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Can a government (Federal) contact be used as collateral on a business loan?

Can a US government contract (if your awarded one) at the same time be used for the acquisition of real estate to help perform the contract. Say, for the property, you finance 80%-can the other 20% downpayment come out of the US government award (along with the rest of the contract as a kind of collateral) which is used as the income producing part. Thanks

Public Comments

1. Yes-sort of. Typically, when you bid on a government contract, you are including in that bid the costs to do everything that you would need to do to perform the contract, i.e. pay subcontractors, buy supplies and goods or buy property. It is doubtful that you could actually use the contract as "collateral" because it's not a guaranteed payout (if you failed to perform on the contract, you could be terminated for default and get no money). However, many banks (as well as the federal government itself) will loan money for business start-ups and the award of the contract is a good way to prove that your business model works! You may also qualify for government grants or loans. Contact the Small Business Administration to find out. If you're relying on the contract award price to provide the funds to buy property and otherwise perform on the contract, be very careful and make sure you lock up suppliers/sellers BEFORE you bid. Many a contractor has lost lots of dough because they won a govt contract for x amount and then they found out their costs increased and they have to pay y amount to perform. In some cases, you can get an equitable adjustment from the feds but it can be an uphill battle. Good luck!
2. A true business credit card is a line of credit that is taken in the name of the business, under the business' credit. Activity, whether good or bad, is reflected on your business' credit report through D&B and other financial institutions, and the liability for any debts incurred and bills owed is with the business. However, some companies out there offer "business" credit cards which they require a person guarantee for. These institutions will often ask for a personal guarantee, and will almost always ask for a social security number from the person applying for the card. If this is the case, the credit card is not a business credit card, but is simply a personal credit card which is used for the business. The business is not liable for bills and debts - you are. When applying for a credit card for your business, watch out for areas asking for your SSN (and not your TaxID or EIN) and be wary of any credit card that asks for a personal guarantee. By ensuring that your credit card is in the name of your business, you can help to build your business' credit, while avoiding creating problems with your own. Many companies offer a list of credit cards that are issued under the business name only. Those lists typically run $300-$900, depending on the quality of the information inquiring. I would suggest starting your search online via google or yahoo. Search for "strong business credit" (just like that in quotes) to find services that sell the information. Good luck, Ilya Bodner Small Business Owner Initial Underwriting Group