Assignment of Claims Act of 1986"....What does this mean for you?

What does this mean to you? Simply, the U.S Government encourages their vendors to seek accounts receivable factoring of their invoices in order to help them grow, improve cashflow, increase performance, and level the playing field.

Access Unlimited Capital Through the Creditworthiness of the U.S. Government Any government contractor, under the the Assignment of Claims Act of 1986, may assign it's rights to be paid amounts due or to become due as a result of the performance of a contract to a bank, trust company or other financing institution. Larger vendors have been doing this for years.

Invoice Factoring is when a business sells unpaid accounts receivable invoices to a specialized financial institution called a Factor. The factoring company buys the invoice from the business for an amount less than its actual face value, then later collects the full amount of the invoice from the account debtor when it finally comes due. This service is useful to a business that cannot afford to wait 30, 60, or 90 days to collect payment from customers, cash is needed immediately for growth or survival.

When a business delivers goods or services to another business, an invoice is generated stating the amount owed and the terms (number of days) in which the invoice must be paid. This invoice along with its terms becomes an accounts receivable: money owed to a business, from a business, for goods or services delivered. The terms for these invoices are usually 30, 60, or even 90 days. After the business sends out the invoice it must wait the length of the term (or longer) to collect the debt and recognize the revenue generated. Waiting for these long billing cycles to close can be difficult for a company that is growing fast or just struggling to survive.

Rather than waiting for long billing cycles to close, a business has the option to sell some or all of its outstanding invoices to a Factor (for a discount) and receive funding within 24 hours or less. The Factor will eventually collect the full amount of the invoice from the account debtor.