CASE STUDY: Department of Defense contractor needed liquid capital


Estimated reading time: 2 minutes

Background

General description:
Midsized ammunition manufacturer

State of formation:

Florida

Customer type:

Government entities including the United States Department of Defense


Companies that benefit from factoring of government receivables may be contractors for federal, state or county contracts. In many cases, minority and women-owned businesses and SBA 8(a) organizations are eligible to factor government receivables.

When working with the Federal Government, any receivables funded must follow the guidelines set forth in the Assignment of Claims Act and the processes set forth in the Federal Acquisition Regulations. United Capital Funding provides the necessary tools and resources in house for these processes.

Issue

This company had strong management, large accounts receivable balances, and a need for liquid capital. It recently upgraded several of its manufacturing lines, but during this process, a large amount of equipment was purchased. Although the equipment was financed through bank financing, the capital expenditures hurt cash flow and limited its ability to seek financing from other traditional channels. 

Proposed Solutions

United Capital Funding proposed its factoring services to alleviate the road rash associated with hyper growth. Factoring would provide the following benefits:

  • Advance on the invoice amount (typically 80% of the invoice value)
  • Comprehensive accounts receivable management and maintenance of payment recovery and outstanding invoices.
  • Credit investigation of future customers
  • Online reporting available through CADENCE

Conclusion

The company accepted the proposal and was approved for factoring with United Capital Funding.

United Capital Funding was able to structure a facility where cash was provided after verifying an invoice with the government entities. These advances enabled the company to expand its operations and bid on additional government contracts. The company can focus on manufacturing and sales and no longer had to deal with servicing payroll needs or keeping suppliers happy. The company’s profitability increased over 500% during its relationship with United Capital Funding


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