You'll probably want to look at purchase order factoring in a situation like this, especially if it's a gov contract where payment is guaranteed. PO factoring can be a great tool for businesses short on funds.

Another approach for creative financing is factoring. When I landed my first large contract, I was, to be honest, a little cash-shy and didn't have all the money necessary to pay my vendors. The government will ding you badly if you are found to be financially irresponsible. So, I went to a major bank which had a factoring component with a federal contracting track record. What happened was this: I would submit my voucher to the feds and the factoring company, within 24 hours, would wire the amount of the voucher to my account and I would pay my vendors. When the actual voucher was paid, the money went directly to the factoring company which took their less than 1% and sent me any balance due. It allowed me to handle a $3 milion contract with no money in the bank. Just a word of caution. Factoring agencies can be sleazy. Choose one that is affiliated with a real bank and choose one that has a demonstrated track record working with the feds. A good quiz question to ask is: well, what do you have to do to my CCR record in order to be my factor? If they can't answer the question, hang up. Jos A. Rivera, JD President & CEO Rivera, Sierra & Co., Inc. jrivera@riverasierra.com

Hi: I think that it would depend on the contracting agency. It sounds like your friend would benefit from talking to a precurement professional such as those provided by the Procurement Technical Assistance Centers (PTAC). PTAC provides network of procurement professionals to help small businesses. The Veteran Business Development Officer in the SBA District Offices may also help provide more information.

Great question! First, I need to clarify a couple of things... The Miller Act requires that all government contracts over $100K be protected by a bond. The bond guarantees your performance on the contract and that all subs and a suppliers will be paid. As a disabled veteran, you can apply for the SBA's Bonding program. See: http://www.sba.gov/financialassistance/borrowers/surety/ for information. You will have to apply with an agency that handles SBA accounts to access the program. Our agency is no longer one of them, as the rates are higher and there is a lot more paperwork. Should you go this route, be sure to find an agency that specializes in them, there is too much that can go wrong otherwise. It sounds like you are new to surety bonds and public work. Prior to diving into it all, be sure to do plenty of research. The inner workings of public work can be very different than private. Keep in mind, you will also be limited by your surety bond line to what you qualify for. Bond line capacities are primarily underwritten using business financial statements. You will need the financials prepared on a 'reviewed percentage of completion method' by a CPA to get over $500K. Not only will you be limited to crawl before you can run, but you are also ultimately held responsible for claims. Bonding is different than insurance in that you will be required to indemnify to hold the surety harmless in the event of a claim. It is more of a form of credit and does not protect you in any way (it protects the government). Check out this video on YouTube that explains surety bonding in depth with visual aides and examples: youtube.com/watch?v=mTZd4nrgN7Q As for the contract, you should get progress payments depending on the size of the job. I am assuming the supplier will be willing to do partial orders as needed. For jobs of this size, you should have a formal written agreement with your suppliers that allow you to get around issues like these, as working capital is not only important to ensure you can complete the job with ease, it is the #1 item any surety will look at when granting you surety credit. Sorry to ramble on so much, but I thought it would be best to clarify as much as possible. Feel free to send any follow-up questions you have. These forums are an excellent resource and I am glad I stumbled upon them! ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.