Factoring for government contractors: cover payroll while the agency takes 30 to 90 days to pay.
Government agencies pay, but slowly and with no upfront payments. If you're a subcontractor, the prime contractor often pays you even later. Factoring turns invoices for goods you delivered or services you finished into cash, with a team that knows the Assignment of Claims process.
Daniel Chirino · Business Development Officer, 1st Commercial Credit
Updated: October 28, 2026
Why government contractors run short of cash
- Weekly payroll and fixed overhead are due long before the agency pays, sometimes at prevailing wages.
- A big contract can use up all your operating capital and pay 30 to 60 days later, or more.
- Materials and overhead for the job are paid upfront.
- You end up passing on new contracts, or struggling to fulfill the ones you have.
Most factoring companies don't want receivables concentrated in a few customers, and in government work that's the norm: one agency or one prime can be most of your revenue. 1st Commercial Credit funds that kind of concentration, and it funds both direct federal contract receivables and invoices to prime contractors.
How factoring works for a government contractor
Deliver and invoice
Finish the work or deliver the goods, and invoice the agency or the prime contractor as you do today.
Assign the payment
On federal contracts, the Assignment of Claims Act sets the procedure for assigning the right to be paid, and the Federal Acquisition Regulation (FAR) governs how it's carried out. 1st Commercial Credit has specialists in that process and is registered with SAM.gov.
Get funded
You receive an agreed share of the invoice upfront, and the rest, minus the fee, once the invoice is paid in full. It can also work as a credit line you draw from.
What 1st Commercial Credit offers government contractors
The offer
- Rates from 0.69% to 1.59%, depending on your volume, how fast your customers pay and their credit.
- Facilities from $10,000 to $10 million.
- Setup in 3 to 5 working days.
- No financial statements required. No facility or audit fees.
- The review looks at whether your customer pays, not at your credit history, so low credit can still work.
- It's not debt: you sell the invoices, with no collateral beyond the invoices themselves.
Who it's for
Companies whose main business is technical services or manufacturing for the federal government: computer-related services, communications systems, systems maintenance, programming support, facilities management, logistics, engineering, military-related products, temporary staffing, distributors and manufacturers.
Also contractors in construction, IT services, logistics and staffing that sell to state or local governments.
Source: 1st Commercial Credit's government receivables page, read October 28, 2026. Rates and terms are confirmed in writing before you sign.
When factoring is not the answer for a government contractor
- The agency or the prime pays you in under 15 days.
- The work isn't finished or accepted yet. Factoring is for goods delivered and services rendered.
- You need money to start a contract you just won. That's purchase order financing, a separate program with its own review.
- The problem is margin, not timing. If the contract loses money, getting paid faster only loses it faster.
Questions government contractors ask me
I'm a subcontractor. Can I factor invoices to the prime?
Yes. 1st Commercial Credit funds invoices to prime contractors as well as direct federal contract receivables.
Most of my revenue comes from one agency. Is that a problem?
Not here. Most factoring companies avoid that concentration, but it's normal in government work and 1st Commercial Credit funds it.
Do you work with state and local agencies too?
Yes. 1st Commercial Credit advances on contracts with local, state and federal agencies.
How long does setup take?
3 to 5 working days. No financial statements are required.
Who do you invoice: the agency or a prime?
Tell me who pays your invoices and how long it takes. I'll tell you if factoring makes sense for your contract.
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