Federal contracting is one of the most stable revenue environments in the American economy. So why do so many capable contractors run out of cash?
The reason is timing rather than performance. Contractors are required to fund the work, including payroll, materials, and compliance, long before the government pays for it. That gap between spending and reimbursement is structural, predictable, and largely invisible until it becomes a crisis. It also explains a hard truth of the market: winning more work can deepen the strain instead of easing it.
Our white paper The Capital Gap in Federal Contracting examines why this gap exists and why the financial products most contractors reach for aren’t built to close it.
What the paper covers:
- Why the capital gap is a timing mismatch baked into how federal contracts are awarded, executed, and paid, and why it says nothing about how strong a contractor’s business is
- How growth amplifies the gap rather than easing it, and why small and mid-sized firms feel it most
- Where each existing option falls short: traditional bank lending, invoice factoring, merchant cash advances, general private credit, and private equity
- What a financing model built specifically for the federal market would need to do differently
One thing worth knowing: even the baseline federal payment framework assumes a lag between performance and payment, and that’s before administrative delays, documentation errors, or a government shutdown enter the picture. For most contractors, the gap is a permanent operating condition rather than an occasional disruption.
New to this series? This is the first of three. Read next: Federal Market Credit as a New Capital Model →