Invoice Factoring

Understanding Invoice Factoring

18:42 20 May in Blog
220

Invoice FactoringInvoice factoring is a common practice that enables businesses to receive immediate payment in exchange for selling accounts receivables at a discount to their face value. Once an invoice is“ “Factored” and it is time for the customer pays for a product or service, the payment is forwarded to the factoring company. One of the most significant advantages of factoring is that businesses can receive immediate cash flow with no additional debt that appears on balance sheets.  Therefore Factoring is an off balance sheet transaction. Factoring can also be advantageous for businesses looking to obtain initial working capital without having to demand immediate payment from their customers.

The Invoice Factoring Process

Factoring is a rapid process that usually takes less than 24 hours to complete. The factoring process starts after a business delivers a product or service and sends an invoice to their customer. A copy of the invoice is then sent to the factoring company, which will purchase the invoice in exchange for an immediate cash payment. Most factoring companies offer up to 80 percent of the invoice value with the balance going into a reserve account. Once the purchase of the invoice has been completed, businesses can have the money, minus nominal fees, sent directly to their bank account.

Advantages of Factoring

Many businesses choose to use factoring because it can provide a predictable, immediate revenue stream than can be used to fulfill an order. While many businesses request prompt payment, they can rarely expect it in the real world. Even when discount incentives are offered, many customers will still choose to pay later. These problems can be especially challenging for newly established businesses that struggle to convince customers that they can deliver. Businesses that use factoring can receive immediate revenue without having to demand upfront payment or incur excessive risks.

Additional advantages of factoring with Capstone include:

  • Insurance against customers that fail to pay.
  • No penalties for failing to meet a minimum invoice sales volumes.
  • No contractual restrictions on how funds can be used.
  • Practically unlimited financing that scales with business growth.
  • Additional working capital with no additional debt.
  • Take advantage of supplier discounts by paying early.
  • Add more value to customers though attractive payment terms.

How Factoring Affects the Bottom Line

Factoring fees are an average of about two percent, which many business owners argue can add up to a lot of money in the long run. In reality, most businesses that use factoring can earn several times more than the factoring fees that they pay. Studies indicate that a majority of businesses can scale their production capacity by more than 25 percent without increasing fixed costs. Since limited capital is the primary constraint for most businesses, immediate payment can enable businesses to operate at full capacity and earn several times more than the factoring fees.

Business Requirements for Factoring

As with any other credit service, businesses will need to be pre-qualified. Factoring services are only available to legal business entities that sell business-to-business services to governments or other companies. Businesses will need to have customers with good credit to qualify for a factoring service.   It is also important to have no outstanding invoice leans. Most businesses that meet these basic requirements can be approved to take advantage of invoice factoring services.

Aftermath of the Dodd-Frank Law

The Aftermath of the Dodd-Frank Law

21:42 07 April in Blog
130

Aftermath of the Dodd-Frank LawIn 2008, when the American housing market crashed, it created a ripple effect in financial institutions. When the Dodd-Frank law went into effect in 2010, its purpose was to “promote the financial stability of the United States by improving accountability and transparency in the financial system.” Since being passed, only one new bank has opened in the United States. To show some perspective, in the 30 years prior to Dodd-Frank, over 100 new banks opened.

The new regulatory requirements are the reason behind this. Banks have had to hire full-time compliance employees in addition to purchasing new software and computing systems, as well as creating regulatory reports. FDIC state examiners are cracking down on banks and thoroughly investigating software systems that are within regulatory restrictions for loan reviews, IT, anti-laundering practices, cyber security and low-income borrowing procedures.

In looking at the impact this has caused, it’s clear that due to increased expenses, no startup banks want to take a risk when the odds are stacked so highly against them. In a statement earlier this year, Senate Banking Committee Chairman Richard Shelby said that improvements to rules impacting small banks should be made. However, if changes aren’t made, what does the future of startup banks look like? Furthermore, what will lending options look like for small business owners?

Fortunately, no matter what the future holds, Capstone Capital Group, LLC can be your capital partner. For years, we have helped growing businesses get the immediate cash they needed without the typical red tape that most banks require. We provide you access to capital through one of our customized funding programs, allowing you to scale your business instead of worrying about finances. For more information on invoice factoring, purchase order factoring, give us a call today at (347) 821-3400 and speak to a representative.

CFPB be Reformed by Neugebauer's Bill

Could the CFPB be Reformed by Neugebauer’s Bill?

14:50 25 March in Blog
170

CFPB be Reformed by Neugebauer's BillOver the past few years, there have been attempts to change the composition of the Consumer Financial Protection Bureau (CFPB), even its name. Now, a new bill might truly pass Congress.

Introduced by Republican Representative Randy Neugebauer for the state of Texas, H.R. 1266 would create a five-member commission structure to lead the CFPB, which is currently headed by Director Richard Cordray.

Neugebauer’s proposed bill lays out the framework for creating a bipartisan commission leadership structure. Included in the bill is a provision that no more than three commissioners can be members of one political party. This is so that there are not coinciding vacancies when terms end.

Additionally, Neugebauer’s bill readjusts CFPB executives’ pay to the federal scale as well as creates an official seal for the agency. There is also a proposal to change the name of the CFPB to the Financial Products Safety Commission.

Much support has already been garnered for Neugebauer’s bill. The legislation was introduced with 20 initial co-sponsors, all Republicans and all members of the House Financial Services Committee, on which Neugebauer serves.

A coalition of banking and business groups including the American Bankers Association and the U.S. Chamber of Commerce expressed their support in a letter that read, “We believe that a five-member commission, as Congress originally intended, will better balance consumer access to financial products with the need to ensure a fair marketplace.”

Because Republicans control the Senate, a bill passed by the House is expected to pass even without Democratic backing. However, a coalition of more than 300 interest groups is in strong opposition to the bill, defending the CFPB.

Capstone Capital Group, LLC has eliminated the bank red tape by offering small to mid-sized businesses Single Invoice Factoring (“Spot Factoring”). Businesses can now get the immediate cash they need in exchange for working capital from Capstone Capital Group. For more information on Capstone’s Single Invoice Factoring call us today at (347) 821-3400.

Will Repealing Dodd-Frank Make Borrowing Easier - explained by Capstone

How the Dodd-Frank “Too Big to Fail” Legislation Hurts Small Banks

21:28 16 March in Blog
90

We have written numerous times about how the Dodd-Frank “Too Big to Fail” legislation is hurting smaller banks and interfering with loan approval for your small and medium-sized businesses.

Much of the regulation was designed to stop large money-center banks from taking depositor’s money and executing risky investments or engaging in risky transactions, which would thereby place the public at risk as well as the US financial system.

However, the unintended consequence of the law has created significant regulatory pressure on small and medium-sized banks, which has caused the regulators to take a one-size-fits-all approach to bank regulating. We can all agree the risks facing small and medium-sized banks are different than those facing the large money-center banks.

Compliance costs alone eat into the profits of the smaller banks, whose scale is smaller and has less profit than more major banks. The portfolios of the smaller banks are vastly different than those of larger banks as well. Most small banks lend into their communities and can assess the economy and risk related to their portfolio first-hand. This is not possible for the larger banks, as their footprint spans either a region of the US or the entire US. This leads to centralized decision- making with computer aided modeling to ensure that the loans are underwritten as conservatively as possible. Though not a negative thing, it’s different from how smaller banks are chartered to operate.

In most cases, the three “C’s” are used in small bank lending because the small town banker knows his customer. Credit, Character, and Collateral are what the small town banker relies on. Federal regulations do not see it the same way, causing conflicts between operation and management. The best way to manage it is to reduce the amount of loans and use the most rigid standards, which do not help the community that these smaller banks are chartered to help.

Congress has been listing to these smaller banks and indicated they would enact legislation to reduce the regulatory burden so they could operate like they should. It is important to note that very few smaller banks were affected by the financial crisis. The Republicans are attempting to provide relief for smaller banks while Democrats require that all of the Dodd-Frank provisions be in place for every bank regardless of size.

The Fed supports the changes for small and regional banks. However, it does not seem that these smaller institutions will be released from the “Too Big to Fail” category any time soon. As the economy continues to grow, and your need for working capital increases, please remember to call or email Capstone Capital Group, LLC at (347) 821-3400 or [email protected]

Job Growth Accelerates in the US

Job Growth Accelerates in the US

15:47 09 March in Blog
90

For the first time since 1997, the job market has seen more than one million new jobs created over the last three months. This is the most significant indicator of economic growth to come. The last five years have been volatile, with many finding it difficult to find appropriate work at livable wages. The accelerated job growth rate is the most promising indicator that our economy is finally emerging from the doldrums of lackluster growth.

Job Growth Accelerates in the USAlthough the indicators of economic growth are not spread worldwide, the trend in the United States is flourishing. This trend is positive for workers who are currently employed but have not had the benefit of any significant wage growth.  Leverage on salary and hourly rate negotiations are moving in the direction of workers.  As the unemployment rate continues to decrease, the pool of qualified workers is being reduced. This will encourage employers to give existing workers raises either for retention purposes or to reduce the cost of training new workers whose performance may not be known until a significant investment of time and money occurs.

Typically, US consumers fuel the world’s economies through consumption and consumer spending. And because of the strength of the domestic job market is so strong, the Federal Government feels more comfortable raising rates. The criterion they are monitoring is wage growth, which climbed 0.5% in January (up 12 cents to $24.75 per hour and 2.2% over the past 12 month).  Combined with hiring momentum, the indicators of growth the Fed has been monitoring make a case to raise interest rates.

Prior to the great recession caused by the financial crisis, and ensuing federal regulation, growth rates in the US were approximately 3% per annum.  At 3% per year, the growth rate was deemed positive and indicated a stable and growing economy.  Currently, growth is approaching 2.5% and is encouraging economists that this will not be a cycle where there a growth spurt is followed by a decline.  One of the indicators economists are hanging their hats on is that workers have started to leave jobs in search of higher pay. This indicates that employees have confidence in the economy, and that moving to a new employer does not bring the risk of layoff should growth rates drop. Employees believe that the economy will continue to grow and their job stability is not at risk.

Of course, there are still headwinds that face the US economy, but it is more sector-related. Construction, manufacturing and healthcare are all major sectors of our economy that are hiring new workers. It is time to harness this growth and bid on new contracts, create product line extensions to sell more goods or services to your existing customers, and find new companies that will benefit from working with you.

Capstone Capital Group, LLC has eliminated the bank red tape by offering small to mid-sized business Single Invoice Factoring (“Spot Factoring”). Businesses can now get the immediate cash they need in exchange for working capital from Capstone Capital Group. For more information on Capstone’s Single Invoice Factoring, commercial financing call us today at (347) 821-3400.

Position Your Company for Growth

Position Your Company for Growth

18:12 03 March in Blog
110

Position Your Company for GrowthSince June of 2014, oil prices have declined by over 40% causing the US dollar to surge in value against most other currencies throughout the world. This may have had a negative impact on the oil patch and US exporters, but it is creating greater disposable income for the middle class. According to the New York Times, “Lower energy prices especially with the cold winter we have all been experiencing have been a benefit to all.” The increased value of the US Dollar also increased consumer purchasing power. If the Fed follows through on increasing interest rates mid-year as is anticipated, we will see oil prices drop and watch the dollar strengthen. Initially, there was a concern over deflation, but growth is mitigating that potential problem.

“The forces that were fueling the creation of wealth and leaving the middle class behind were high oil prices, easy money and a weak dollar. Two of the three forces have been quelled that being, high oil process and the weak dollar,” according to the New York Times.

As a result, capital inflows into the U.S. will occur. The economies of the G-20 are all in negative growth or slow growth phases due to high social welfare policies and high taxes. The capital inflows will help create demand in our economy and cause growth as businesses take this capital in and use it to expand.

These trends work in favor of job creation, higher wages and business growth. As was mentioned in our last blog, the low business formation rate over the last six years has reduced competition and given many small businesses the ability to move from start-up to entrenched businesses. These businesses are poised for economic growth and wealth creation. Add to this the upcoming presidential election that will be in full swing by the middle of this year and optimism should prevail through most of the economy.

If it looks like the next president will be friendlier towards business, you will be in for a great period of growth even if policies do not change. The fact that we will have a new leader who at least supports business growth will have a tremendous impact on growth and overall sentiment regardless of which party controls the White House or Congress.

It is imperative that you continue to invest in your business and increase your infrastructure to handle increased demand for your goods and services. Position your company to ride the growth wave as other have in the mid-1980s, late 1990s and early 2000. For years, we have helped organizations get the immediate cash they needed without the typical red tape that most banks require. For more information about our Commercial financing, Single Invoice Factoring, give us a call today at (347) 821-3400 and speak to a representative.

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