Small business government contractors have it tough. Small margins, little brand recognition, and larger, more established competitors who can smaller margins. Not to mention, once you get a contract, you have to pony up money to fund it before getting paid to finish the work.
None of this is fun. All of it is stressful. And, sometimes, it can lead to a gap in funding that makes fulfilling a contract difficult. This is especially true when it comes to delivering physical goods on contract, either as a reseller or service provider that needs to install and service physical goods (e.g., servers, satellite equipment, etc.).
This is where the ability to borrow against delivery orders, or DO for short, comes in. We fund up to 30% of the value of all DOs in hand that will be delivered in the next 180 days. This helps contractors purchase physical goods upfront to support or fulfill an order long before an invoice is able to be generated.
Here’s how it works:
- You get a delivery order contract.
- You need to provide your supplier a down payment in order to get the product shipped.
- To fill the gap, you borrow against your delivery orders at any amount up to 30% which allows you to cover upfront costs until an invoice can be generated, at which point you are able to borrow up to 90%.
- This process works across all of your DOs, aggregating them together and providing a “maximum borrowable amount” on day 1 that increases as the work progresses. For example, if you have six DOs in hand each worth $100K (total of $600K) and will need to deliver one per month for the next 6 months, you can borrow $180K today ($600K X 30%).
These loans are incredibly valuable for a variety of small business owners. Borrowing against a delivery order:
- Keeps your supply chain uninterrupted.
- Maintains great relationships with vendors and others on whom you rely to fulfill a contract or an order.
- Gives you the confidence you need to bid on more delivery order contracts knowing you have the capital to support fulfillment.
Under ideal circumstances, the federal government would pay small business contractors quickly and easily. With reality being so very different, Parabilis lines of credit serve an important role to keep a contractor on the road to success.
Contact us today to learn more.