Bank Financing Tag

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.

Banks Threatened as Lending Leaders - Capstone Financing

Banks Threatened as Lending Leaders?

16:21 07 December in Blog
90

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.

Banks Attempt to Finance Small Businesses Fall Short - Capstone Funding

Banks Attempt to Finance Small Businesses Fall Short

16:31 24 November in Blog
90

Banks Attempt to Finance Small Businesses Fall Short - Capstone FundingSince the financial crash, small loans have represented a decreasing percentage of banks’ overall business. Banks are hesitant to work with small businesses, and—naturally—small businesses are hesitant to borrow from the very same lenders who many believe caused the crash in the first place. Trying to improve the state of affairs, banks have now begun a method of financing small businesses called supply-chain financing. On the surface, this may seem like a positive development for small businesses, but optimism simply isn’t borne out by the facts.

Banks Trying to Support Small Business

In supply-chain financing, a bank purchases the receivables from a company’s smaller supplier and pays them early, giving the company more working capital and flexibility. A company receiving supply-chain financing may receive funds in one month that they need to pay their bills in sixty days’ time, for example.

Problems with Supply-Chain Financing from Major Lenders

In the wake of the financial crash, increasing government oversight, the passage of Dodd-Frank, and the creation of the Consumer Financial Protection Bureau, small businesses have found financing options from major banks and credit unions all but dried up. Those who do manage to qualify for financing have found their service clunky, slow, and inefficient. The problem with supply-chain financing from large banks and credit unions is simple: they’re not truly designed to meet the needs of small businesses. Banks charge interest for the service, usually basing it on the borrowers’ credit, not the credit of their suppliers. As a result, Wells Fargo, Citigroup, and J.P. Morgan Chase & Co. have primarily extended supply-chain financing to large companies—the very same companies that have made it difficult for small businesses and minority contractors to compete. Another problem with supply-chain financing from major lenders is that, because they offer government-secured financing, the paperwork and credit checks needed to qualify often take far too long.

Capstone’s Diverse Financing Options

Small businesses who borrow from traditional lenders take on significant credit risk. Capstone provides personalized service and tailored business funding solutions to meet our clients’ needs. We recognize that many minority contractors, small manufacturers, and small businesses don’t have excellent credit, despite the fact that they have huge opportunities for growth. Our diverse small business funding strategies base creditworthiness on the credit of our clients’ customers, not our clients themselves. This allows us to provide our clients with far more financing than if we lent to them directly.

Bank Loan or Invoice Finance

Bank Loan or Invoice Finance: What’s Best for You?

01:53 12 October in Blog
110

Bank Loan or Invoice FinanceHere is the situation: unexpectedly, you receive a huge product or service order. Besides the huge profit you’ll net by filling the order, you’ll also be establishing a business relationship with a desirable client. There’s just one problem: you don’t have the funds to buy the materials or pay your workers to complete the order!

Do You Really Need a Loan?

It’s in situations like this that business owners don’t hesitate. Nobody likes the notion of going into debt, but small business owners know that it’s part of the formula for success. The order is more important to the business’s future than going into debt. Taking calculated risk is what sets them apart from less enterprising individuals. The question is, should you get a bank loan or a get funding from personal invoice financing?

Bank loans are probably more common, but that doesn’t make them better. Until recently, taxis were the only way to get from point A to point B if you didn’t have a car, and hotels and motels were the only place to stay if you were in from out of town. There was a need in the market for alternatives, and Uber and Airbnb filled the niches. The same is true with single invoice finance.

Though bank loans are more common, single invoice finance offers some distinct advantages that you should know before making your decision.

Advantages of Single Invoice Finance

• Receive funding immediately
• Bank loans can take several weeks for approval, whereas single invoice finance can get you funds within 24 hours.
• Repayment is made by your customer
• Less paperwork
• Use only the invoice you are factoring for collateral
• Fewer fees
• Your credit is not important, your customer’s credit is important
• Once your customer pays the invoice, the contract is terminated.
• Won’t show on your balance sheet

Selling an invoice is selling money that technically belongs to you. It’s your asset, and therefore it doesn’t have to be noted on your balance sheet.

Get in touch with Capstone Capital Group and get in the game with factoring, funding, and financing. For more industry insights, read our previous blogs.

Bank Loan or Invoice Finance

Bank Loan or Invoice Finance: What’s Best for You?

21:53 04 September in Blog
130

Bank Loan or Invoice Finance

Here is the situation: unexpectedly, you receive a huge product or service order. Besides the huge profit you’ll net by filling the order, you’ll also be establishing a business relationship with a desirable client. There’s just one problem: you don’t have the funds to buy the materials or pay your workers to complete the order!

Do You Really Need a Loan?

It’s in situations like this that business owners don’t hesitate. Nobody likes the notion of going into debt, but small business owners know that it’s part of the formula for success. The order is more important to the business’s future than going into debt. Taking calculated risk is what sets them apart from less enterprising individuals. The question is, should you get a bank loan or a get funding from personal invoice financing?

Bank loans are probably more common, but that doesn’t make them better. Until recently, taxis were the only way to get from point A to point B if you didn’t have a car, and hotels and motels were the only place to stay if you were in from out of town. There was a need in the market for alternatives, and Uber and Airbnb filled the niches. The same is true with single invoice finance.

Though bank loans are more common, single invoice finance offers some distinct advantages that you should know before making your decision.

Advantages of Single Invoice Finance

• Receive funding immediately
• Bank loans can take several weeks for approval, whereas single invoice finance can get you funds within 24 hours.
• Repayment is made by your customer
• Less paperwork
• Use only the invoice you are factoring for collateral
• Fewer fees
• Your credit is not important, your customer’s credit is important
• Once your customer pays the invoice, the contract is terminated.
• Won’t show on your balance sheet

Selling an invoice is selling money that technically belongs to you. It’s your asset, and therefore it doesn’t have to be noted on your balance sheet.

Get in touch with Capstone Capital Group and get in the game with factoring, funding, and financing. For more industry insights, read our previous blogs.

Lawmakers Continue to Turn Up The Heat On Big Banks

20:49 16 October in Blog
170
In a recent hearing before the Senate Banking Committee, lawmakers continue to call for increased regulatory reform from regulators in an effort to reduce the risk big banks pose to the U.S. financial system. 
 
A distinction was made between large banks and other financial institutions. Several senators encouraged regulators to lessen the burden, or possibly exempt, certain insurance companies and small to midsized banks from aspects of Dodd-Frank.
 
Sen. Bob Corker (R., Tenn.), for instance, called on regulators to take whatever steps necessary to make certain these banking institutions are not too complex so as not to be resolved through bankruptcy. 
 
Other senators praised the Federal Government for promising to raise the capital requirements on the largest U.S. banks.  According to Sen. Sherrod Brown (D., Ohio), there is a great deal of support in both the house and senate to implement stronger capital standards.  Such standards could require big banks to retain additional earnings in order to build capital they would use to fund lending rather than allocating such earnings to their shareholders. 
 
Banking executives believe that capital rules for the largest U.S. banks are already too high.
The senators’ frustration regarding Wall Street banks were further expressed in the hearing by Sen. Elizabeth Warren (D., Mass.). She inquired as to why individual bankers were not being held accountable for their nefarious actions which lead to the financial crisis.  Ms. Warren’s concern is that lack of criminal prosecution may send the message that you can break the law, get away with it, and receive a bigger paycheck. 
 
With lawmakers continuing their efforts to put pressure on regulators to come down hard on banks, the ones that ultimately suffer are those looking to banks for capital.  Individuals and small business owners who rely on bank financing may find it more difficult to obtain the loan they so desperately need in order to make payroll or expand their business.  
 
As lawmakers continue to apply pressure on regulators to impose more stringent requirements on the banking industry, it is clear small business and working capital loans will become ever more difficult to acquire. Capstone Capital Group, LLC understands the concerns of commercial borrowers who are considering bank financing.  Accordingly, we offer various business finance options, including “Single Invoice Factoring” which functions as a safer alternative to traditional, and often times unpredictable, bank financing. 
 
Our underwriting guidelines are simple, straightforward and not subject to stringent regulatory oversight and control.Capstone Capital Group, LLC specializes in Purchase Order factoring, Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group.  Give us a call today to find out how we can help you.

Citigroup, Other Big Banks Pass Midterm Stress Test

17:28 14 October in Blog
190
The nation’s largest banks continue to prepare for exams to be conducted by the Federal Reserve next year. These exams are to determine whether they have the financial strength to handle a severe downturn akin to the 2008 financial crisis.

Under the 2010 Dodd-Frank financial law, the nation’s too-big-to-fail banks are required to run themselves through stress tests designed to ensure that they can weather another financial crisis. They do this by determining if they have sufficient liquid capital to handle some hypothetical worst-case scenarios. The “stress tests” are the Fed’s way of mitigating against another dismal performance by the banking sector in response to a financial calamity.

Citibank, Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and others have been war gaming in preparation for the official Federal Reserve stress-tests. This round of tests is particularly important for Citigroup, which has had two requests for approval to return capital to shareholders rejected by the Fed. While Citigroup met the Fed’s capital requirements this year, the central bank expressed concern about the company’s competence in measuring the risks facing its global operations.

The Fed uses the so-called Tier 1 common capital ratio as its measure of a bank’s ability to buffer itself against another severe economic downturn. Federal regulations require that banks maintain a minimum of 5% common capital. Citibank chose a hypothetical sharp decline in emerging-market currencies as its doomsday scenario. Defaults by its sister banks in the Far East, and weaker housing markets throughout the region, it assumed, would subsequently occur. It predicted that its ratio would fall to 8.4% under that scenario. The bank’s projected ratio was 9.1% under the stress-test it conducted last year.

J.P. Morgan Chase and Morgan Stanley passed their own midterms with solid results. J. P. Morgan Chase predicted its capital levels under a hypothetical economic downturn would be 8.4%, down from 8.5% a year ago. Morgan Stanley projected its ratio would fall to 8.9%, down from a 9.5%. Bank of America Corp. said it would have the same capital level – 8.4%- that it had last year under a stressed scenario, but said it took on tougher hypotheticals on some fronts.

Goldman Sachs and Wells Fargo & Co predicted they would be in a better position to navigate strong financial headwinds than they were. Goldman pegged its estimated ratio at 10.1%, up from 8.9%, and Wells Fargo predicted its ratio would be up from 9.6%to 9.9%. The Federal Reserve’s annual stress-testing process typically concludes sometime in spring.

As big banks continue to shed riskier investments in order to pass the government’s stress test, small business will most likely suffer.  This is because small business loans may be subject to increased risk ratings making borrowing more difficult. Capstone Capital Group, LLC understands the concerns of commercial borrowers who are considering bank financing.  Accordingly, we offer various business finance options, including “Single Invoice Factoring” which functions as a safer alternative to traditional, and often times unpredictable, bank financing.  Our underwriting guidelines are simple, straightforward and not subject to stringent regulatory oversight and control. Capstone Capital Group, LLC specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group.  Give us a call today to find out how we can help you.

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