The need for capital only grows in intensity and necessity as you contemplate the cash need, whether operating a steady state business, managing a short (or longer) downturn, or preferably, gearing up to fund a fast-growing Govcon.

All capital entails a degree of risk, whether funded operationally or through equity from the founder and foundational investors, bank supported loans, client payment on contracts, or later stage equity.

Growth increases your confidence that your firm can bid and capture increasingly larger awards, and importantly, execute them successfully. Despite this, the capital equation becomes more complicated, even as the funding options expand.

The hard truth – rapid growth brings the need to establish predictable, affordable, timely, and flexible capital solutions.

Often, CEOs are unable to fully anticipate the consequences of rapid growth. Why might that be?

• Their relationships aided quick contract turnarounds.
• Their offering became in higher demand than anticipated.
• They sufficiently impressed a key client that had previously not been willing to materially grow their contract client.
• They simply neglected to make a funding plan prior to going after the work they won, as all effort had gone into capture, proposal and award startup.

Rapid growth is one of the key reasons to have a funding plan in place.

There are many traditional lenders who loan to small and mid-tier GovCons. We have worked successfully with several of them. You can certainly continue to engage with your traditional bank if you have a great relationship and no foreseeable issues with funding.

However, given the challenges your company now faces, we recommend exploring alternative financing sources. For example, a financing engine like Parabilis can add alternative solutions for that hard-to-obtain capital.

Parabilis is one of the emerging players in the ’non-bank lending’ space. Founded by experienced GovCon operators and investors, the company is managed by experienced individuals who have merged their credit expertise with their knowledge of GovCon.

In addition to having great flexibility in loan structure, they offer a realistic solution to ‘mobilization’ capital, the funding needed to meet obligations before the client begins to pay invoices for that new contract. Parabilis explains it this way:

“Collateral in traditional lending to businesses is heavily reliant on receivables. The bank wants to see that you have robust and consistent money flowing in, so if you ask to borrow, the investment is protected by your ability to pay it back. Banks have never been known to lend on a bet. Due to federal regulations and covenants, they have always protected their interests from industries that present a more risky environment–like government contracting. The ebb and flow of the procurement process doesn’t promote confidence in a traditional lending environment.”

“But don’t be discouraged, there are still banks that are lending to government contractors. The key is having financial documentation that supports the ability to put your business into the underwriting process. Businesses also need to be informed on how well they are performing from a cashflow perspective in terms of billing going out and payments coming in. No reputable lender can give you money simply because you have won an award or because you say you are profitable. You have to prove it. And that is done through financial reporting, so be sure yours accurately reflects where you are today and where you are going.”

Want to learn more? You can reach Parabilis at info@parabilis.com.