Q: Our nonprofit organization offers shelter for homeless people. We are funded by federal grants. But the money does not come in until after we provide services and submit invoices. How do we survive financially until we get paid?
-- O.F.S., Bayamon, Puerto Rico

A: Your problem is common to both profit-making companies and nonprofit agencies that do business with local, state, and federal government agencies, hospitals, and educational institutions -- all of which can be slow at paying. Between lengthy approval processes, budget shortfalls, political power struggles, and red tape, it may be as long as eight months before you get funds for work done or goods delivered. Or payment might be delayed at the beginning of a long-term contract.

Any time billing is done on credit terms, business owners face the problem of liquidity. This is an issue that crops up in many situations -- not just when you're working on a government contract. Often, small-business owners turn to home-equity loans or personal credit cards to fill the gap. But there are other solutions you may prefer.

Since you're a not-for-profit providing shelter, you ought to first contact a local government housing or redevelopment agency and ask whether it would offer bridge funding for you out of its budget. If no municipal agency is willing to help, try a local lending institution. The federal money you get down the line could be assigned to you and the bank or regional agency that's helping you out. Therefore, repayment would be virtually guaranteed. "The government is a good payer. So all you need is a big brother who's got some ready cash, which sounds like a city or county agency or a bank," says Kent J. Burnes of Burnes Consulting, a small-business and economic development adviser in Grass Valley, Calif. "A lending institution will make sure that their payments don't get ahead of the service delivery schedule. But they should feel pretty easy about up-fronting you the money. Then you can do some fund-raising to help pay the interest."

As you are a nonprofit, there may also be local philanthropists or businesses to help you with funding and to tide you through this cash-flow crunch, Burnes says.

For businesses, there's another option -- factors, says Miles Stuchin, founder and president of Access Capital Inc. (www.accesscapitalinc.com) in New York. In a factoring deal, you sell your accounts receivable at a discount to a third party at the time you send the invoices for your goods or services, giving you immediate cash and someone to manage your accounts receivable. When the underlying bill is paid, the funds will go to the factor, who will typically also charge you interest.

"Factoring is done across all industries," says Stuchin. "Traditional factoring is concentrated in the apparel, textiles, and furniture industries. Nontraditional factoring involves virtually any industry you can imagine, anywhere there are credit terms and sales by businesses to institutional customers like governments and schools."

A good place to find a factor is through the Commercial Finance Assn., which has a roster of members ranging from asset-based lenders and huge commercial finance corporations to independent, one- or two-person operations. The CFA, based in New York (212 594-3490), provides information, lists, and a monthly newsletter on its Web site, www.cfa.com. A subset of its membership specializes in working with government contractors and small businesses, Stuchin says.

Have a question about running your business? Ask our small-business experts. Send us an E-mail at frontier@businessweek.com, or write to Smart Answers, BW Online, 46th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.