Defence contract financeability check: will lenders accept this government contract?

Is this government contract financeable?

Answer sixteen questions about one government contract and see where each answer sits against what lenders usually look for, with the point to work on and a link to the key term behind it. Your answers stay in your browser. The first part is free; the rest unlocks with a free sign-up.

Randeep Bubbra | Lawyer | Making defence financeable

1The contract and the customer

Who is the customer?A government department or agency, directlyWhat lenders look forSovereign credit risk: usually the strongest a lender will see.A prime contractor (we are a sub-contractor)Financeable with workThe credit risk is the prime's, and the government's rights usually flow down without its payment certainty.A foreign governmentFinanceable with workLenders will look at sovereign risk, sanctions and whether export credit or a letter of credit is available.The key term behind this question

How was the contract awarded?Competitive award, standstill passed, no challengeWhat lenders look forSafe to rely on.Direct award or an Other Transaction prototypeFinanceable with workFine to rely on, but lenders ask whether follow-on production is committed or only possible.Recently awarded, with the standstill or challenge window still openLikely diligence pointLenders usually leave it out of a borrowing base until the window has passed.The key term behind this question

Is the value you are relying on funded?Yes, funded for the period the financing relies onWhat lenders look forLenders can count it.Funded year by year, or through options not yet exercisedFinanceable with workLenders count funded value and treat options as upside.A framework or IDIQ with no committed ordersLikely diligence pointA framework is a right to compete for orders, not revenue.The key term behind this question

Is this government contract financeable?

1The contract and the customer

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