For many growing GovCons, in the space between winning and missing a contract award lies the ability to financially perform the work. There are billions, that’s right, billions of dollars in opportunities that are won by the same large contractors time and time again because many smaller contractors don’t know where to access the cash they need to fulfill the obligations required for the work.
For instance, FEMA contracts offer to the industry billions of dollars in opportunity and are usually awarded to a small pool of the same contractors each bid. The reason being that much of the work requires quick turnaround of goods and services amounting to a lot of upfront cash flow that most smaller contractors can’t access without a lending partner to assist. But this problem is not exclusive to FEMA contracts. Many contractors do not seek financing until after they have been awarded the work and that can make the process of obtaining cash cumbersome.
Not to mention, not all lending options are the same and the ability to access what is available may have requirements that you may not meet at your stage of growth. Finding this out after a contract award could be extremely stressful and cause you to choose an option that may not be best for your needs. So having a plan prior to, that includes a financing partner, can create more streamline in your operations, and the ability to bid bigger contracts along the way. Everyone knows, cash is king.
Here are 4 quick tips to consider in the pre-bid stage:
- Knowing your options first based on your stage of growth can eliminate or at least lessen your chances of making the wrong decision. When you aren’t in a rush to fill the cash flow void, you have a better chance at looking through all of the options and choosing one that you qualify for and meets the needs for your work.
- Choosing partners with government contracting experience and knowledge is more than an added benefit, it is a necessity. Many lenders may tout that they work with government contractors, but that is different than understanding the lending needs of contractors who work with certain agencies that may pose challenges that differ from others, for example, like the aforementioned FEMA contracts. They require a fast turnaround for goods and services which will necessitate fast facility increases to accommodate scaling and purchases. Not all lenders can accommodate this for a small business.
- Being clear on every dime you pay for the money you borrow takes specific understanding by the borrower. If you don’t know what you don’t know, you may miss fees and requirements that you don’t want. Some lenders do not let you know up front all of the fees and costs you will incur by utilizing their money. Better to know before you get going on your contract and you are in need, than to find out you’re paying more than you wanted after the fact.
- Interview your lending options like you would an employee. Not all lending options are the same and neither are the people responsible for your relationship.
Don’t let lack of capital keep you from opportunities that you are capable of winning!