The short version: Yes. Federal law has allowed contractors to assign payments on government contracts to a bank or financing institution since 1940. The Assignment of Claims Act and FAR 32.8 set out the conditions, and because Integra operates as part of a national bank, assignments to Integra fit the rule. Invoices to prime contractors and to state or local governments follow different rules, and this article covers all three.
Every disaster season the same question comes in from debris haulers, monitoring firms and restoration crews: “We are working a government job. Can we even do this?” The worry is understandable. Government contracts carry clauses most commercial contracts do not, and nobody wants to put a FEMA-funded payment at risk.
The answer is yes, and the mechanics are more settled than most contractors expect. What follows is the plain-English version of how A/R funding, also called invoice factoring, works on government receivables, who has to be notified, and where the rules change depending on who is actually paying you.
What does the Assignment of Claims Act allow?
The Assignment of Claims Act (31 U.S.C. § 3727 and 41 U.S.C. § 6305) lets a contractor on a federal contract assign the money due under that contract to a bank, trust company or other financing institution. It is the legal basis for A/R funding on federal work, and the Federal Acquisition Regulation spells out the conditions in FAR 32.802.
Under FAR 32.802, an assignment of contract payments is permitted when:
- the contract specifies payments aggregating $1,000 or more;
- the assignment is made to a bank, trust company or other financing institution, including any Federal lending agency;
- the contract does not prohibit the assignment;
- unless the contract expressly permits otherwise, the assignment covers all unpaid amounts payable under the contract, is made to only one party, and is not subject to further assignment; and
- the assignee sends a written notice of assignment, with a true copy of the assignment instrument, to the contracting officer or agency head, to the surety on any bond on the contract, and to the disbursing officer designated in the contract to make payment.
Two of those conditions do most of the work. The “bank, trust company or other financing institution” requirement is why the funding source matters on federal work. Integra operates as part of a national bank, so an assignment to Integra meets the test. The notice requirement is why the process is visible to the agency: the contracting officer and the paying office are told, in writing, that payments on the contract now go to the assignee. There is nothing hidden about it, and contracting officers see these notices routinely.
Does the government have to agree to the assignment?
The agency does not approve or deny the assignment the way a lender would. The Act gives the contractor the right to assign; the agency’s role is to acknowledge the notice and redirect payment. What the agency does check is that the conditions above are met: an eligible assignee, a contract that does not prohibit assignment, and a notice that reaches the right offices.
In practice, the funding partner handles the paperwork. Integra prepares the assignment instrument and the notice, sends them to the contracting officer, the disbursing office and any surety, and keeps the acknowledgments on file. Your job is to supply the contract, the contact information for the contracting officer and payment office, and any bond information. We review your contract’s assignment and payment terms at setup, before anything is sent.
What if you are a subcontractor to a prime?
This is the most common situation in storm and debris work, and it is simpler than the federal case. Most debris, monitoring, staffing and restoration crews do not hold the federal or county contract. They work for a prime contractor and invoice the prime. That invoice is an ordinary commercial receivable, and the Assignment of Claims Act does not apply to it at all.
Commercial receivables are governed by Article 9 of the Uniform Commercial Code, which every state has adopted in some form. Under UCC § 9-406, once the account debtor (your prime) receives notice that the receivable has been assigned, it discharges its obligation by paying the assignee. The same section generally makes a contract term that tries to prohibit assignment of an account ineffective, with limited exceptions. Translation: a pay-when-paid clause or a boilerplate “no assignment” sentence in your subcontract usually does not stop you from funding the invoice, though it may affect when the prime pays, which is a separate question we cover in our utility vegetation management A/R funding guide.
What matters more on prime-contractor work is the prime’s own credit and payment history. That is where the underwriting happens. Integra runs a free credit check on each customer before you commit, and approval depends primarily on your customers’ credit, not your time in business.
Can you fund invoices to a county, city or state?
Yes, and this is where storm and debris work differs from ordinary federal contracting. Most FEMA-funded work is not a federal contract. FEMA’s Public Assistance program reimburses the state or local government that hired you, so the county or city is your customer and the contract is governed by state law, not the Assignment of Claims Act.
Every state permits some form of assignment of payments due under public contracts, but the mechanics vary: some require the agency’s written consent, some require only notice, and some contracts set out their own procedure. Local governments are strong payors, which is good for underwriting; the practical issue is usually timing, because many of them wait on FEMA reimbursement before they pay. We cover that cycle in FEMA & government contractor A/R funding.
At setup we read the specific assignment language in your contract and handle the consent or notice the way that jurisdiction requires. If a particular contract genuinely cannot be assigned, we tell you before you sign anything, and you choose which invoices to fund.
How does A/R funding work on a government invoice, step by step?
- You do the work and bill it. Load tickets, monitoring reports, timesheets or progress billings, whatever the contract requires.
- Integra checks the payor. A free credit review of the agency or prime, before you commit to the job if you want it early.
- The assignment is set up once. For federal contracts, the FAR 32.8 notice goes to the contracting officer, the disbursing office and the surety. For primes and local governments, the notice or consent follows the contract and state law.
- You submit invoices as you bill. Approved invoices submitted before the 1:00 p.m. CT cutoff, Monday through Friday, fund the same business day.*
- The agency or prime pays on its normal terms, to Integra, and the transaction closes. One disclosed fee, no loan payment schedule, no debt on your books.
A/R funding is not a loan. You are selling an invoice you have already earned, so there is nothing to repay out of future revenue. Pricing is a custom quote based mainly on who your customers are, how long they take to pay and your invoice volume.
What about Prompt Payment rules?
On a direct federal contract, the Prompt Payment Act (5 CFR Part 1315) generally requires the agency to pay within 30 days of receiving a proper invoice, with interest owed if it is late. That is a real protection, and it still applies after an assignment; the payment simply goes to the assignee. It does not help a subcontractor, because the Act governs the agency’s payment to the prime, not the prime’s payment to you, and it does not govern a county or city that is waiting on FEMA. Those gaps are exactly where A/R funding earns its keep.
Common mistakes to avoid
- Assuming a “no assignment” clause ends the conversation. On federal work the Act controls; on commercial work UCC 9-406 usually makes the clause ineffective for accounts. Have the clause read before you walk away from funding.
- Sending notice to the wrong office. On federal contracts the notice must reach the contracting officer, the disbursing officer and the surety. Missing one can delay redirected payment.
- Funding only after the cash crunch starts. Assignments and credit checks take paperwork. Set the facility up before the season, then use it when you choose.
- Billing late or thin. Government payors pay on documentation. Clean load tickets and complete invoices get paid, and funded, faster.
Frequently asked questions
Can a subcontractor on a FEMA-funded debris job use A/R funding?
Yes. Your invoice to the prime is a commercial receivable governed by the UCC, not by the Assignment of Claims Act. Integra credit-checks the prime and funds approved invoices as you bill.
Does the Assignment of Claims Act apply to county or city contracts?
No. It covers federal contracts. State and local contracts follow state law and the contract’s own assignment language, which Integra reviews at setup.
Will the contracting officer object?
Contracting officers process assignment notices as a routine part of contract administration. The agency acknowledges the notice and redirects payment; it does not underwrite the assignment.
Does funding change what the agency owes?
No. The agency pays the same amount on the same terms, to Integra instead of to you. You receive the advance up front and the balance, less one disclosed fee, when the agency pays.
Is this a loan?
No. A/R funding is the sale of an invoice you have already earned. There is no loan payment schedule and no debt added to your books.
The bottom line
Government invoices can be funded. On federal contracts the Assignment of Claims Act and FAR 32.8 lay out exactly how; on prime-contractor work the UCC governs; on county and city work the contract and state law do. The common thread is that the paperwork is routine for a funding partner that operates as part of a national bank, and the payor’s credit, not yours, carries the approval.
Working a government or prime-contractor job now? Get a quote or call Mark Dubs at (516) 587-7449. Send your contract and your A/R aging and we will tell you which invoices we can fund, with no obligation.
*Same day funding when complete documentation is submitted before the 1:00 p.m. CT cutoff, Monday–Friday. All funding subject to initial approval.
Key takeaways
- The Assignment of Claims Act lets federal contractors assign contract payments to a bank or financing institution; FAR 32.802 lists the conditions.
- Integra operates as part of a national bank, so assignments to Integra meet the “bank, trust company or financing institution” requirement.
- Invoices to a prime contractor are commercial receivables under UCC Article 9; anti-assignment clauses are generally ineffective for accounts.
- County and city contracts follow state law and their own assignment language, which Integra reviews at setup.
- Approval depends primarily on your customers’ credit; you choose which invoices to fund.
Go deeper: See how A/R funding works for line-clearance, storm, hurricane debris and wildfire-mitigation crews in our utility vegetation management guide. Read the guide →
Sources: FAR 32.802, Conditions (48 CFR 32.802); 31 U.S.C. § 3727 and 41 U.S.C. § 6305 (Assignment of Claims Act); UCC § 9-406; 5 CFR Part 1315 (Prompt Payment). This article is general information, not legal advice; have your contract reviewed by counsel for jurisdiction-specific questions. To qualify for same day funding, complete paperwork must be submitted by the 1:00 p.m. CT cutoff time M-F. All funding is subject to initial application approval.