The Role Of Government Contract Financing

By Tammie Caldwell

Many development projects are approved by the authorities and the ideas should be actualized as planned. The projects are mainly aimed at promoting services delivered to citizens thus improving their welfare since most are involved in constructions. It is not possible for any government to have representatives at every place a project is being done so they opt to hire companies to perform the tasks on their behalf. This makes it important for any company that wins the bid to visit any government contract financing institution to get the help they require.

Projects given out to contractors are those that require high capital investments since they are very huge. This may result to the companies who are given the tenders to under perform because they have a lower capacity to implement these projects efficiently. However, this problem has been catered for by having monetary institutions that work closely and can come in to finance the projects.

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.

Provision of these loans requires the companies to prove doubt that are in a position to make full repayments when time is due. An assessment of contractors is done by these institutions by evaluating the cash flows that have been presented. This helps to find out how much would be secure to lend out as opposed to what a borrower proposes to get.

The amounts come with some conditions that the borrower must meet while making the payments. A small interest is charged by the institution and is paid together with the other amount. Despite it being quite costly to borrow, considerable benefits have been realized since allocation of funds by the government is usually a lengthy task. This makes projects to be done within a short period.

Availability of sufficient funds to contractors in time is very important in ensuring timely commencement of all projects. This makes funds available to acquire the raw materials that are going to be used in doing the work. This also makes sure that there are funds that will be used as salaries to workers and meeting any arising expenses. This will enable to operate within the budget limits that will not lead to cash shortages.

It is important to have more lenders willing to support contractors. The lending procedures should be shortened and this will help more people to get the financial help they need. This will bring about more infrastructural development in most countries thus enhancing service delivery.

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