Winning a contract does not put money in your account. You buy materials, pay your crew, and cover payroll for weeks or months before the first invoice clears, and even a prompt-paying agency generally takes about 30 days to pay a proper invoice once you submit it (more on that in getting paid, invoicing, and holds). On a contract with a slow ramp or a construction mobilization phase, that gap can be the difference between a great year and a cash crisis, regardless of how solid the underlying contract is.
Why this catches people
The award letter feels like the finish line. It is closer to the starting line. You need cash for labor, materials, insurance, and often a bonded mobilization before the government owes you a dollar, and the size of that gap scales with the size of the contract. The bigger the win, the bigger the hole you need to fund first.
The usual tools
A business line of credit is the cheapest option if you can get one, and it is easier to get before you desperately need it, so open one while your finances still look calm. Invoice factoring, selling your unpaid invoices to a finance company for a discounted upfront payment, is faster to access and does not depend as heavily on your credit history, but it costs real margin. Read the factoring agreement closely: rates, fees, and whether the factor takes over your customer relationship for collections can vary a great deal between offers, and a bad factoring deal can quietly erase the profit on an otherwise good contract.
For construction, mobilization is its own line item. Getting equipment and crews on site before the first payment often means a mobilization advance built into the contract, a line of credit, or both. Ask about mobilization terms before you bid, not after you win, because the answer can change whether the job is fundable at all.
One more option worth knowing exists: assignment of claims lets you legally assign the payments from a federal contract to a bank as security for a loan. It has specific paperwork and rules, and a lender who works with government contractors can walk you through whether it fits your situation.
Why banks like this receivable
A government contract is unusually good collateral. It is a payment obligation from an entity that does not go out of business and pays on a known cycle, and lenders who work with government contractors know that. That is often the difference between a bank saying no to a young company and saying yes once they see a signed federal award instead of a projection.
The real lesson
Line up financing while you are deciding whether to bid, not after you have already won. If a contract's size would strain your cash before the first payment lands, that is a bid or no-bid factor, not a problem to solve in week two of performance.