-month terms. We also offer six months of early payoff discounts.

Balance Sheet Options

Noble Funding can structure financing with no UCC filings on corporate assets, maintaining flexibility for other financing needs.

Personal Asset Protection

Qualified contractors can access our capital without personal guarantees, keeping business and personal finances separate.

EBITDA Flexibility

We work with companies that have positive or negative EBITDA. Government contractors often have timing-related profitability issues, and we understand that.

Use Cases: Financing Government Contracts

New Contract Startup

A cybersecurity firm won a $4 million federal contract but needed $600,000 to hire cleared personnel and set up secure facilities. Their bank could not move fast enough to meet the contract start date. Noble Funding provided the capital in 3 days.

Scaling Operations

A professional services contractor with $20 million in revenue won several new task orders simultaneously. They needed $2 million to scale their team while waiting for payment on existing work. Junior capital from Noble Funding filled the gap.

Equipment and Materials

A construction contractor won a $10 million state highway project. They needed $1.5 million for equipment mobilization and materials. Noble Funding funded the project startup costs quickly.

Payroll Bridge

A staffing contractor providing IT personnel to federal agencies experienced payment delays on multiple contracts. They needed $1 million to cover payroll while invoices processed. Our bridge financing kept their people paid.

Acquisition Opportunity

A defense contractor identified an opportunity to acquire a smaller competitor with valuable contract vehicles. Noble Funding provided $3 million in acquisition financing, enabling the deal to close quickly.

Bonding Support

A growing contractor needed to demonstrate additional working capital to satisfy surety requirements for larger performance bonds. Noble Funding’s capital strengthened their bonding capacity.

Key Considerations When Financing Government Contracts

Understand Your Contract Terms

Before seeking financing, know:

• Payment terms and invoicing requirements
• Progress payment or milestone provisions
• Retainage percentages and release conditions
• Assignment and subcontracting restrictions

Maintain Strong Financial Records

Lenders need to understand your business quickly:

• Keep financial statements current
• Track government receivables carefully
• Document contract performance history
• Organize records for due diligence

Plan for Multiple Scenarios

Build financial models that account for:

• Normal payment timelines
• Extended payment delays
• Multiple contract wins simultaneously
• Retainage timing

Build Financing Relationships Early

Do not wait until you win a major contract to find financing:

• Establish bank relationships before you need capital
• Understand your options with alternative lenders
• Have a plan for rapid capital deployment

Consider Combined Financing Approaches

Multiple financing sources can work together:

• Bank line for ongoing operations
• Invoice factoring for immediate cash
• Junior capital for growth and bridge needs

Financing Government Contracts: Requirements and Qualifications

What Noble Funding Looks For

Business Profile:

• Annual revenue of $5 million to $150 million
• Established operating history
• Active government contracts or strong contract pipeline
• Experienced management team

Financial Position:

• Reasonable financial health (positive or negative EBITDA considered)
• Manageable existing debt
• Quality accounts receivable
• Adequate working capital relative to operations

Contract Quality:

• Creditworthy government agencies
• Clear payment terms
• Strong performance history
• Reasonable contract duration

Documentation Typically Required

• Recent financial statements
• Government contract documents
• Accounts receivable aging report
• Bank statements
• Corporate tax returns

Frequently Asked Questions About Financing Government Contracts

Can I get financing if I am a small business contractor?

Yes, if your business meets our revenue requirements ($5 million to $150 million annually). Noble Funding works with small, mid-size, and larger contractors.

Do I need to pledge my government contract as collateral?

Not necessarily. Noble Funding’s junior capital can be structured without UCC filings on corporate assets.

How does this work if I already have a bank loan?

Noble Funding’s financing is fully subordinated to your bank or senior secured lender.

What if my contract has not started yet?

We can work with contracts in various stages, from award notification through active performance. Contact us to discuss your specific situation.

Is my business profitable enough?

Noble Funding works with companies that have positive or negative EBITDA. We understand that government contracting involves timing issues that affect profitability metrics.

How quickly can I get funding?

Noble Funding can provide $2 to $3 million in 2-3 business days for qualified borrowers.

Do you require a personal guarantee?

Not always. Qualified contractors can access our financing without personal guarantees.

Take the Next Step with Noble Funding

Financing government contracts does not have to be complicated. Noble Funding has spent over 20 years helping contractors access the working capital they need.

Why contractors choose Noble Funding:

• 20 years of government contractor financing experience
• Over $1 billion funded to businesses nationwide
• A+ BBB rating with zero complaints
• Funding in days, not weeks
• $300,000 to $10 million available
• Fully subordinated to your existing bank
• No personal guarantee options

Contact Noble Funding today to discuss financing solutions for your government contracts. Your contracting business deserves a financing partner who understands the unique challenges and opportunities of working with government agencies.