The Importance Of Government Contract Financing

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By Tammie Caldwell


There are a many projects that the government in place needs to undertake so that it improves service delivery to people. It is difficult to manage all these projects at a go because it would be very costly to oversee the progress at different sites. In order to reduce this cost, it is advisable to hire other companies that have the capacity to complete the projects in time. This requires a lot of capital making it important to have government contract financing agencies in place.

It has been found out that most infrastructural constructions require huge sums of money that most contractors may not have. Taking such bids will mean that the companies are likely to face financial crisis leading to crippling of operations. Smaller companies are more likely to suffer as compared to larger companies that have more sources of funds.

These institutions are part of the treasury which is aimed at availing required funds to any lenders to help in implementing and realization of projects. They have been known to finance major projects that most banks cannot handle due to the large amounts that are involved. Their presence has been a major breakthrough to smaller contacting companies whose finance base is so limited.

In order to start the borrowing procedure, the borrower need to meet all conditions set aside by the authorities in the institutions. There should be presentation of required documents that are used as a basis of evaluating how much the borrower can be awarded. This process is quite lengthy and this delays the time on which funds will be released. The borrower is required to have documented his proposal well in such a way that it can convince the lenders.

The decisions made are based on the cash flow records that the companies provide to the banks. This is done to ensure the correct amount is issued out and the borrower is likely to meet the conditions given. Their budget estimates are also considered so that they are not given less money that will run out before the projects are completed.

Once the processing is complete, the money is released to contractors. This ensures that the contractors are ready to start implementing the projects that they have taken. A small amount is usually charged by lenders on the sums given out to the borrowers. This increases the performance capabilities of companies in completing their projects.

It is important that any developers who win the bids sort out earlier forces of money. This helps the construction to take place within the stipulated time and save on costs incurred. This will help in making regular payments to workers involved as well as provision of materials that are going to be involved. This is very important to ensure clear budgeting is done within the limits that will not overstretch the resources available.

More agencies should be established and existing ones expanded so that more financiers can be available. The procedures should be shortened so that the time taken is reduced making performance very efficient. This will bring about more developments within a short time.




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