Government Purchase Order Financing

Selling products to the US government can be lucrative, especially for small business owners who qualify for the 8(a) program. This program offers a number of opportunities to companies that meet its criteria – usually small businesses, minority-owned businesses, and women-owned businesses.

However, many small companies that get a government contract often lack the working capital to deliver it. Product contracts often have large values that exceed the financial capabilities of small government vendors. These companies face a dilemma: they can win the orders but they cannot fulfill them.

The solution

If your company sells products to the US government, you can solve this problem by using purchase order (PO) financing. PO financing is a type of business funding that helps finance government contracts.

This solution provides you with funding to pay your supplier expenses. Once paid, your suppliers can manufacture the goods and deliver them to you. This strategy allows you to fulfill the order with the government and book the revenue.

The transaction settles once the government pays, in 30 to 60 days.


One advantage of PO financing is that it is available to small business owners with limited resources. Advantages of PO financing include:

  • Easier to get than a bank loan
  • Can be setup quickly
  • Flexible

What types of orders can be financed?

We can only finance orders in which your company resells a finished product to the government. This requirement means that you must purchase the completed goods from a manufacturer and sell them at a markup.

Alternatively, you can manufacture your own goods as long as you use a third-party manufacturing company. You can find additional information here.

The Assignment of Claims Act

The government allows purchase orders to be financed through the Assignment of Claims Act. Although the performance of the contract may not be assignable to another party, the revenues from the contract often can be assigned. The Assignment of Claims Act allows you to finance your purchase orders as long as you follow the rules.

Transaction structure

The PO financing transaction structure is relatively simple and works as follows:

  1. You sign on with a finance company
  2. You get a government purchase order
  3. The finance company pays your supplier
  4. Your supplier delivers the goods to the government
  5. You invoice the government
  6. Once the government pays, the transaction settles

This article has more information about how PO financing works.


The cost to finance a purchase order varies based on the size of the order and the reputation of the suppliers. Rates average 3% per 30 days but can be higher or lower based on transaction risk. Here is additional information about PO financing rates.

Things to consider

If possible, select a PO finance company before you submit a bid. Doing so gives you ample time to handle any potential issues beforehand.

Also, you can often specify if you are assigning the claim to a finance company when submitting the initial bid form. Assigning the claim during the initial bid submission is easier than making the assignment later. Actually, the handling of the assignment after the initial bid form is sent depends on the government contract officer that is assigned to your project. This process can take a couple of weeks.

Learn more

If you would like a PO financing quote, please fill out this form or call us at (877) 300 3258.