Chamber Insider Blog

Q&A on Growth Funding for Contractors

Thank you to Matt Stavish, Vice President at Republic Capital Access

For more information on the GovCon Initaitive, click here!

Each month, government contractors meet to network and learn through the Loudoun Chamber’s Government Contracting Initiative Committee and Educational Workshop Series.  Below is an expert form a recent series event entitled, Growth Funding for Government Contractors with Ted Lauer, SVP at Access National Bank, and Matt Stavish VP at Republic Capital Access.

Access National Bank and Republic Capital Access discussed options to financing growing government contractors over eggs and coffee at Eggspectations in April.  Below are a few of the questions from the crowd:
How can I access capital for my first government contract win?
Depending on the size of the financial need and operating / profitability history of the company, a traditional bank line of credit may not be an option.  Another approach is true-sale factoring or selling receivables.  An advantage of selling AR is; non-recourse, no personal guarantees, no liens on company assets, and no covenants.  In selling AR – your company can gain access to as much funding your company bills the government.  This is typically less (much less) expensive the asset-based lending or other alternative means of financing.  
In obtaining non-bank finance are they any guidelines?
If you are a government contractor – work with a company that is focused on government contracting.  It takes expertise from your financing source to understand the nuances in the federal market.  Ask for current and past client referrals. 
How DO SBA loans DIFFER from traditional loans? 
Lenders can be more aggressive on loan approvals when a guaranty from the U.S. Small Business Administration is obtained.  Such guarantees reimburse the Lender for 75% to 85% of any amount lost by the Lender on such a loan, thus the Lender can take the risk of making a bigger loan to a borrower, a loan earlier in the life cycle of borrower, and/or a loan not backed with substantial collateral.  SBA loans are often utilized to fund organic growth including mobilizing on a large contract win, or growth via the purchase of another business, or select contracts of that business.   Additionally, SBA loans can fund management buyouts, partners buy-outs, and employee ownership through ESOP transactions.
When a bank makes an SBA-guaranteed loan, the bank knows that if there is a loss on the loan that the federal government will reimburse.

Thank you to Matt Stavish, Vice President at Republic Capital Access

For more information on the GovCon Initaitive, click here!