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Is Invoice Factoring an option when starting a company?

12:24 23 April in Articles, Blog, Business Financing, Business Financing
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Every new business hopes to join the ranks of those famous unicorns that turn profitable right out of the gate. Sadly, most startups fail to meet this goal. Even worse, the best concepts often struggle or even fail within the first few years.

According to research cited by SCORE, almost all budding companies wrestle with cash flow problems — and problems with cash flow management represent the almost universal plague that leads to new business stumbles and even failures.

These startups may have succeeded at bringing ideas to market and even attracting customers; however, 82 percent of failed new businesses just did not have enough funding to grow or, in many cases, keep operating. And for just these kinds of startups, invoice factoring could provide a solution to improve cash flow in ways that would lead to thriving, growing young companies.

Yes, startups should consider invoice factoring as a new business financing option. Find out how invoice factoring will significantly improve cash flow, how it works, and if it’s the right solution for all startups.

How Invoice Factoring Empowers Startups

The most basic kind of invoice factoring refers to selling accounts receivable to a third party. In other words, startups can convert their unpaid invoices into immediate working capital.

New businesses won’t have to wait days, weeks, or even months for their customers to pay invoices. In turn, they can use this money to service more customers, develop new products and services, pay operating expenses, expand marketing, or in whatever way best suits their goals.

Some highlights of the benefits of invoice factoring for new businesses include:

  • Credit building capacity: Factoring can help establish a credit record for a business.  Generally, a new company has no existing credit record making it more difficult to establish lines of credit, negotiate additional payment time with suppliers, and negotiate new contracts. Since factoring depends on the creditworthiness and financial strength of the startup’s customers, it is a great option that allows the business to meet debt obligations promptly.
  • Streamline collections: Collecting payments can be stressful, but not with a dependable factoring company.  Since the factoring company will be in charge of chasing customer payments, the startup can invest its time in more meaningful activities.
  • Minimize risk for payment:  Many non-recourse factoring companies take the credit risk away from the business.  In this structure, they will shoulder all the risk of credit default once they purchase the invoice.
  • Improve cash flow: The business can offer their customers credit and still invigorate cash flow by getting immediate working capital from invoices.
  • Factoring is flexible:  Businesses have options when factoring their accounts receivable. They have the opportunity to include all eligible customer invoices or select a few customers because they have extended payment terms.

How Does Invoice Factoring Work for New Businesses?

Capstone offers flexible factoring options while eliminating hassles. That means startups can start enjoying the benefits of better cash flow and improved efficiency right away. This list explains all the steps involved in invoice factoring a common, flexible solution for startup businesses:

  1. Invoice customers as usual for goods or services rendered.
  2. Complete an easy application and approval process to get started.
  3. Submit copies of invoices (or any type of progress billings) along with required documentation on the receivables chosen for invoice factoring.
  4. Enjoy an immediate advance that usually amounts to 70 to 80 percent of the total invoice value, depending upon the agreement.
  5. After the customer pays, receive a rebate for the remaining balance, minus modest factoring fees.
  6. Repeat when needed.

What are the Best Businesses for Invoice Factoring?

In general, invoice factoring can provide the best solution for companies doing business with creditworthy customers but have delays in cash flow because of a time gap between invoicing for goods or services rendered and getting paid. Other typical characteristics include:

  • Working capital strain due to insufficient credit lines from banks and suppliers
  • Immediate growth opportunity with a product, customer, project, or market share
  • Sells finished goods or services to creditworthy buyers
  • Losing sales and missing sales opportunities
  • Backlog of orders or jobs
  • Trade cycle of 60 – 150 days, or more

 

How to Find the Best Financing Solution for a New Business

Capstone provides essential funding requirements to emerging and growth companies. Take a moment to learn more about Capstone’s flexible options for new business invoice factoring.

Invoice factoring helps new and established businesses manage cash flow and work more efficiently. New companies can discuss their needs and concerns with a Capstone representative to choose the best financing option for their unique situation.

Contact Capstone by email or phone to tell them more about your business needs and goals, so they can help you choose the perfect option.

letters of credit in trade finance

Letters of Credit in Trade Finance

15:50 13 April in Articles, Blog
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In its basic form, a Letter of Credit (or LC) is a document produced by a financial institution delivered to another financial institution that guarantees an Importer’s payment to an Exporter will be received on time and for the correct amount. The Importer is required to send payment to the issuing institution who then transfers funds to the Exporter’s advising institution or directly to the Exporter. In the end, the Exporter will receive payment as long as the transportation of the goods is compliant with the LC’s terms and conditions. Letters of Credit are most often used between Banks that are in different countries for international trade.

Trade Finance Process Flowchart

Trade Finance Process Flowchart

Trade Finance

Trade Finance assists with trade cycle funding gaps and allows businesses to obtain goods from a Supplier with cash upfront. When a Supplier abroad is exporting goods to a business partner elsewhere, they will want assurance that payment will be received in a timely fashion. Instead of the business owner paying for goods right away, the institution handling their import financing will instead produce a Letter of Credit that will be presented to the Supplier or their finance company. As previously mentioned, the Letter of Credit serves as a guarantee of payment when the conditions of the initial Supplier agreement are met. Upon receipt of goods, payment is made to the Supplier or their finance company.

This arrangement can be used for a one-time purchase of supplies or continuingly if there will be a lasting business relationship between the Importer and the Exporter.

Reasons to Use an LC with Trade Finance

There are a few key reasons why an LC should be used with Trade Finance

  • First, International Trade between countries is difficult due to a variety of issues including differing laws, customs, languages, currencies, and so forth.
  • In general, LCs offer a more secure method of payment for both parties involved.
  • Next, the financial institutions handling the transaction offer their expertise and resources for aiding the completion of the transaction.
  • The central benefit of using an LC is that it mitigates the risk of the buyer missing their payments, especially if the Seller is unsure of the buyer’s credit.

Need funding for trade? Capstone is here to help: Let us work with you today to help you find the best solution to your cash needs without taking on more debt. Whether you are facing an immediate one-time need for cash to secure a contract, or you require a long-term solution to cash flow, contact our skilled team of representatives today and let us work with you to find the best options for your funding needs.

 

 

 

Exploring Merchant Cash Advance Versus Invoice Factoring

Getting a Small Business Loan with Bad Credit in 2021

09:33 04 March in Blog, Business Financing
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One of the consequences of COVID-19 is the negative impact on the credit of small and mid-sized business entities. Lending institutions are generally risk-averse and the pandemic has only further pushed them to implement more stringent underwriting standards focused on the creditworthiness of borrowers.  This creates a problem as more and more businesses do not qualify for a traditional line of credit. 

Since many businesses were forced to completely — or partially — close down from early 2020, with some even closed or operating at significantly limited capacity well into 2021, business owners are now grappling with the effects that limited income and slower cash flow have had on their credit. In fact, according to McKinsey Insights, lenders will be forced to take a deeper look at credit criteria moving forward. One statement stands as a stark reminder of this crisis on the finances of businesses “From the perspective of financial institutions, the conditions that the COVID-19 crisis triggered have specific implications for managing and mitigating credit risk.”

Securing Financing Amid Pandemic Concerns

Thousands of small business owners were eligible for, and received, Paycheck Protection Program (PPP) funding to help them through the pandemic. For most, however, this capital only helped them maintain operations for a short period of time. Many business owners would never have believed that one year into the pandemic they would still be operating at limited capacity and still uncertain about a return to full operations. 

While vaccines and other mitigation factors have lessened the overall human impact of the pandemic, the long-term financial impact on businesses is still largely unknown. Some businesses are faced with declining credit ratings meaning they could face steeper than normal challenges securing funding.

Alternative Funding Solutions

A better alternative for businesses is to use their accounts receivable to gain access to capital.  Invoice factoring is able to provide immediate working capital and liquidity.  Funding is not dependent on the creditworthiness of your business.  Instead, the creditworthiness of your customers provides the basis for determining whether you can factor your invoices. 

Typically, businesses are forced to wait 30, 60, or even 90 days before they are paid for the products or services they provide.  Factoring turns those invoices into cash — nearly immediate cash. This allows business owners to have the necessary cash on hand to sustain operations and meet obligations to their customers, while not depending on the financial institution for a line of credit.

Some of the advantages of invoice factoring include:

  • Faster than business loans — in most cases, rather than waiting weeks, or months for bank approvals, you can have cash in your bank account within days of accepting a factoring contract and having your customers approved.
  • Flexibility and control — factor all of your invoices or only specific ones.  You select which customers you’d like to factor.  You may elect to use a process called “spot factoring” which is a funding method where you simply take a valuable invoice and turn it into nearly immediate cash with no long-term agreement.  This is common when a company has a single one-time need for immediate capital to get them over a period of slower cash flow that is not anticipated to continue.
  • Strengthen or repair your credit profile — with sufficient cash flow you will be able to meet vendor and supplier payment commitments.  As you build up positive credit history by paying in full and on time, it will gradually boost your business credit score.

 

Qualifying for funding is relatively easy. The key requirement is to have invoices that are payable by dependable and creditworthy customers.  Whether you need immediate capital, or you need regular access to cash, invoice factoring can help you meet your financial obligations. 

Customized Solutions Work Best

This is one reason more businesses are turning to Capstone Capital Group. Regardless of what your business credit situation is, your financing needs are not the same as every other small business. We do not try to take a one-size-fits-all approach to capital since every business operates differently and has different cash demands.  We take the time to understand your business model, your goals, and your overall financial situation. We then work on a customized solution that suits your financing needs. We understand the importance of cash flow to the long-term success of your business and we are committed to providing solutions to help you succeed. 

Capstone is here to help: Let us work with you today to help you find the best solution to your cash needs without taking on more debt. Whether you are facing an immediate one-time need for cash to secure a contract, or you are in need of a long-term solution to cash flow, contact our skilled team of representatives today and let us work with you to find the best options for your funding needs.

What To Do When You Lose Funding Amid a Pandemic

13:16 11 February in Blog
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Losing funding is devastating to a business at any time, but the ongoing crisis created by the COVID-19 pandemic has shaken up banking on a massive scale which makes keeping your business functioning financially even more difficult. We already know government programs like the Payroll Protection Program (PPP) were given out on a first-come, first-served basis and many small businesses were left out in the cold. Even with subsequent rounds of funding, many businesses were unable to qualify for various reasons including, in some cases, their banking relationships.

Other businesses were faced with being notified by their financial institutions that lines of credit were being suspended, small business owners who were depending on their home equity to take a line of credit were found those lines were suspended, and still, others learned banks were not accepting new applications for loans. Where does this leave business owners who need capital to maintain their current business operation or to expand their operation?

Why Financials Institutions Are Decreasing Their Lending Availability

The COVID-19 pandemic has financial institutions making changes in how they do business.  One of the more prevalent trends we may see are financial institutions taking measures to counteract increased risk with their lending practices.  There are specific reasons behind this change including:

  • The continued economic fallout from COVID-19 – banks do not like uncertainty and lending in today’s environment can potentially be riskier than ever because they are not able to accurately predict the continued economic challenges which commercial and retail clients may face.
  • Liquidity issuesfinancial institutions are not free from the economics of COVID-19. Many are facing their own issues with reduced liquidity making to fund extensions of credit and renewals of revolving lines of credit.  In certain situations, capital may only be allocated to the most profitable business loans.  They will be ready to shed under and non-performing loans.  Banks may also be minimizing their exposure to nonessential lending services (such as investment banking, international expansions, etc.) that consume considerable amounts of capital.
  • Risk assessment standards – portfolio risk thresholds are being reassessed.  Financial institutions have or will be, implementing more stringent underwriting standards and tightening their policies for extending credit.  This makes it harder for small businesses to secure new financing or renew their current facility.  The historical financial performance of their clients and other previously relied upon metrics may no longer be relevant risk indicators.  

 

These factors and others impacting financial institutions mean business owners need contingency plans to access the capital they need. Business owners also need to be prepared for potentially losing an existing line of credit when they need it most. While this is important DURING the pandemic, the same could be true for any time your funding lines are interrupted.

Finding an Alternative Funding Source for Long-Term Success

Given these challenges, more businesses are finding they fall outside the acceptable risk threshold to access and retain lines of credit as well as more traditional business funding.

When faced with financial demands or an opportunity to expand operations, some business owners may feel pressured to reach out to private investors and offer a piece of equity in their company. There are other options businesses can consider including working with vendors to extend credit terms, taking out a personal loan, or invoice factoring.  Each has the potential to provide you the capital you need on relatively short notice.  Joseph Ingrassia, the Managing Member for Capstone Capital Group, LLC, provides insight and points of consideration for each in a recent Forbes Expert Panel article on Funding Your Business with a Personal Loan? 14 Things to Consider First and also in Emergency Business Funding: A Look at Your Options.

Business owners should avoid taking steps that could damage them financially. For example, these include hard money lenders, credit card advances, and merchant cash advances (MCAs). These options may be available to you but in the long-run, they could harm your business financially as they typically come with high-interest rates and will create a never-ending cycle of debt.

Converting accounts receivable to immediate cash through invoice factoring makes sense from a practical point of view. Here are some of the reasons why this option is a good one:

  • No new debt on your balance sheet
  • No need to give up equity in your business
  • Personal liability is limited
  • You have control and flexibility — factor all your invoices or only specific ones
  • The fastest method of obtaining cash for your immediate business needs

While banks may prefer to lend to businesses with only positive financial performance, stable cash flows, and predictable revenues, factor companies, such as Capstone, can often work beyond these issues and provide funding based on the quality and strength of a business owner’s accounts receivable.  Also, businesses often turn to invoice factoring for their cash flow needs as the approval process is simpler and faster than the underwriting process at a bank.  That means businesses have quicker access to crucial working capital. 

This is one option, among others that we can help establish to help your business meet your financing needs. Capstone continues to be a leader in developing customized plans for businesses in a wide range of industries to help them meet their capital needs. Whether you are currently facing uncertainty in your funding, or you want to have a plan in place which eliminates the need to take on new debt from your bank, contact Capstone by email at [email protected] or call us at (212) 755-3636. Let us help design a customized financing package that works for your business.

Securing Funding for PPE Transactions

12:47 25 January in Blog
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Businesses that have been producing and supplying personal protective equipment (PPE) are facing numerous challenges since the pandemic began in the United States in early 2020. In addition to facing unprecedented demand for their products, they were also facing problems with shipping thanks to travel and export bans, and concern for the health and safety of their workforce.

For some businesses, none of these was the most significant challenge — the biggest challenges came in two phases, the first obtaining raw materials, and the second having sufficient working capital on hand to ensure they could ramp up their production to ensure they can meet the demand for finished products.

Meeting Challenges Needed to Successfully Deliver PPE

Some of these challenges have continued. In fact, as recently as August, there are still ongoing reports of shortages of PPE for healthcare workers. In part, this is because no one planned for a need of the amounts of PPE which would be needed — today, not only healthcare workers, but daycare centers, schools, offices, and restaurants are also in need of PPE. This need is likely to continue well into the end of 2021 given it could take that long to get vaccines distributed and administered to larger portions of the population of the United States.

For those businesses who supply PPE finding the balance between maintaining open supply lines and ensuring they can meet demand while building inventory for future demand can be challenging. The challenges range from being able to obtain raw materials and ensuring they have the logistics set up for delivering the products they are manufacturing. This may involve the need to not only have a sufficient amount of capital on hand to purchase raw materials but may also require a company to review how they currently receive raw materials and deliver completed products.

COVID-19 Impact on Manufacturing Overall

In a broad report released by Thomasnet.com® we learned just how challenging manufacturing been since the beginning of the pandemic. Some of the statistics show:

  • 46 percent report shipping and logistics disruption
  • 35 percent face production restrictions in offshore factories
  • 8 percent cite an increase in the costs of goods

Those who are manufacturing and supplying PPE must be prepared for this “new” normal and prepare for these challenges during 2021 and going into 2022. Demand is likely to continue in industries that once never called for PPE including restaurants, school districts, and smaller business owners including hair and nail salons, and more. This is an opportunity to grow your business if you have the financial plan in place to take advantage of the increase in demand.

Securing Funding to Fulfill Contracts

With demand for PPE continuing to escalate, businesses must have sufficient funding to source the PPE items from third-party manufacturers or to secure raw materials if you manufacture products in-house. Those with contracts can either take out a loan, impacting their balance sheet, sacrifice equity in their company by raising funds from outside sources, or they can opt to leverage purchase orders and invoices for cash.

Many large users of PPE including government municipalities, hospitals, and school districts order supplies using purchase orders (POs). In effect, these purchase orders are a contract between you and the other party stating they want to purchase a specific amount of PPE by a certain date. You must be prepared to deliver this product while understanding that upon delivery, it could take as long as three months, and in some cases longer, for you to be reimbursed because a payment has been made. One of the most critical financing tools you can have at your disposal in these cases is purchase order financing. Not only will you have access to secure the necessary capital you need to purchase supplies or raw materials, but you also have the opportunity to develop a reputation as a business that fulfills orders in a timely manner. This alone can help fuel your growth.

Smaller PPE contracts for facilities such as nursing homes assisted living facilities, and restaurants may order smaller quantities of materials. Generally, you can fulfill their needs from inventory provided you have been able to maintain inventory. However, even in these cases, you may not receive payment for your products until 60 to 90 days following delivery — leaving you with insufficient cash flow to replenish your inventory. Invoice factoring can help bridge these cash flow gaps.  Factoring allows you to supply products to your end customers, and when it comes time to issue them an invoice, you can use factoring to convert the account receivable into immediate cash. 

Whether you need immediate capital to fulfill an existing purchase order, need cash to replenish your dwindling inventory, or are facing challenges with supply lines, you should consider contacting Capstone. We offer an entire suite of financial tools designed to help you succeed. Call us at (212) 755-3636 to speak with a representative today and let us help find a solution that works best to meet your current challenges.

Forbes Council – Funding Your Business With A Personal Loan? 14 Things To Consider First

10:56 15 January in Blog
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In December’s Forbes Expert Panel, Capstone’s Managing Member Joseph Ingrassia discusses what to expect when funding your business with a personal loan and how you will probably need to put up personal collateral.
 

“You’ll probably have to put up personal collateral.

Many banks and credit facilities require a pledge of all of your personal assets, and this pledge may limit your ability to borrow additional funds as your business grows. Having your personal residence as collateral may add stress to your personal relationship since the bank may also require your spouse’s personal guarantee. If there is a blip in the business it could lead to the loss of your residence.”

– Joseph Ingrassia, Capstone Capital Group, LLC

 

COVID-19 Fallout: Bankruptcy Filings Increasing Post Pandemic

12:33 22 December in Blog
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We have been facing an unprecedented time during 2020 with COVID-19 ravaging our communities. Governors across the United States have taken steps, which we once never imagined including ordering business owners to close their doors. This massive closedown was in response to states losing lives, hospitals filling up, and the virus spreading at rates one could only be shocked at hearing about.

Unfortunately, while there have been massive strides in combating the virus including some therapeutics and the recent announcement of an emergency use authorization for a vaccine, we still have a long way to go before our businesses get back to “normal” operations. During this time, we have heard about more businesses than ever before filing for bankruptcy protection, and if the prognostications are accurate, we can expect more.

Borrowing is Driving Business Bankruptcies

Energy companies, travel and tourism businesses, and retail businesses which were on the edge were toppled during the early months of the pandemic. There were very few industries which were not impacted by lack of sales, inability to continue operating with fewer people being allowed to congregate indoors, and naturally, fewer people traveling for business or pleasure. According to Bloomberg News, thousands of businesses filed for bankruptcy protection, while thousands more shuttered their doors for good. However, this may not capture the full impact of the COVID-19 pandemic on bankruptcy filings for business.

The International Monetary Fund (IMF) has indicated they anticipate seeing the trend of business bankruptcies to continue ticking up over the next several months, and perhaps well into the third quarter of 2021. In large part, they believe this trend will be driven largely by debt, and not as a result of any restrictions which are placed on businesses, though there are currently significant restrictions in place, and more may be headed our way.

The IMF believes this trend is a result of businesses who were forced to borrow money to see their way through the initial lockdowns. However, for many of these businesses, getting the doors open is only part of the problem. Customer confidence walking through the doors of a retail outlet means depressed sales. Lack of confidence in being safe from the virus will continue to ravage many businesses including, and perhaps most notable, the hospitality industry.

Some of the sectors which have seen notable bankruptcies recently include:

  • Retailers such as JC Penney, Lord & Taylor, Neiman Marcus and Brook Brothers are the most notable bankruptcy protection filers this year. Many smaller retailers have also filed for protection. Many other clothing retailers are still facing pressure and may be forced to file bankruptcy if holiday sales figures do not rescue them from disaster.
  • Energy prices have taken a beating and while it is likely some of the larger companies will be able to ride out the decrease in sales and lower prices there is a high probability some regional energy companies, particularly those who have been forced to work with smaller profit margins may have to consider bankruptcy and close their doors for good.
  • In the car rental sector, another notable name was HertzCorporation. The company also owns other rental car brands including Dollar and Thrifty. In May, they filed for Chapter 11 protection and most recently, they changed CEOs for the fourth time in six years.
  • Another sector which has been ravaged by closedowns is personal gyms and training facilities. 24 Hour Fitness and Gold’s Gym have both filed for Chapter 11 protection and neither is expected to be able to rebound from the shutdown.
  • Restaurants have been hit particularly hard by COVID-19 restrictions. CEC Entertainment (Chuck E Cheese), California Pizza Kitchen, Sizzler USA, Ruby Tuesday, Friendly’s Restaurants and FoodFirst Global Holdings, the parent company of restaurant chains Bravo Cucina Italiano and Brio Tuscan Grille all have filed for protection and in some cases, have committed to closing all or some of their remaining locations.

Red Flags for Getting Back to Business

Slower holiday sales are anticipated this year for a number of reasons. Currently, many states are actively encouraging people to not open up their homes to people outside, even family members to help stop the spread of COVID-19. Additionally, many are uncertain about how long they will have to wait before they return to full employment, or whether they will have a job come January of 2021. Uncertainty at how much government assistance is available, and other factors will likely continue to slow consumer spending.

Black Friday sales and other holiday sales often serve as a warning signal for the economy. In-store sales dropped an unheard-of 52 percent while online sales increased 22 percent. This may indicate more consumers started shopping earlier or may be saving money and buying less. If this holds true, we could see unprecedented business closures post-holiday season as businesses begin to evaluate their financial outlook for 2021 and make decisions about where their focus should be.

Getting Back to Business in 2021

Reopening the doors and being ready to meet the challenges of 2021 may only be the tip of the iceberg. Unemployment numbers, which tapered off from the high level of 14.7 percent in April of 2020 currently sits at about 6.7 percent, an amazing improvement. However, many of these numbers can be deceptive because some of the people currently unemployed may not have jobs to go back to because their businesses no longer exist. In some industries, there have been complaints from employees because they have been told that should the company reopen, they will have to reapply for their jobs versus being guaranteed a job. This is a recipe for disaster for businesses and for individuals. Keep in mind, these numbers also do not reflect employees who may currently be “furloughed” versus laid off.

For those businesses who are facing COVID-19 slowdowns, dealing with reopening, and still facing an uncertain future, going into debt could exacerbate any issues they were facing before the pandemic. One problem many businesses have faced, cash flow issues, will likely continue into early to mid-2021 whether restrictions on opening hours and capacity are lifted. Demand over the holiday season will help some businesses, but only if they can take advantage of the demand for delivery of services direct to consumer, or direct to businesses who are dealing directly with consumers. For those business owners, the need for ready access to capital to fund materials purchases will be the key to keeping their doors opening and avoiding the need to consider bankruptcy or exchanging equity in their company in return for capital to fund growth.

Financing New Growth and Demand Needs for 2021

Unfortunately, one other side effect of the pandemic is while interest rates have remained low, the credit markets still offer little relief for small and mid-sized business owners. Even with low rates, small business lending continues to be a challenge with fewer small business loans being granted. During the second quarter of 2020, small and mid-sized business lending decreased, when in reality, it was probably needed more than ever.

To avoid needing to seek protection under the bankruptcy code, many small and mid-sized businesses, particularly those which are in already underserved markets such as entertainment, staffing, and contractors will need customized solutions to their cash flow problems. At Capstone, we offer that flexibility. We can help your small to mid-sized business find a financing solution that helps you bridge the cash flow gap between now and the vaccine being more widely distributed allowing businesses to return to normal operations. Contact us today and let us help you find a solution that works for your business so you have the capital you need to survive through these uncertain economic times.

Available for Immediate Download: Payment Protection Program Loan Forgiveness Guide

12:23 13 October in Blog, Business Financing
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Every business in the United States faced some form of setback during the COVID-19 forcing shutdowns and slowdowns. In response, millions of business owners were forced to seek out additional sources of capital. Fortunately, the Paycheck Protection Program (PPP) was available to millions of small businesses.

The Paycheck Protection Program launched with some confusion about how to apply, what the criteria was, and how the loans would eventually be forgiven. For this reason, many business owners are still uncertain about the process necessary to turn these loans into grants.

For those who took out loans under the PPP including those in construction, manufacturing, wholesale and retail trade, and transportation and warehousing now have to be ready for their next big challenge — applying for loan forgiveness.

Some who were able to successfully borrow money under this program, there were also several changes meant to make it easier for businesses to use the program. This also meant that those businesses who obtained funds during the initial funding windows may not be aware of what steps they have to take to ensure their loans are “turned” into grants instead.

The 24-week period for applying for the forgiveness of the loans is quickly approaching for most businesses.

To help business owners — including tribal businesses, those who were self-employed, independent contractors, nonprofits which met specific criteria and more — navigate the unprecedented challenges you are facing, download our white paper, Payment Protection Program: Loans Forgiveness which will help guide you through the process to make sure you are fully prepared for the future.

Available For Immediate Download: Restarting Your Business After COVID-19 Mandatory Shutdown

09:27 18 September in Blog, Broker Resources
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The last thing you need is to have your business collapse after working tirelessly during these lockdowns to stay prepared. Now that you are ready to reopen, you want to make sure you are prepared for any challenges that may come your way.

Capstone Capital Group, LLC wants to help you make sure your planning is flawless, which is why we are offering this free guide to help you get back to business on a sound financial footing.

This guide provides you with the tools to:

  • Assess the state of your business and customers
  • Plan a strategy that will keep your business on course for success
  • Implement your strategy through a series of steps 

All of this is meant to guide your business and your customers through the challenges of restarting your business in this post-COVID world.

Download this free guide now and get access to our limited monthly newsletter to which thousands of professionals rely on for an in-depth monthly analysis of the state of the North American Business Finance Industry.

Download Now

2020 Global Factoring Report

13:31 14 August in Blog
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During 2014, more than $3,000 billion dollars changed hands between businesses and companies who provide factoring. A 2019 study recently published by Reports Monitor (RM) determined that by 2026, more than $4,600 billion will be handled in this manner.

The data in this study shows other information which is fascinating when you consider the past and future potential for factoring including the geographical areas where businesses use factoring. In fact, there are very few businesses that take advantage of this unique type of financing. Geographically, the following percentage of businesses use factoring:

  • North America 2.1 percent
  • Europe 5.3 percent
  • Asia Pacific 5.4 percent
  • Latin America 4.5 percent
  • Middle East and Africa: 3.3 percent

Overall, this is a relatively small percentage of the businesses who could benefit from this type of financing.

Use of and Reasoning For Factoring

This study also shows that nearly 79 percent of all factoring is done by small and medium-sized businesses. Despite the small percentages of businesses who rely on factoring, over the years, the largest growth rate use of factoring is within small and medium-sized businesses. These business owners often face the biggest challenge in getting more traditional financing and often have the most struggles with cash flow.

This study goes on to talk about why factoring is so beneficial to these business entities in specific and have a significant impact on company growth. Some of these reasons include:

  • Not taking on debt — one of the challenges many business owners face is having well-established banking relationships. Even when they have excellent banking relationships however, they often do not have the balance sheets which will allow them to have a loan approved quickly.
  • Need for immediate cash flow — when cash flow is drying up, business owners still must pay their employees, need cash on hand for bidding on contracts and acquiring materials, and have monthly obligations to pay. While a traditional loan can take weeks, or months to get approved, factoring offers near-immediate cash flow to the business.
  • Costs of doing business — while there are costs associated with factoring, one way a company saves money with factoring is the elimination of the need to collect payment on invoices. Because factoring companies are buying your invoices, they also take responsibility for the collection of those invoices.

A Glimpse into the Global Factoring Market

More than 65 percent of the global factoring market is in Europe. These markets skyrocketed during the recession and are now showing signs of slowing. In the United States, factoring declined seriously through 2018, a result of fraudulent activities which many were slow to react to. Asia and other emerging markets will likely continue to see an increase in the use of factoring as more business owners get engaged in growth in these markets. What is particularly fascinating is the number of companies that offer factoring services in various regions. Keep in mind, in many global markets, factoring is dominated by big banks. Here’s how the number of factors looks globally:

  • Europe 646
  • Asia-Pacific 5,133
  • North America 764
  • Middle East and Africa 59
  • Latin America 744

With tighter banking regulations, better security, and blockchain technology, the growth potential exists in the factoring market.

How the Current Markets May Impact Factoring

Business owners who have been shut down during the COVID19 pandemic are only beginning the reopening process. Many of them are facing unprecedented challenges including operating at a smaller capacity. Because there is every reason to believe this pandemic will put downward pressure on demand, more business owners will be searching for creative ways to keep their doors open and continue to grow. Factoring may provide that opportunity.

Currently, none of us has a magic ball which will tell us how business owners will survive the current downturn in consumer demand. We also cannot determine what will happen to lending restrictions once demand picks up. What we do know is that business owners will all have overhead costs to pay including salaries, taxes, and will need to purchase materials for their business.

Factoring growth in the United States has been much slower than other corners of the globe but during the upcoming period where businesses may face unprecedented challenges, this could provide an opportunity for factoring in the United States to exceed growth expectations.

 

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