Bidding season for government contractors is in full swing. As a small business owner, you’ve already got an advantage when bidding for government contracts. Furthermore, if you’re a registered Veteran Owned Business (VOSB), Service Disabled Veteran-Owned Small Business (SDVOSB), 8(a), HUBZone, or Women-Owned small business, you’ve got an even better chance at winning a contract. Other than the size of your business or how you’re registered, though, what else does the government look at when choosing the right small business to work with?
As part of our government contracting blog series, you’ve seen that following all of the guidelines and responding to every requirement the contract sets forth is important when writing your proposal. We’ve also shared another great tip – to think about your government contract financing plan ahead of time. Now we’re training our sights on making sure you have financing in place prior to winning a bid.
Why do we think this is essential? Because the best time to think about financing is before you bid or have been awarded the contract. Knowing you have financing in place can provide extra assurance that you will be able to fulfill your part of a contract as a subcontractor to a prime contractor. Besides, in many cases, the government is going to require this from you; i.e. they’re going to want you to prove you have the financial capability to actually perform the contract you want to win. The first step in proving this capability is with a Financial Capability Letter (also called a Bank Confirmation Letter, or a Bank Comfort Letter). Click here to watch the recorded webinar on contract financing below.
Be Prepared with a Financial Capability Letter
If you’re seeking reliable financing partners before winning, you’re ahead of the game. As you seek out the right partner, don’t forget you can also have that lending partner or contract financing company (StreetShares is conveniently both, by the way) provide you with a letter that demonstrates that should you win the bid, you’re covered and fully capable on the financial end to make this contract a successful one. This, in essence, is the Financial Capability Letter.
Financial Capability Letters are valuable because they can show you have adequate financial resources to perform on the contract. You may appear as a stronger vendor to the government if you can show financially how you will complete the work. The contracting officer may also ask for this document, so it’s always good to be prepared. Under the Federal Acquisition Regulations (FAR), the government must determine if a contractor has adequate financial resources to perform the contract, so having this letter in hand can potentially solve one hurdle on your way to winning a contract. Prime contractors may also like seeing this from their subcontractors as well. Here are a few benefits you'll discover once you have this document:
- may help you bid on a contract
- show the contracting officer you have the financial means to fulfill your contract
- give you confidence in your bid with financial backing
- help you avoid high-rate lenders because you're not waiting until the last minute
- provide a financial health check that can help you down the road
Start Thinking Now about Your Contract Financing Plan
Of course, once you’ve won a bid, there may be several months of preparation before you can invoice. If you’re already planning ahead for a Financial Capability Letter, as we’ve stated above, don’t forget to give some thought to financing your contract. Since you may not get paid for 30-60 days after you invoice, it’s always a good idea to plan how you will cover monthly expenses such as payroll or other expenses you didn’t anticipate. The last place you want to be is successfully landing a large prime contract and then find yourself in a situation where you can’t perform on the contract because you’re waiting to get paid.
Get a Financial Capability Letter
It’s never too early to start thinking about your finances. StreetShares can provide, at no cost to you, a Financial Capability Letter. This letter provides assurance to the contracting officer that you’ll have the resources in place to have advance funding on contract invoices. You can request this free service from StreetShares at any point before, during, or after the bidding process. Click here to request a Financial Capability Letter.
Government Contract Financing 101 Webinar
Interested in learning more? Our partners at GovTribe, a federal contracting market intelligence platform, hosted a webinar last week about government contract financing. Marc Vogtman, Co-Founder and CFO of GovTribe sat down with Brendon Dibella, VP of Development and Strategy, and David Bann, VP of Sales at StreetShares to discuss:
- types of contract funding options
- types of business lenders
- financing solutions from StreetShares
- how to get prepared for government contract financing
- examples and habits of successful small businesses
Learn all about government contracting including financing, evaluating your market and bidding on contracts in an ebook we wrote with GovTribe, FedBid and WinBiz Proposals. Download "The Government Contractor's Handbook" now.
Disclaimer: Financial capability letters are prepared at your request and are confidential. Financial Capability letters should not be construed as an offer of credit and are only made in reference to specific government contracts upon which you are bidding. All financing referenced in a Financial Capability letter is subject to approval by StreetShares’ senior management and/or Chief Credit Officer, and will be reviewed in conjunction with the final contract to ensure that the contract has the ability to assign the claims therein and complies with StreetShares’ policies. Financial Capability letter terms are not guaranteed, StreetShares reserves the right to not prepare a Financial Capability letter at our sole discretion. This is not an offer or credit or a loan. Contract financing subject to individual approval, upon submitting an application. Financing amounts and rates will vary.