Businesses Reluctant to Spend - Capstone

Businesses Reluctant to Spend, Report Says

16:57 29 April in Blog
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In a time when consumers are holding their funds close and avoiding spending, a recent report found that businesses are being even more cautious. These findings are likely to weigh heavily on Federal Reserve officials as they consider raising the Federal Fund Rate, despite the fact that they recently decided to delay any increase until at least June.

Business Spending Faltering

Aside from orders for aircraft and defense-related goods, business investment declined by 2.4% in the first quarter of 2016. That means that many companies are reluctant to buy staples like electrical appliances, computers, equipment and heavy machinery. These numbers are reflective of a somewhat bleak economic picture: productivity is low, demand is weak at home and abroad, wage growth is weak, and the global economy is experiencing increased volatility as China’s production slows down.

Earnings Season and Poor GDP Growth

On April 28th, the Wall Street Journal’s prediction of 0.7% first-quarter GDP growth was proven incorrect, and the number rung in at just 0.5%. This bad news came in the wake of earnings disappointments for several major U.S. companies—most notably Apple. Some economists are noting that after years of constant growth, the U.S. economy is bound to plateau. The question remains whether this is a broad market correction or the beginning of a prolonged downturn.

Reasons for Optimism?

One bright spot in the economy is the job market, which has posted steady gains over the last several months. Oil and gold prices have rebounded dramatically in the first quarter, though credit for these recoveries can be attributed to a weakening dollar which inflates their value. Though new orders for durable goods would be expected to rise with a weakening dollar, a recent Commerce Department report found that new orders rose just 0.8% in March—the majority of which were for aircraft and defense-related goods.

Increase Working Capital with Capstone

For qualified clients, we provide the 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 factoring. To learn more, please visit our homepage.

Sluggish Start Becoming a Pattern for U.S. Economy - Capstone Financing

Sluggish Start Becoming a Pattern for U.S. Economy

18:45 15 April in Blog
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Sluggish Start Becoming a Pattern for U.S. Economy - Capstone FinancingThe U.S. economy’s sluggish start to the year is validating the wait-and-see approach the Federal Reserve has taken with raising interest rates.

Business investments, constrained by falling corporate profits and diminishing exports, and held back by the strong dollar, have both played their role in the disappointing start to 2016.

Spending-cautious American households are doing their part to stymie growth. According to figures released by the Commerce Department, retail sales dropped 0.3 percent in March. It was the third straight month without gains in retail spending.

Is This Just a Typical Slow Start?

It’s not uncommon for the American economy to lag behind projections in the first quarter of the year. Gross domestic product (GDP), one of the key measurements of overall economic success, either fell or grew at disappointing rates in both 2014 and 2015. Second, third, and fourth quarters brought much better returns the last two years, and many expect the same to happen in 2016.

Forecasts for the Rest of 2016

GDP forecasters believe the economy will resume recovery throughout the rest of 2016, but growth rates are not expected to be strong. J.P. Morgan Chase has predicted a growth rate of 0.2 percent, while Nomura says 0.7 percent and Macroeconomic Advisers 0.9%.

Following a 1.4 percent growth rate in the closing month of 2015, which itself was viewed as a disappointing figure at the time, Fed officials are likely to remain on the cautious path they’ve already been traveling with interest rates.

In December, the central bank raised the benchmark rate for the first time in nearly 10 years. They have stopped short of further changes due to financial market volatility and global uncertainty. These external forces play a bigger role than domestic economic growth in affecting the central bank’s decisions moving forward.

Some Positive Indicators

The labor market has been one source of good news for the economy. Directly following a lull, more than 1.5 million jobs were added over the past six months.

Boost Working Capital with Capstone

For qualified clients, we provide business funding solutionssingle 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.

Think US Manufacturing is Dead? Think Again - Capstone Financing

Think US Manufacturing is Dead? Think Again

22:08 30 March in Blog
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Think US Manufacturing is Dead? Think Again - Capstone FinancingThe US manufacturing sector weakened throughout 2015 as the dollar strengthened and made US exports more expensive overseas. Manufacturing activity increased in February, but it remained below the 12-month average. New orders remained positive in January and February, buoyed by increased consumer spending. Though consumer confidence weakened somewhat in March—hurting the manufacturing sector even more—month-by-month evaluations can be misleading. There’s a common conception that US manufacturing is dying, but that conclusion is not supported by a deeper analysis of the facts.

A Large and Dynamic Sector

While it’s true that the manufacturing sector has lost 5 million jobs since 2000, it’s important to remember that technological advancements have made it easier to manufacture more with fewer workers. US manufacturing remains a powerhouse. Though we’re second to China in terms of total output, gross output of US manufacturing industries was $6.2 trillion in 2015—nearly two times the output of other big sectors like real estate and professional and business services. 77% of research and development spending goes toward US manufacturing, meaning that innovation in the private sector relies on US manufacturing more than any other sector.

Output is Near a Record High

Today’s factories produce twice as much as they did in 1984, but they’re doing it with one-third fewer workers. US manufacturing was clobbered by the Great Recession, but it is within 3% of its peak in 2007. Durable good output reached an all-time high in 2015, tripling the levels of 1980. Electronics, machinery, aerospace goods, and motor vehicles are at near or surpassing all-time highs.

Some Industries Hit Harder than Others

Textile mills and apparel factories have all but disappeared in the United States since the 1980’s, and that has dragged down averages for the entire sector. Textile mill output has fallen 50% since 2000. But as old industries fade or move to cheaper shores, newer industries have stepped up to take their place. Nondurable goods like chemicals and paper have fallen, but food production and petroleum have taken up the slack.

The Big Picture

If we continue to compare US manufacturing activity to its heyday during and after WWII, we will continue to be disappointed. It’s unlikely that factory workers will ever make up one-third of all workers in the US ever again—but that doesn’t mean that manufacturing will lose its important place in the US economy. Business owners simply have to adjust to new realities and new demands in order to thrive.

Accelerate Working Capital with Capstone

Capstone specializes in Purchase order factoring, Single Invoice Factoring, which enables small businesses to either transfer the credit risk of their accounts receivable to a third party and/or leverage their accounts receivable to accelerate working capital through the sale of their accounts receivable to a third party.

For qualified subcontractors, we also provide single invoice and full-contract factoring for work performed under contract with a creditworthy general contractor. We have highly experienced construction professionals on staff to facilitate the purchase of construction-related accounts receivable. To learn more, please visit our homepage.

Action on Climate Change Boosts NY Construction - Scope explained by Capstone

Action on Climate Change Boosts NY Construction

21:33 15 March in Blog
140

Action on Climate Change Boosts NY Construction - Scope explained by CapstoneNew York State has experienced much warmer temperatures over the past thirty to forty years, and the sea level along New York’s coast has increased about 12 inches over the past 100 years. Though past trends do not necessarily predict future trends, New York officials are indicating with their investments that a real threat exists.

The threat of rising sea levels has stimulated construction and infrastructure investment across the world, but nowhere has that investment been greater than in New York. A recent article in the Wall Street Journal cited a University College of London study that found New York City outspends all other megacities in countermeasures to rising sea levels, with $2.2 billion alone in the last year.

The predicted challenges of climate change would affect many sectors including water, energy, communication, and transportation—and this means that New York construction firms, contractors, and subcontractors would be a key part of the solution.

Infrastructure Challenges and Construction Opportunities in New York

The Responding to Climate Change in New York State report (ClimAID) published in 2014 identifies numerous transportation, water, and architectural challenges that could impact New York. It also identifies solutions to these challenges—and all of them suggest a significant increase in construction investment in the coming years.

Infrastructure Challenges

• Increased strain on road surface materials
• Stress on electricity grid
• Delays in railroad schedules
• Sagging of large bridges
• Decreased clearance on waterway bridges
• Traffic and public transportation delays
• Reduced building lifespan
• Increased impact of ships and barges

Construction Opportunities

• Convert water managers to handle large variability
• Install more pumps, water tanks, and filters for water supply systems
• Install leak detection systems, low-flow devices, and rainwater harvesting systems
• Upgrade combined sewer and stormwater systems
• Relocate aging infrastructure out of flood-prone areas and construct levees and berms
• Replace old transformers and wiring with heat-resistant models
• Increase seat length of expansion joints on bridges and lengthen airport runways
• Increase capacity of drainage systems and culverts
• Invest in permeable road surfaces and regrade slopes to direct runoff away from roads and tunnels
• Move communication cables underground

What Does it Mean for You?

New York is directing around $20 billion of local, state and federal funding to complete numerous long-term construction projects designed to mitigate the effects of climate change. Half of that money will go to coastal protection and urban drainage projects, which means huge opportunities are on the horizon for general contractors and subcontractors.

Single Invoice Factoring for Qualified Subcontractors

For qualified subcontractors, Capstone provides single invoice 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. For more information, read our blog, visit Capstone Capital Group homepage, or contact us today.

Revised GDP Figures - Capstone Financing

Late 2015 Slump Turns into January Boost for American GDP

18:58 29 February in Blog
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Revised GDP Figures - Capstone FinancingBetween plummeting oil prices and a global growth slowdown, the United States economy ended 2015 with a dip — but January’s spending figures and new data on the previous quarter suggest that American consumers are brushing off the jitters. This is heartening news for small businesses and large financial entities alike, with indications that the manufacturing sector and overall economic landscape could be on the mend.

Revised GDP Figures

Friday, February 26 brought a double dose of good news for the financial market. The Commerce Department provided revised figures for the last three months of 2015, suggesting that fourth-quarter gross domestic product (GDP) growth was stronger than original reports. The revision came about through revelations that business stockpiling — holding back key inventory items in order to mitigate potential economic downturn — was lower than expected. While this is a positive outcome for the end of 2015, analysts from the Wall Street Journal expect that the accumulation could hamper first-quarter 2016 growth as businesses work their way through currently-substantial stockpiles.

GDP is widely considered to be the broadest metric of economic strength. The initial figures for Q4 2015 put its growth at .7% — a fraction of Q3’s 2% jump — but the Commerce Department has since revised that figure to a solid 1%. The same report confirmed that investments in trade and business were a critical drag factor on the economy, affected by overall global weakness.

A Promising Start to the New Year

The biggest news for businesses, however, is the roaring activity in overall consumer spending. A boosted job market and strong gains in wage levels appear to have stimulated American’s willingness to spend, with figures at their highest level in eight months. Consumer spending accounts for a whopping two-thirds of economic activity, and experts across the financial landscape are predicting that this gain will provide a significant boost to cross-sector economic growth.

January brought good news for other key indicators as well, with home purchases, retail sale levels, and big-ticket good orders all making a significant jump.

Looking to the Future: Inflation and Interest

The Federal Reserve will be closely monitoring inflation rises through 2016 in order to determine interest rate increases for the year. Inflation is a key price measure that the Fed uses to decide central banking interest rates.

The Fed typically sets its inflation target at 2% per year, but has not met that goal since 2012. However, the February 26 release stated that it is currently at 1.3% — higher than they expected it to be at the end of 2016 — indicating that the economy is now resilient enough that the central bank can step back from supporting spending and investment initiatives.

Single Invoice Factoring for Qualified Subcontractors

For qualified subcontractors, Capstone provides single invoice 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. For more information on small business funding, Purchase Order Funding, read our blog, visit our homepage, or contact us today.

Capstone Predicts Recession Risk Growing

Economists and CEOs Agree: Recession Risk Growing

20:19 15 February in Blog
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Capstone Predicts Recession Risk GrowingAn increasing number of economists and corporate leaders say the risk of the U.S. dipping into a recession is rising. More than anything, they have pointed to the global growth slowdown and convulsions in financial markets.

According to the Wall Street Journal’s monthly survey of economists, the average estimate of odds of a recession starting in the next twelve months jumped to 21%—double the count from a year ago and the highest since 2012. Economists at Bank of America Merrill Lynch place the chances even higher at 25%.

Despite positive marks in many economic indicators, deteriorating U.S. confidence reflects concerns about slumping foreign economies.

Fed Chairwoman Testimony

In recent testimony before the Senate Banking Committee, Fed Chairwoman Janet Yellen said that the central bank is monitoring global financial markets, but reiterated her opinion that an economic contraction is not imminent. She emphasized that the Fed is keeping a flexible outlook on interest rate changes, but recent developments have not downwardly shifted the risk balance.

Business Concerns

The overall sag in financial markets, however, is feeding into concerns from business leaders. Despite a quarterly profit surge, PepsiCo CEO Indra Nooyi cautioned of a “delicate” recovery. Cisco Systems CEO Chuck Robbins said some corporate customers have started halting non-essential purchases.

Market and corporate sentiment have slid recently, and some, but not all, economic indicators have followed suit. Decreases in both oil drilling and output from utilities have prompted the decline of industrial production, and employment in the oil sector has slipped sharply. A similar decline in energy production, coupled with a strong American dollar, has put pressure on manufacturers. Factory activity decreased in January for the fourth straight month, according to the Institute for Supply Management.

Positive Signs

On the contrary, household spending continues its rise, up 3.2%. While incomes have grown slowly, the dive in gas prices means incomes are outpacing inflation. Labor market barometers show healthy readings, including the 4.9% unemployment rate, down from 5.7% a year ago, and the underemployment rate which has fallen to 9.9% from 11.3%.

Economic activity has remained stable despite market turbulence, according to Ram Bhagavatula, an economist at Combinatorics Capital, a hedge fund. The evident disparity presents a conundrum for the Fed, which projects continued modest economic growth and gradual increases in interest rates and inflation. The Fed will have more to say about its growth outlook after its next policy meeting in mid-March, but it is paying attention to foreign economic developments that pose risks to U.S. growth.

By historical standards, the current economic expansion has lasted a long time. Since World War II, the average economic expansions have lasted for just under six years. The current expansion, beginning in June 2009, is now over 6.5 years old.

Capitalize on Growth with Capstone

Whether we’re simply seeing a market correction or a full-fledged recession, Capstone is here to help. We help businesses and subcontractors take advantage of opportunities for growth with diverse business funding and financing options. For qualified subcontractors, Capstone provides single invoice 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. For more information, read our blog, visit our Capstone Capital Group homepage, or contact us today.

Booming Rent to Continue explained by Capstone

Builders Betting on Booming Rent to Continue—Should They?

22:47 22 January in Blog
160

Real estate investors are betting, perhaps mistakenly, that the six-year trend of rising rents in luxury urban apartment units will continue. Likewise, developers are hoping it will be worth their time, and money, to continue building them. According to research conducted by Axiometrics Inc., developers have built nearly 900,000 new urban apartment rental units over the past three years. This number is expected to climb by roughly 100,000, over the next three years, approaching one million new apartment units.

The Numbers

There were 328,000 multifamily apartment units built in 2014, the most in any given year in the past 30 years, according to Jed Kolko at the Terner Center for Housing Innovation at Berkeley. Since early 2010, rents have increased by over 20%. In 2015, real estate research firm Reis Inc. reports that, nationally, average rents rose by 4.6%. Demand for apartments remains high, and economists generally expect this trend to continue through 2016. But all this construction may correlate poorly with actual demand. Contractors are overwhelmingly focused on the higher end of the market, and many new multifamily properties being built are only affordable to renters making twice to four times the median income in their area.

Developers Flocking to High-End Construction

Many contractors that have previously worked in other market sectors have now moved into luxury multifamily urban apartments. Whether their background was in single-family homes, office buildings, or retail space, many have been drawn by the promise of huge profits from luxury, high-rent buildings.

Doubts in the Industry

Though optimism in housing is high at the moment, some contractors aren’t confident that the bull market for luxury apartment will continue much longer. “People are working against the clock right now,” said Jaime Lee, CEO of Jamison Realty Inc. “We’re coming to market as quickly as we can.” Lee thinks the market could start to slow in the next few years, which is an expectation shared by many economists. Statistics show that vacancies in the suburbs are declining, even as vacancies in certain urban areas have begun to rise. This trend may indicate that people are starting to feel the effects of high rents and are now looking outside of cities for housing.

The demand for new apartments is very real, but new construction, by focusing on the higher end of the rent spectrum, might have drifted too far from the typical renter’s budget.

Working with Capstone

For qualified subcontractors, Capstone provides single invoice factoring for work performed under contract with a creditworthy general contractor. We have highly experienced construction professionals on staff to facilitate the purchase of construction-related accounts receivable factoring. For more information, visit our homepage, or contact us today.

Market Woes Affecting Online Lenders - Capstone

Market Woes Affecting Online Lenders

11:54 08 January in Blog
202

Market Woes Affecting Online Lenders - CapstoneThere’s a great deal of uncertainty in the market right now. The Fed has already increased their target short-term rate from 0.25% to 0.5%, and they’re planning on increasing it incrementally throughout 2016. In recent years, online platforms like LendingClub Corp. and Prosper Marketplace, Inc. have challenged banks’ hegemony in the lending industry. Today, we’ll discuss how the rate hike and other developments have had a negative effect on online lending platforms and ask whether or not they’re here to stay.

Online Lenders Arrive on the Field

Online lenders find borrowers and sell their loans to investors. Using comparably low operating costs and working with investors with low yield expectations, they’ve had considerable success. According to a Wall Street Journal analysis of securities filings, marketplace loan funds raised $8 billion in 2015, over six times the amount raised the year before. Recent market woes are pinching the numbers, however, and putting online lenders’ niche at risk.

Online Lenders Forced to Raise Rates

Funding for consumer loans has started to show signs of damage. Among the recent ills are delayed deals, increased funding costs, and declining prices for securities backed by the loans. Many online lenders will require borrowers to pay higher borrowing costs. LendingClub Corp., for example, raised their interest rates by 0.25%, matching the increase by the Federal Reserve in their short-term rate. Citigroup Inc., which has sold over $1 billion in loans from Prosper, is now offering higher and higher yields to entice investors to buy. The end result will either be rising costs for borrowers or diminishing margins for investors and the lending platforms they work with.

Growth of Online Marketplace Lending in Doubt

The volume of loans made by online platforms like Prosper and LendingClub have surged in recent years, and investment vehicles that buy marketplace loans have grown as well. Now, experts are wondering if the growth will continue. In October, Stockholm-listed P2P lender TrustBuddy collapsed after serious misuse of client money. Poor stock performance by several major U.S. platforms is another cause for concern in the industry—as is the pullback of credit that has forced some high yield mutual funds to halt or close redemptions. In the end, it remains to be seen whether the recent poor performance by online lenders is an aberration, or something here to stay.

Financing with Capstone

Capstone uses unique underwriting strategies to provide accounts receivable invoice factoring, PO financing, and trade finance to small businesses, subcontractors, licensees, and distributors. For more information, please visit our homepage.

Winners and Losers from Fed Rate Increase - Capstone Financing

Winners and Losers from Fed Rate Increase

18:32 22 December in Blog
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Winners and Losers from Fed Rate Increase - Capstone FinancingThe last seven years have been painful for consumers, homeowners, small business owners—indeed for all Americans. The financial crisis of 2007-2008 was the worst economic downturn in the United States since the Great Depression in the 1930s. It was caused by a number of factors, including a burst housing bubble, the selling of high-risk financial products, regulatory failures, and the drying up of bank and insurance liquidity. The result was thousands of closed businesses, evictions, and foreclosures, as well as a decline in consumer wealth in the trillions of dollars. Globally, the Great Recession was the worst financial disaster since World War II. Throughout it all, Capstone worked with small businesses to provide financing when they needed it most. Today, we’ll tell you what you need to know about the Fed increase.

Fed Interest Rates

In response to the recession, the government enacted legislation like the Dodd-Frank Act and lowered interest rates. As of December 16th, the Federal Reserve made it official that it is raising key interest rates for the first time since 2006. With the Fed creating a new Federal Funds rate target of 0.50%, all kinds of lending will be affected, from business loans to auto loans, mortgages, and credit card rates. Many are wondering how the long-anticipated rate increase will affect small businesses. Who are the winners and losers? The lending experts here at Capstone would like to give their two cents.

The Winners

When it comes down to it, the winners are the big banks. They will charge more interest for their loans, but not pass on the increase to any of the savers. Savers are unlikely to receive any significant difference in the interest paid to their accounts. The investment firm Charles Schwab Corp., for example, made $1.8 billion in net interest revenue over the last year. Net interest revenue refers to the difference between interest earned on lent assets and interested paid on deposits. With short-term interest rates higher, companies like Charles Schwab are likely to see a huge increase in net interest revenue. When interest rates were low, big money-market fund players like Fidelity, Goldman Sachs, and Morgan Chase & Co. were forced to eliminate many investor fees—resulting in hundreds of millions of dollars in losses. If the rate continues to rise over the next year above .50%, many in the money-market fund industry would be able to remove the damaging fees.

The Losers

The stock market has been falling in recent days. Liquidity in the market was already on the decline prior to the interest rate adjustment, and now it’s likely to decline even more. The losers are those who invest in equities and long-term bonds. Some also predict that the increase will negatively affect homeowners with mortgages, but this is probably overstated. Mortgages are long-term loans, and they are more heavily affected by economic growth and inflation expectations than short-term rates.

Working with Capstone

Capstone works with small businesses, subcontractors, licensees, and distributors with accounts receivable factoring, PO financing, and trade finance solutions. We have a diverse array of underwriting strategies that allow us to lend based on the creditworthiness of our clients’ customers, not our clients. For more information, please visit our homepage.

Banks Threatened as Lending Leaders - Capstone Financing

Banks Threatened as Lending Leaders?

16:21 07 December in Blog
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Since time immemorial banks have been the default institution for lending, but online lending sites, together called FinTech companies, are now posing a threat to bank’s hegemony.

FinTech Companies a Legitimate Threat to Banking?

Though there are many FinTech enthusiasts, some believe this is simply a phase that will fizzle out, much like the peer-to-peer lending craze did several years ago. The difference between FinTech companies and peer-to-peer lenders is that FinTech companies get their funding from institutions rather than individuals. This makes them legitimate marketplace lenders.

Others think fintech companies are here to stay. Marketplace lending has expanded rapidly in recent years. According to the Harvard Business School, the portfolio balances of online alternative lenders have doubled every year since 2005. In 2014 alone, they lent $7 billion to individuals and $5 billion to small businesses.

Where is it Headed?

All signs point to the trend of alternative loans continuing. LendingClub, a leader among FinTech companies, plans to lend $7.6 billion in the coming year—about as much as the previous eight years combined. With demand high and alternative lenders taking just 1.1% of consumer-based loans and 2.1% of small-business loans, there’s lots of room for growth. Despite these promising numbers, FinTech companies face rising sales-and-marketing expenses as they try and take on the big lenders like Morgan Stanley and Goldman Sachs Group.

Banks to Compete with Alternative Lenders

Traditional lenders aren’t simply going to let FinTech companies creep in on their share of the marketplace. Big lenders have shown willingness to compete for credit-card loans. They’ve also invested significantly in marketing to tech-savvy consumers who would be drawn to FinTech lenders. FinTech detractors predict that the unprecedented growth of marketplace lenders will slow by 2017. Many FinTech companies have lowered their rates despite increasing demand, which is a sign that traditional lenders are gaining back some of the market share.

Choosing Capstone for Alternative Sources of Funding

Demand for alternative loans is high because they fulfill a consumer need. Capstone provides small businesses, subcontractors, licensees and distributors with construction accounts receivable factoring, PO financing, and trade finance. Despite the pressure from big lenders, we’re confident there’s plenty of room in the marketplace for FinTech companies and alternative lenders like Capstone. We provide the flexibility that big lenders simply can’t offer. If you’re running a business and you need an advance of funds before an invoice is paid, Capstone should be your number one choice. For more information on our services, please visit our homepage.

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