Government contracts are key to stable revenues In the trucking industry. It gives your business the financial stability needed to keep going in the lean times. Landing these contracts takes time and expertise that some smaller companies lack.
Did you know freight factoring can help you secure profitable government contracts? Knowing how to build the right freight factoring partnership with a partner like Saint John Capital, is the first step to securing favorable contracts from the government.
Understanding Government Contracts and Payment Delays
The Department of Transportation’s 2024 budget was over $145 billion, which is a lot of money available for trucking companies who get into driving loads for government agencies. That work is available through 10 government organizations.
- Federal Aviation Administration (FAA)
Federal Highway Administration (FHWA)
Federal Motor Carrier Safety Administration (FMCSA)
Federal Railroad Administration (FRA)
Federal Transit Administration (FTA)
Great Lakes Saint Lawrence Seaway Development Corporation (GLS)
Maritime Administration (MARAD)
National Highway Traffic Safety Administration (NHTSA)
Office of the Secretary of Transportation (OST)
Pipeline and Hazardous Materials Safety Administration (PHMSA)
In addition, there are also FEMA loads (Federal Emergency Management Agency) that are critical after disasters like hurricanes, floods, tornadoes, wildfires, etc. These deliveries must be made as quickly as possible to get necessary supplies to the people who need them the most after a life-changing event.
Using government databases to find these contracts is the first step. Applying correctly by following the instructions is the second step. If you’re selected, you need to complete the delivery as promised, and then the wait begins. Federal contracts may take several months to get paid.
How Freight Factoring Helps
Freight factoring offers the chance to get paid as quickly as the same day after completing a delivery. It’s a simple process where you sign up with a freight factoring specialist and create an arrangement that suits your company’s needs. This determines the freight factoring fee and any other additional fees, such as a bank transfer fee.
When you complete or pick up a delivery, you submit the bill of lading to the factor in order to get paid. The company processes your request, deducts the fee, and submits the payment to you. If you meet the deadline, you could get paid later that day or never more than a couple of business days. This process offers several benefits over a traditional invoicing process.
You gain financial stability through timely payments.
When you have government contracts, you often send one invoice at the end of a month. The government then processes the request, which can take a month or two, and approves the payment. It can then take another month or so for the payment to be issued. Once that happens, you have to wait for the payment to arrive. It can be three or more months before you receive the payment.
In the months while you’re waiting, you have bills piling up. You have drivers to pay, trucks to maintain or repair, and business expenses looming. If you rely on a credit card to cover these expenses, you’re facing high interest rates and late payment fees if you cannot pay the minimum payment on time. It adds up quickly and takes more money from your potential profits.
Your administrative costs decrease.
A freight factoring company handles the invoicing for you. They generate an invoice that you can upload to your bookkeeping software. You need fewer people in your office handling financial matters like invoicing, chasing late payments, and processing checks that arrive in the mail. The factoring company does that for you, which reduces your administrative costs.
It improves your cash flow.
You’re being paid when you make a delivery. Because of those timely payments, you have a stronger cash flow. You’re no longer waiting impatiently for money to arrive months after the fact.
Your business credit score improves.
When you have a strong cash flow, you have the money available to pay your creditors. Timely payments improve your credit rating. A higher credit rating ensures you qualify for lower interest rates when you need to apply for a business loan or want an advantageous interest rate on a business credit card. A higher credit score also makes you more appealing to government agencies as it shows you’re financially savvy.
You have more money freed up for bids on government contracts.
Bidding on government contracts does cost some money. You have documentation fees to register as a government contractor. You also need someone to prepare the proposal, which costs money. That person also needs to research the work details and ensure you meet all of the compliance checks and have the proper permits in place before submitting the bid.
When you’re paid quickly through freight factoring, you have the money available to have a proposal writer and researcher on your administrative team. With a solid proposal, you’re more likely to land the contract.
Common Mistakes Trucking Company Owners Make When Bidding on Government Contracts
Trucking company owners make a few mistakes that can damage your chances of landing a government contract. As tempting as it is to bid on every contract you see, don’t do this. Being overeager can lead to you bidding on a project that you’re simply not able to do properly. If you land it and can’t complete the work at hand, you’re not going to get another government job. You destroy your reputation as a trustworthy, reputable trucking company.
Don’t skim the RFP (request for proposal) documentation. You need to take your time to read the full document and get clarification on anything you don’t understand. By carefully reading over each section, you’re unlikely to miss something when it comes to formatting and finalizing your bid proposal.
Hire a quality writer to draft, proofread, fix, and submit your proposal. The cheapest isn’t the best, even if you’ve saved money. Your proposal has to contain everything requested in the RFP, and it has to be formatted as directed. Incorrect formatting can cost you the potential work.
It needs to be detailed and specific on how you will deliver the items on time, and what you will do if you run into unexpected construction areas, road closures, or weather-related delays. You have to cover the equipment you have, the driver’s experience, and the company’s experience. A vague proposal will not win the job, even if it takes less time to create.
Don’t put in a low bid that seems too good to be true. Many companies feel if they bid low, they’ll land the job. A low bid can make you seem like a risk as it can show inexperience or make the government question the quality of your equipment.
Remember that you’re in a competition to get that work, but it’s not a competition to rush. You need to focus on what makes you stand out. A rushed or poorly written proposal may get your bid in first, thus beating the competition, but it’s going to look sloppy and give your competitors the advantage.
Find the Right Freight Factoring Partnership
Before you bid on government contracts, develop a strong partnership with a freight factoring company. You need a company with low factoring fees, decades of experience in the trucking industry, and services that help you save money. Saint John Capital’s same-day payments, Click & Pay API, and business lines of credit help you run your business efficiently and affordably.
Gain the numerous benefits freight factoring offers through an arrangement with Saint John Capital. In addition to favorable factoring fees and same-day payments, we offer the option for 50% cash advances when you pick up your load or 100% cash advances after you deliver it.
