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FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.3

FAR 32.304-3 Asset formula.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains how an agency normally limits a guaranteed loan made mainly for working capital, using an asset formula capped at a specified percentage (90 percent or less) of the contractor's investment in defense production contracts. It also lists what the formula must exclude and how progress payments and certain working capital situations are handled.

Applies to: Contractors with guaranteed loans made primarily for working capital purposes under defense production contracts

What it requires

  • The agency shall normally limit the guarantee by use of an asset formula to an amount that does not exceed a specified percentage (90 percent or less) of the contractor's investment in defense production contracts.
  • The formula shall exclude amounts for which the contractor has not done any work or made any expenditure.
  • The formula shall exclude amounts that would become due as the result of later performance under the contracts.
  • The formula shall exclude cash collateral or bank deposit balances.

Key terms: guaranteed loans · working capital purposes · asset formula · defense production contracts · progress payments

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) Under guaranteed loans made primarily for working capital purposes, the agency shall normally limit the guarantee, by use of an asset formula, to an amount that does not exceed a specified percentage (90 percent or less) of the contractor's investment (e.g., payrolls and inventories) in defense production contracts. The asset formula may include all items under defense contracts for which the contractor would be entitled to payment on performance or termination. The formula shall exclude—

(1) Amounts for which the contractor has not done any work or made any expenditure;

(2) Amounts that would become due as the result of later performance under the contracts; and

(3) Cash collateral or bank deposit balances.

(b) Progress payments are deducted from the asset formula.

(c) The agency may relax the asset formula to an appropriate extent for the time actually necessary for contract performance, if the contractor's working capital and credit are inadequate.

Sections that refer to it

← 32.304-2 Certificate of eligibility. · 32.304-4 Guarantee amount and maturity. →

Rule changes for FAR Part 32

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 32.304-3 Asset formula · SpendQuery