How to Finance Government Contracts the Right Way: Recurring Fulfillment PO Funding with Invoice Factoring Support

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Presented by 1st Commercial Credit, LLC

Government contracts offer tremendous growth opportunities for small and mid-sized businesses, particularly those owned by veterans, women, and minorities. Whether you're supplying medical equipment, office materials, janitorial services, or recurring consumables, landing a government contract can be a major milestone.

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But winning the bid is only half the battle. The next, and more difficult, question is how to finance the order.

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Many vendors face the same roadblock: they don’t have the working capital to pay suppliers, hire labor, or cover production before getting paid, especially on Net 30, 60, or 90 payment terms. This is where Recurring Fulfillment PO Funding with Invoice Factoring Support becomes essential.

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At 1st Commercial Credit, LLC, we provide a two-tiered funding solution for vendors with long-term, recurring government contracts. This approach is not designed for one-time purchase orders or speculative projects. We specialize in funding businesses with predictable, repeatable delivery cycles, offering financial stability from the moment a purchase order is issued until the final invoice is paid.

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What Businesses Qualify – Minimum Qualifications

To ensure we fund viable and scalable government vendors, we have clear minimum criteria. If your business meets the following qualifications, our funding model may be an ideal fit.

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Minimum Vendor Requirements:

• At least 12 months in operation
• Recurring government contract or purchase order (12 months or longer preferred)
• Monthly funding need of at least $25,000 in sales
• Minimum 20% gross profit margin
• Experience delivering the specific product or service offered
• Qualifies for invoice factoring with 1st Commercial Credit

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This program is for recurring, fulfillment-based contracts with federal, state, or municipal government entities, or through large prime contractors.

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IMPORTANT: One-time sales, startup ventures, or construction projects are not eligible.

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What Businesses We Do Not Fund

It’s equally important to clarify what we do not fund:

• Construction-related projects
• One-time or speculative government POs
• Startups with no operational history
• Businesses attempting to enter an unfamiliar industry or product category
• Contracts below $25,000/month in funding volume
• Transactions with profit margins below 20%

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If you’re looking to finance a one-off government sale, we are not the right fit. Our program is for vendors who can reliably fulfill the same or similar orders over time and want to build long-term relationships with public-sector buyers.

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Why Recurring Fulfillment PO Funding + Factoring?

Most government contractors experience a cash flow gap between the time they receive a purchase order and when they receive payment, sometimes 60 to 90 days later. And if they lack capital to fulfill the PO upfront, the cycle stalls before it starts.

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That’s where our dual-layer funding model comes in:

1. Recurring Invoice Factoring Support:
   We factor your government receivables, giving you immediate access to 85–90% of your invoice amount once you bill the agency or prime contractor.
2. Recurring Fulfillment PO Funding:
   We provide capital in advance, before invoicing, specifically for purchasing inventory or paying suppliers tied to long-term, repeatable purchase orders.

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This integrated model ensures that you never have to delay performance, miss a delivery window, or turn down a contract due to lack of working capital.

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Sample Use Case

Let’s illustrate with a common client profile:

Vendor: Woman-owned small business (WOSB)
Contract: 12-month recurring PO with a state university system
Products: Monthly delivery of paper, toner, janitorial supplies
Contract Value: $300,000 (spread evenly over 12 months)
COGS: $225,000 (25% gross margin)
Terms: Net 60 payment from state agency
Funding Need: $25,000/month for supplier prepayment

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How 1st Commercial Credit Helps

• Approves the vendor for invoice factoring support
• Reviews and approves the recurring PO for fulfillment funding
• Funds $18,750 /month directly to the vendor’s supplier
• Vendor fulfills monthly delivery as scheduled
• Vendor issues invoice each month for $25,000
• Invoices are factored and applied to pay down the purchase order funding
• Once the agency pays, 1st Commercial Credit releases the remaining balance to the vendor

The vendor doesn’t need to use internal capital and now has predictable cash flow throughout the entire contract term.

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How the Process Works

Here’s how our funding program flows from start to finish:

1. Recurring Purchase Order Issued
   You receive a valid PO from a government agency or prime contractor. The PO must involve recurring fulfillment of the same products or services and vendors.
2. Factoring Approval
   You apply for invoice factoring with 1st Commercial Credit. We review your business, contract, and government customer to approve an A/R facility.
3. PO Review for Fulfillment Funding
   Once factoring is in place, we evaluate your PO for upfront funding support, used exclusively to pay suppliers or service providers directly.
4. Supplier Payment Released
   We fund the cost of goods or services before delivery, allowing you to fulfill your obligation without using your own capital.
5. Goods Delivered / Service Completed
   You complete the scheduled delivery or provide the agreed-upon service to the government entity.
6. Invoice Issued & Factored
   You issue an invoice to the agency or prime, and we factor it, providing an advance to purchase order balance and difference goes to you (Depending on the advance rate and your cost of goods) while waiting on payment.
7. Invoice Payment Received
   Once 1st Commercial Credit receives payment from the government or prime contractor, the factored amount is applied to the outstanding invoice and surplus moves to the cash reserve account.
8. Balance Released
   Any remaining funds after the PO paydown and our fees are remitted back to you from the cash reserve account.

This structure continues month-over-month for the duration of the contract.

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Why We Require Factoring First

Factoring is not optional, it’s the foundation of the funding structure.

It gives us confidence in the transaction and ensures:

• There is a repayment path for PO funding
• The government or prime contractor is creditworthy
• Cash flow is stabilized over the contract life
• We maintain control over collections

Factoring also allows us to offer higher funding limits and lower risk, which benefits you, the vendor.

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What Types of Vendors and Contracts Work Best?

We support businesses supplying:

• Janitorial and cleaning products
• Medical and PPE goods
• Office and IT supplies
• Lab testing kits or consumables
• Non-construction maintenance services
• Monthly recurring product shipments or service providers

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Ideal contracts are awarded by:

• State agencies
• School districts
• Federal departments
• City governments
• Prime contractors working under public-sector master agreements

Contracts must be repeatable, scheduled, and documented via PO or subcontract.

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Labor Compliance & Pricing Considerations

Vendors pursuing service contracts should be aware of labor-related laws and compliance risks. These costs must be factored into your bid pricing.

Key Regulations:

• Davis-Bacon Act and Service Contract Act require:
  • Prevailing wage payments
  • Fringe benefits (health, holiday, vacation)
  • Certified payrolls
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• Union Labor Requirements may involve:
  • Union hiring protocols
  • Contributions to benefit funds
  • Payroll recordkeeping

Failure to comply can lead to penalties, back pay, contract loss, or legal action. Build these costs into your margin, and remember, we require a 20%+ gross margin for funding eligibility.

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Opportunities for Minority and Small Business Vendors

Many government contracts are set aside for:

• Minority Business Enterprises (MBEs)
• Women-Owned Small Businesses (WOSBs)
• Veteran-Owned Small Businesses (VOSBs)
• HUBZone-certified businesses
• SBA 8(a) program participants

These designations help agencies meet procurement targets and improve your odds of winning multi-year contracts.

At 1st Commercial Credit, we frequently work with certified diverse vendors and tailor our funding to support your scaling efforts.

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When We’re Not the Right Fit

Our program is structured to support long-term recurring performance, not speculative or transactional sales.

We are not a fit for:

• One-time government sales (no contract renewal or schedule)
• Startups with no prior delivery history
• Vendors attempting to enter new industries without experience
• Construction-related government contracts
• Sub-$25K/month contract performance

If your goal is to build a recurring book of public-sector business and need working capital to scale, that’s when we can help.

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Why Choose 1st Commercial Credit?

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• We’ve funded over 3,500 small businesses since 2001
• We specialize in public-sector contract financing
• No financials required in many cases
• No long-term commitment, month-to-month flexibility
• Approvals within 24–48 hours in most cases

We work exclusively with companies that value operational stability, predictable receivables, and recurring performance.

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Let’s Get Started

If your business is supplying recurring goods or services to a government buyer, and you're looking for a strategic financing partner, reach out today.

We’ll assess your eligibility for Recurring Fulfillment PO Funding with Invoice Factoring Support, and help you turn steady contracts into steady cash flow.

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Contact Us‍

Phone: 800-674-4436

Email: info@1stCommercialCredit.com

Website: www.1stCommercialCredit.com