Small Business Funding Crunch - Capstone business financing

The Small Business Funding Crunch

11:07 15 October in Blog
155

According to a new study, there should be no doubt about how strapped for cash many small firms are today.

Small Business Funding by the Numbers

JPMorgan Chase Institute’s think tank relied on data collected from their in-house bank to work up an analysis of the current state of the small-business sector. They found that the small-firm landscape is less likely to be home to the future Ubers and Googles of the world and more likely to be filled with lots of tiny businesses living month to month.

The companies JPMorgan Chase Institute looked at may be small, but they represent a surprisingly large portion of the American economy. The Small Business and Entrepreneurship Council (SBEC) reports that small businesses account for nearly half of the national GDP and more than half of all new job creation in the U.S. — the latter being a metric that the Fed watches closely to determine whether or not the economy can cope with financial constrictions. But even though they’re contributing a great deal to the economy, JPMorgan Chase said, there remains ignorance about their financial outlook.

The Big Picture

On average, small firms surveyed in the recent study had just 27 days’ worth of cash reserves, which is defined as money needed to cover expenses if inflows suddenly stopped.

Restaurants typically hold the smallest cash buffers, with just 16 days of reserves, while the real-estate sector boasts the largest, at 47 days.

Small businesses looking to expand (or at the very least stay afloat) are finding it hard to build up reserve cash, with daily income exceeding expenses by only $7, according to the JPMorgan study.

The findings in the report arrive as optimism in small businesses begins to stagnate. The Small Business Optimism Index, maintained by the National Federation of Independent Business fell 0.2 percent in August. Currently, at 94.4, the index is well below its 42-year historical average (98.0).

Political Uncertainty Weighs

According to a chief economist from Bloomberg Intelligence, another expert quoted in the Bloomberg News story, political uncertainty stemming from the upcoming presidential election could be adding a little extra distortion to the current outlook on the small business sector.

Nearly 40 percent of the small business owners surveyed did cite political uncertainty as one of their biggest reasons for delaying expansion. That number represents an all-time high.

The JPMorgan Chase Institute says that it hopes small business owners focus more on factors over which they have control, rather than regulatory changes, taxes, and other things that are out of their hands.

JPMorgan’s advice to small businesses? Focus on having a clear sense of your liquidity picture. That’s the factor that is likely to have the most immediate impact on their livelihoods that they can act on.

Get in the Game with Capstone

For qualified clients, Capstone provides purchase order factoringsingle invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. To learn more about our services and how we serve small businesses, please visit our homepage.

Small Banks Get a Big Break - Capstone Financing

Small Banks Get a Big Break

10:37 29 September in Blog
153

Banks with less than $250 billion in total assets may soon be seeing a relief in their federal obligations. A proposed alteration from the Federal Reserve could mean that smaller regional banks who do not conduct significant nonbank or international business would be exempted from certain parts of the “stress tests” on their economic resilience.

Issue Background

2010’s Dodd-Frank Financial Reform Bill compels any banking institution with over $50 billion in assets to undergo yearly assessments designed to measure their viability against periods of financial stress. The ultimate goal is regularly ensuring that the system is strong enough to withstand widespread economic turmoil like that seen in 2008’s Great Recession.

The tests encompass a wide variety of stressors, from overall adequacy of the organization’s capital to structural stability to whether planned capital distributions are viable in a variety of scenarios. This is a rigorous and exhaustive process that can take up significant staff time and organizational funds.

More than 30 banks across the country take this test every year, but for smaller institutions, the cost outlay can be significant — particularly for those close to the $50 billion line. In a recent statement at Yale University, Federal Reserve governor Daniel Tarullo indicated that the organization would be moving to a more risk-sensitive, customized testing model.

Model Alterations

Tarullo’s statement indicates that banks that fit the aforementioned criteria (greater than $50 and fewer than $250 billion dollars in assets, limited international or nonbank business) would be exempt from the “qualitative” portion of the stress test, which deeply investigates the organization’s risk-management systems. However, all affected banks will have to demonstrate that they can survive a potential recession with adequate capital reserves to maintain lending operations, as well as additional scrutiny around mortgage and money-laundering rules.

Systemic Importance

The Fed is also reportedly considering a separate proposal that would raise the capital requirements for banks considered “systemically important.” In short, the modifications aim to create regulatory measures that are more stringent for financial organizations of greater importance, while relaxing non-essential requirements for smaller firms.

Single Invoice and Full-Contract Factoring from Capstone

For qualified clients, Capstone provides purchase order fundingsingle invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

S&P 500 Profit Slump Extends into Sixth Quarter - Capstone financing

S&P 500 Profit Slump Extends into Sixth Quarter

09:53 16 September in Blog
152

Expectations are falling, and the idea that the third quarter would mark the return to growth for U.S. companies has fallen flat. Companies in the S&P 500 will report earnings in the coming weeks, and the expectation is that they will once again report declines. The current slump of 6 consecutive quarters of shrinking earnings is the longest since FactSet began tracking the date in 2008 – leading many in the market to wonder how long stocks can rise while corporate earnings continue to fall.

Some Improvements, but Not Enough

Two factors – failing oil prices and a strengthening dollar – that have hurt corporate earnings in recent years have subsides in 2016, yet the recession in earnings continues. Despite the slight uptick in oil prices, the energy sector is expected to report the largest year-over-year decline in earnings of all S&P 500 sectors – a whopping 66% drop.

Stock Prices & Earnings: The Disconnect

Although earnings have dropped steadily, stocks have remained on a near-unprecedented bull run. This oxymoron can be explained by revised expectations: by lowering earning expectations shortly before they are released, analysts give companies a better chance to beat expectations. Investor confidence rises, money flows in, and the stock price continues to rise, even though the company did not really outperform expectations. Another factor that has kept this atypical bull run on track is the (in)activity of the central bank, which has not carried out any of the four planned interest rate hikes that were scheduled for this year.

Market Explanation

Faced with a situation where the entire market — not indices and individual stocks – is overpriced, many investors now point to quarter four as the turning point. They point to the fact that the market is hovering near all-time highs as evidence that a resumption of earnings growth is right around the corner.

Accelerate Your Working Capital with Capstone

For qualified clients, Capstone provides Purchase order factoring, single invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Made in USA - Capstone Financing

Indianapolis Manufacturers Express Concern Over Presidential Trade Platform

16:03 15 August in Blog
166

In a state where manufacturing is an economic support beam, Indiana businesses are growing more and more concerned over the presidential race’s implications for trade.

Former IN Governor Mike Pence ran his 2012 gubernatorial campaign on a strongly pro-trade platform and voted for every available free trade initiative during his House of Representative’s tenure. However, his alliance with presidential running mate Donald Trump — who has strongly condemned international trade agreements — now has businesses skeptical of his commitment to their interests.

The other side of the aisle presents little comfort, given Democratic nominee Hillary Clinton’s recent sharp trade critiques. In an August statement to The Indianapolis Star, local international sales manager Nate LaMar expressed a concern that both presidential candidates wanted to “turn back the clock” on trade systems.

The big question is this: what impact would revisions to long-standing international trade deals like NAFTA have on small businesses and manufacturers – especially those in states like Indiana.

Local Economics to National Concerns

Indiana has the highest distribution of manufacturing professionals in its workforce among American states. It also owes a great deal of its post-Great Recession recovery to a rebound in exports in products like pork, corn, and soybeans. Economists say that the state’s high level of factory competitiveness led to this advantageous performance after the North American Free Trade Agreement (NAFTA) opened up Mexican markets.

Changing Tides

Pence’s pro-trade convictions have taken on some damage in recent months, beginning with Indianapolis heating giant Carrier Corp.’s relocation to Mexico. After accepting the Republican vice-presidential nomination, Pence receded from his previous stance: he has now backed away from both NAFTA and the Trans-Pacific Partnership (TPP), an agreement that would lower trade barriers between America and a host of nations. For Indiana exporters — many of whom are owned or invested in by Japanese entities — this reticence signals a worrying lack of concern for his former constituency’s best interests.

Pence explicitly distanced himself from the TPP on the Laura Ingraham radio show, stating that it was time to “rethink” NAFTA’s implications and “hit the brakes” on TPP, dealing with Asian and Pacific Rim countries on a case by case basis to “promote growth.”

As a more “isolationist” wave sweeps the nation, manufacturers across the country will have to hope for the best, but prepare for the worst. For now, all eyes are on the presidential election.

Accelerate Your Working Capital with Capstone

For qualified clients, Capstone provides single invoice factoring, purchase order factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Number One Threat to Long-Term Economic Growth - Explained by Capstone

This is the Number One Threat to Long-Term Economic Growth

12:10 07 August in Blog
236

Amid positive job reports and a surging stock market, one factor still presents a major obstacle to long-term economic growth in the US: a persistent slackening of productivity. We are currently in the midsts of the longest downward slide in worker productivity since the 1970’s, an unfortunate asterisk that should accompany the latest round of job reports. It’s also likely to keep the Fed from raising interest rates any time in the near future.

Productivity by the Numbers

Productivity — the measure of what goods and services a worker produces each hour on the job — fell 0.5% at a seasonally adjusted rate during the second quarter, according to the Labor Department. That marks the third consecutive quarterly drop in productivity, the longest streak since 1979. What’s worse, the trend shows few signs of abating; productivity growth rang in at just 1.7% from 2007 to 2015, half that of 2000 through 2007.

Why Worker Productivity Matters

For business owners, the importance of worker productivity can’t be understated. The equation is simple: less productivity means more expenses and less profit. On a macro level, productivity is a key gauge in measuring wage growth, prices, and overall economic output — which have all been falling as well.

What’s Killing Productivity?

According to numerous studies, lagging productivity has several culprits. Among the most important are businesses unwillingness to invest in new equipment, machinery, and equipment — the raw materials that translate directly into job growth, wage growth, and gains in worker efficiency and productivity. While the exact cause of lagging productivity is difficult to nail down, it’s worth noting that fixed nonresidential investment, the meat and potatoes of business spending, has also dropped the last three quarters along with productivity.

That lack of investment has lead to a decline in new orders for nondefense capital goods on a year-over-year basis for much of the last year and a half.

What’s the Solution?

As we mentioned in our most recent blog, the majority of US manufacturers are small businesses — and many find themselves sorely lacking the working capital needed to invest in their businesses, jump-start productivity, create backlogs, and grow. As a low-risk remedy, manufacturers and other small businesses with strong demand for their products use invoice factoring to boost their cash flow. That’s where Capstone can help!

Grow Your Business with Capstone

For qualified clients, Capstone provides purchase order factoring, single invoice and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

About US Manufacturing - Capstone Financing

4 Things You Didn’t Know about US Manufacturing

09:37 15 July in Blog
171

As we discussed in a recent blog, US manufacturing is alive and well—despite what many people may think. Following up on that piece, we are happy to give yet another positive update from the manufacturing sector.

The stars have aligned for US manufacturing in July, with domestic demand strengthening and offsetting the relative strength of the US dollar. US manufacturing activity hit a 9-month high in July, dispelling fears that the UK’s decision to leave the EU would hurt the already poorly performing sector. Factors that are boosting US manufacturing activity include a strong housing market, strong automobile demand, and solid consumer spending: all of which help to increase spending on manufactured goods.

US Manufacturing: Down and Out or Just Different?

It’s true that today’s manufacturing landscape is quite different from that of 1950. It’s even changed significantly since the year 2000, having shed 5 million jobs since the turn of the century. But what many people don’t realize is that it’s not only US manufacturing that’s being transformed. Technological advancements have made it possible to increase production with fewer workers. The end result is a strong (albeit much quieter) manufacturing sector that increasingly relies on tools like invoice factoring to increase working capital and expand business.

Surprising Facts about US Manufacturing

Here are four things you probably didn’t know about US manufacturing.

  1. Most US manufacturing firms are small; 75% have less than 20 employees, and 99% have less than 500.
  2. The US boasts 12 million manufacturing workers —9% of the entire workforce
  3. The average manufacturing worker earned over $4 more an hour than the US average — $25.58 compared to $21.32.
  4. Many manufacturing companies use invoice factoring to boost cash flow and expand their business

Boosting Working Capital with Capstone

For qualified clients, Capstone provides single invoice and contractor factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Stake for Small Business Owners this Election Season

What’s at Stake for Small Business Owners this Election Season

19:40 29 June in Blog
484

Stake for Small Business Owners this Election SeasonU.S. presidential elections are a marathon, not a sprint, and this race has been exceptionally grueling—both for the candidates and the public at large. But more concerned than the average U.S. citizen are small business owners, who have responded to the uncertainty by delaying new hires, forgoing new equipment orders, and avoiding all but the most essential investments. We’ll tell you why confidence is slipping and what small businesses can do to buck the trend.

An Unprecedented Election Season?

Every presidential election captures the nation’s attention, but this year’s race seems to have no precedent. Whereas most Americans tune into the race after the primaries are over and the Republicans and Democrats have chosen their respective nominees, both parties saw unconventional candidates challenge the status quo during the primaries and capture the attention—and votes—of millions. Now that the primaries are over and Donald Trump and Hillary Clinton are set to face off in the general election, the future and the direction we’re heading remains as unclear as ever.

Small Business Owners Uncertain

According to a survey conducted by the Wall Street Journal and Vistage Worldwide Inc, one-third of business owners report that uncertainty over the coming election is negatively impacting their business.

Though small business owners are responding in different ways, the overarching theme is this: they have opportunities to grow their businesses, but they’re hesitant to spend the money. It’s not just the election causing concerns—there’s also global concerns, like the recent exit of the U.K. from the European Union, which threw global markets into a brief tailspin and the tenuous state of the Chinese economy. Closer to home, there’s also uncertainty over the timing and impact of future interest rate hikes.

Small-Business Confidence, by the Numbers

Given the picture we’ve just painted, it’s no surprise that small-business confidence fell to its lowest level since November of 2012 this month. Even industries that consider themselves ‘immune’ to political drama, like real estate, construction and development, are seeing activity dwindle. In the end, small businesses off all types face higher cost of capital than their larger counterparts, and that’s why they bear the lion’s share of the burden when uncertainty prevails and consumers reduce spending.

Luckily, there are several tools that small businesses can use to seize opportunities for growth—regardless of the prevailing political and economic climate.

Capstone Helps Small Businesses Boost Working Capital and Grow

For qualified clients, Capstone provides purchase order factoring, single invoice factoring, and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

How to Grow Business in an Unnatural Economy - Capstone

How to Grow Business in an Unnatural Economy

21:58 15 June in Blog
476

How to Grow Business in an Unnatural EconomyStalled growth, disappearing jobs and a sense of foreboding are the defining characteristics of today’s economy. So, what or who is to blame? According to one theorist, the process of “creative destructions,” whereby the death of one business or industry gives rise to another, is failing. We’ll tell you why it’s happening and show you how Capstone’s single invoice and full-contract factoring allow businesses to grow along with demand, avoid taking on additional debt, and improve their balance sheets organically—even in an economy stuck in limbo.

The Numbers

A sobering job report released earlier this month showed the creation of only 38,000 new jobs —124,000 fewer than had been predicted — which is the lowest monthly total since September 2010. Furthermore, the Bureau of Labor Statistics reported that 94,708 Americans were not participating in the labor force during the month of May, bringing the participation rate to 62.6%.

A Limited Recovery

There’s no doubt that we’ve recovered from the Great Recession. The stock market has been on a 7-year bull run—although it has been tested recently. If you’ve tuned into the rhetoric coming out of the presidential race, you’ve heard the conviction that the recovery has been rather one-sided—that the gains of the last 7 years have benefitted a select few while the majority of the population has been left on the sidelines. No matter where you stand politically, the notion of a limited recovery seems to be supported by an analysis of Census Bureau data.

A Tale of Two Counties

According to the Census Bureau, the net increase of new business establishments is just 2.3% since 2010. Compare that with a 6.7% net increase during the 1990 recovery and a 5.6% net increase during the 2000 recovery. What’s worse—over half of the 166,000 new businesses formed in the United States since 2010 are located in just 20 counties. In short, a select few geographic areas are prospering, and the rest of the country is losing businesses and losing jobs at an alarming rate.

Aggressive Oversight and Misplaced Regulation

Touted as the culprits of the financial crash, banks and financial institutions, the drivers of growth since time immemorial, have been forced to tighten their lending requirements. The unintended consequence, of course, is that businesses’ traditional sources of credit have dried up. An enduring irony of the Dodd-Frank Act, which among other things was designed to limit the size of financial institutions, is that its burdensome requirements have actually forced many small community banks out of business—making the Big Banks BIGGER, not smaller.

If a lack of funding weren’t bad enough, businesses are now contending with rising federal regulatory compliance costs and state licensing requirements. And here the bitter irony continues. The new wave of regulations have disproportionally harmed small businesses—the symbol of the American Dream and American industriousness—not the large corporations the regulations were meant to control. A report ordered by the U.S. Small Business Administration found that the per-employee cost of federal regulatory compliance was $10,585 for companies with 19 or fewer employees. Companies with 500 or more employees, by contrast, paid an average of $7,755 per employee to stay compliant. Added to compliance costs are a rapidly multiplying number of state and local licensing requirements. 5% of employees required certificates or licenses in 1950. Today, the number stands at 30%.

A Metaphor for our Economic Ecosystem

There are many apt metaphors that describe what’s happening to the U.S. economy, but one of our favorites has to do with Smoky the Bear and forest fire prevention. Forest fires aren’t pretty, but they’re a natural and necessary phenomenon. They clear away the old, dead wood and give new generations of plants the space they need to grow. If the old, dead wood remains propped up for too long, the ecosystem ends up with less growth, less diversity, and a few individuals soaking up all the sunlight. And when a fire does finally come along, it’s much bigger and more destructive than it ever needed to be.

Boost Working Capital with Capstone

Capstone gives small and midsize businesses that are negatively impacted by Dodd-Frank and other constrictive legislation the working capital needed to seize opportunities for growth. For qualified clients, we provide single invoice factoring, construction factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage for more information.

Interest Rates Predicted to Rise - Capstone Explained

U.S. Economy Picking Up Momentum in Q2; Interest Rates Predicted to Rise

19:56 27 May in Blog
424

Interest Rates Predicted to Rise - Capstone ExplainedAfter another harsh winter, the American economy is stabilizing and beginning to shrug off concerns of a prolonged slowdown or recession.

According to the latest economic gauges, industrial production is increasing, inflation is firming, and the housing sector is continuing to pick up momentum. All of these factors, combined with data reflecting retail sales rebounds, job gains, and rising consumer confidence, point to improved — though still less than spectacular — growth potential for the second quarter of 2016.

Interest Rates

Fed officials afraid of financial market volatility and poorly performing overseas economies have kept a steady hand on short-term interest rates throughout 2016. A domestic growth rebound in Q2 could be just the inspiration they’ve been looking for to raise rates this summer. Their next opportunities come at the policy meetings scheduled for June, July, and September.

John Williams, President of the San Francisco Fed, recently told the Wall Street Journal that the data is starting to make a strong case for rate increases not just in June, but potentially more than once in the next few policy meetings.

Despite Positives, Some Forecasters Remain Cautious

First quarter 2016 gross domestic product (GDP) increased only 0.5 percent over Q1 2015, but growth might be poised to accelerate.

Since the end of the recession, Q1 GDP growth has consistently been weak, followed by a rebound in Q2. The latest reports of modest but definite growth in highly important sectors would suggest that the same pattern is about to repeat itself in 2016.

Macroeconomic Advisers, a forecasting firm, estimates that GDP will expand at a rate of 2.3 percent this quarter. The Federal Reserve Bank of Atlanta estimated an even higher growth rate of 2.5 percent.

However, it’s not all sunshine and roses. Despite all the positive data starting to roll in, many forecasters are still leery about the economy’s current health as well as its general outlook for the future. Earlier in May, a Wall Street Journal survey of economists revealed an estimated 20 percent chance of a recession taking place in the U.S. sometime in the next 12 months.

Boost Working Capital with Capstone

For qualified clients, we provide purchase order factoring, single invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. To learn more, please visit our homepage.

Novel Way for Subcontractors to Find Financing from Capstone

A Novel Way for Subcontractors to Find Financing

20:13 11 May in Blog
281

Novel Way for Subcontractors to Find Financing from Capstone2015 was a picture-perfect year for construction, a banner year for the post-recession. Yet in 2016, many contractors in the United States are struggling to find financing for construction projects.

The lack of financing has been a reality even over the past several years with the economy recovering by leaps and bounds. It was a reality throughout the housing crisis and even prior to the recession when construction and development were booming. Contractor business financing has been a struggle, but it’s clearly nothing new.

Banks’ Aversion to Construction Financing

Banks are perennially gun-shy when it comes to lending to construction firms. They cite the industry’s volatile revenue fluctuations, the unpredictable nature of construction, contractors’ sensitivity to economic cycles, and excess competition as reason to stay away. The recent failure of several prominent construction firms has only strengthened banks’ resolve to avoid offering lines of credit to construction firms, contractors and subcontractors.

Contractors & Underwriting Issues

Steady bank relationships are often out of reach for construction firms with a poor ratio of accounts receivable to accounts payable and limited liquidity in working capital. But when construction firms and contractors struggle to find financing, subcontractors tend to suffer even more. Banks are hesitant to allow subcontractors’ bonded accounts receivable to serve as collateral for lines of credit, and those who primarily engage in bonded work often find it difficult or impossible to provide additional collateral.

Is there any hope for subcontractors in today’s construction industry?

Factoring: A Solution for Subcontractors

Factoring is a finance technique that allows a company to leverage its accounts receivable and accelerate its working capital through the sale of its accounts receivable to a third party. Specifically, a factor gives a business an advance on a customer invoice — generally between 70 to 90% of the invoice amount – so they can create a backlog of work without equity or debt financing. As the company improves their balance sheet, they increase the likelihood of receiving a traditional line of credit from a bank.

Seize Opportunities for Growth with Capstone

For qualified subcontractors, Capstone offers contractor financing and provides a single invoice and full-contract factoring for work performed under contract with a creditworthy general contractor. Capstone has highly experienced construction professionals on staff to facilitate the purchase of construction-related accounts receivable. To learn more about our contractor business financing and other services, please visit our homepage.

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