Winning a federal contract looks great on paper—until government contract cash flow problems hit your business. Payroll’s due, vendors are waiting, and you’re still 60 to 90 days away from getting paid.

It’s not a rare issue. Over 70% of government contractors face long payment delays, funding gaps, and tight working capital. And in 2025, with billions in infrastructure and defense spending flowing through the pipeline, these financial pressures are only intensifying.

We Understand the Cash Flow Challenges of Government Work

At Capital Source, we work with government contractors who are stuck in this exact cycle. Our team is well-versed in:

• Federal Acquisition Regulations (FAR)
• Assignment of claims procedures
• The payment structures and billing limitations unique to federal contracts

While many banks and lenders hesitate when they see “government receivables,” we know what’s behind them—and how to build financing strategies around those contracts.

The 3 Biggest Government Contract Cash Flow Problems

1. You’re Waiting 90 Days to Cover a 30-Day Payroll

A “Net 30” clause doesn’t mean much in practice. Invoices can get trapped in slow-moving internal systems, held up by budget delays or bounced between approval levels.

• Employees expect timely payroll
• Vendors expect net terms (that they’ll enforce)
• Overhead continues week after week

That delay creates a real risk. Without cash on hand, even profitable contracts can lead to lost staff, unpaid bills, or defaults.

2. You’re Financing the Government’s Project Out of Pocket

Many federal contracts tie payments to milestone deliverables. But those milestones might be 60–90 days out—or longer. To hit those deliverables, you’re already paying for:

• Labor and subcontractors
• Equipment, tools, and materials
• Certifications and compliance protocols

With no payment in sight until a milestone is met, you’re funding the entire front end yourself.

3. Compliance Costs Stack Up Fast

Winning a contract doesn’t mean you’re ready to start. Before work begins, many contractors spend tens of thousands on:

• Facility clearances and background checks
• Compliant accounting systems
• Cybersecurity controls
• Bonding and liability insurance

These aren’t optional—and they aren’t cheap. Most lenders don’t understand why you need that spend before the project even kicks off.

How Cash Flow Struggles Impact Everything Else

• Employee turnover rises when payroll is uncertain
• Subcontractor trust erodes if they don’t get paid on time
• New bids stall because you can’t front the cost of new work
• Rush financing costs more, chewing away your margins

Why Traditional Financing Doesn’t Work for Government Contractors

Most banks don’t understand government receivables, FAR compliance, or why milestone billing creates risk for the contractor—not the agency.

You’re forced to over-explain or walk away empty-handed. Even if approved, the structure usually doesn’t align with the real-world demands of your contract terms.

That’s where specialized financing makes the difference.

Financing Options That Work for Government Contract Cash Flow Problems

• ✅ Government Invoice Factoring: Get 80–90% of your invoice value within days. No waiting 60+ days for accounts payable.
• ✅ Asset-Based Credit Lines: Leverage your equipment and government receivables to secure working capital that grows with your contract volume.
• ✅ Contract-Based Funding: Tie financing directly to your awarded contracts, structured around your actual delivery schedule—not arbitrary payment terms.
• ✅ SBA 7(a) and CAPLines: Longer-term capital for qualified small businesses. Slow to secure, but useful with the right preparation.

Capital Source Can Help You Build a Reliable Funding Strategy

Our team has experience working inside and around the federal procurement space. We understand the regulations, the timelines, and the internal systems that define government payments.

We don’t treat your contract like any other commercial job—because it’s not. And that’s exactly why traditional lenders fall short.

Solve Government Contract Cash Flow Problems Before They Disrupt Your Business

If you’re facing long delays between work delivered and payments received, you’re not alone—and you don’t have to accept the risk.

Schedule a 15-minute call with the Capital Source team.
We’ll review your current contract pipeline and map out a financing strategy that keeps operations moving without delays.

👉 Book a Call Now