When government contracts are tendered, the company awarded the contract receives some of the money up front from the government as stipulated in the contract agreement to fund start-up costs (purchase of raw materials, labor, etc.), so bank financing is needed. This is why bids for government contracts are usually so hyper competitive. In addition, one of the main reasons small businesses are given a priority by the government when awarding contracts is that the federal dollars usually stimulate small businesses and help grow this very delicate sector of the economy.
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