How New State Disclosure Regulations Negatively Affect Funding Options for Your Clients

The New Year ushered in the implementation of newly inked commercial finance disclosure regulations (“CFDR”) in New York, Utah, and California. At least nine states across the country have, or are considering, consumer-style disclosure requirements in the form of disclosure bills, disclosure laws, and disclosure regulations.  The New York State Department of Financial Services announced disclosure regulations for NY’s Commercial Finance Disclosure Law  effective August 1, 2023, while compliance with California’s and Utah’s CFDR became effective January 1, 2023.

CFDR legislation has far-reaching implications for lenders, commercial finance companies, financial brokers/ISOs, and small businesses. It encompasses the full range of commercial financial products, including closed-end transactions, open-end credit plans, invoice factoring and sales-based financing, lease financing, asset-based lending transactions, and MCAs.

Providers of commercial financing will now be subject to new laws and regulations requiring that they provide consumer-style disclosures for transactions, and brokers will be responsible for fulfilling certain steps in the disclosure requirements.

Original Intent of Disclosure Regulations

The original intent of the disclosure regulations was to provide Truth in Lending-like disclosures which were designed to protect clients (small businesses), and curb predatory lending practices. 

These new disclosure requirements are modeled after the disclosures required for consumer credit transactions in the Truth in Lending Act (“TILA”) despite the significant differences between the terms of consumer and commercial credit transactions. The disclosure regulations overlay consumer-style loan disclosure requirements onto commercial finance transactions which will result in negative consequences for all the parties involved – clients, providers, and brokers.

Negative Impacts on Small Businesses

Legislators, well intentioned as they might be, seem to be interpreting laws without having much knowledge of the industry.  Accordingly, there are bound to be significant problems because of this. Legislators may think that TILA concepts are applicable to all financial transactions, but they do not translate exactly in the context of commercial finance transactions like sales-based financing and accounts receivable factoring transactions. These types of transactions do not typically have fixed terms or easily calculable payment amounts and APRs.  In some instances, the calculations are impossible and only create confusion for all parties. 

Non-bank commercial lenders and financial service companies simply do not have experience complying with consumer-style disclosure regulations.  This one-size-fits-all approach to regulating consumer and commercial finance transactions will have a number of negative impacts, including:

• CFDRs will freeze many small businesses out of the commercial finance market and limit their financing and business funding options.
• Lenders and financial service providers will pull out of some states altogether and will not be able to provide service anymore.
• Lenders won’t want to risk being penalized for funding small transactions. In New York for example, the Department of Financial Services can impose a civil penalty of $2,000 per violation of the CFDR and $10,000 per willful violation.
• CFDRs will impact underwriting practices and slow the process down.
• The regulations add lender/ provider compliance hurdles which increase costs and reduce incentives to provide some financial products and service segments of the market.
• Brokers may not be able to find business funding for their clients in certain markets.
• Fees charged by brokers may have to be disclosed to the client.
• Disclosures would be inaccurate or misleading in some cases and confusing to clients which can lead to loss of business.

Scope of Commercial Finance Disclosure Requirements

The  disclosure regulation’s definition of “providers” in commercial financing is overly broad and includes all types of providers of commercial finance and business funding transactions currently available in the market.

In California and New York, there are disclosures for each type of commercial finance product. They are very specific and differ depending on how the transaction is classified. Disclosures must be made at the time of extending a specific commercial financing offer (when an offer is quoted to the recipient and prior to funding), and they must be signed by the client and returned to the broker or provider.

Disclosure requirements are ongoing for every transaction over the client relationship however general exemptions are provided for large-dollar commercial loans or transactions. The exemptions will also differ by state.  In New York, for example, the statutory threshold is transactions in amounts up to $2.5MM while in California that amount is $500,000. Thresholds like these leave small businesses to bear the brunt of the regulations. 

Brokers are not responsible for the content of disclosures, but they are responsible for relaying the disclosures from the provider to the client, obtaining signatures, delivering signed disclosures back to the provider, and in California, retaining records.

If a broker is involved, a copy of the broker disclosure must be provided with the other disclosures. Providers may need to include warranties in the broker agreement and discontinue relationships with brokers who engage in a pattern of noncompliance with disclosure regulations.

The ink is barely dry on the new disclosure regulations so a lot of interpretation will follow from the outcome of lawsuits that will be filed by members of the industry. Brokers will need to be among the parties that need to know the latest developments.

There has been a lot of pushback from the industry with lenders even filing suits contesting California’s regulations. Commercial finance companies find it extremely difficult to have multiple financial products under one umbrella and utilize a uniform financial disclosure. It’s overly ambitious by lawmakers to try and loop all these financial products into one.

For example, invoice factoring is not a loan but yet falls under the same umbrella of a finance transaction according to the CFDR.  Invoice factoring represents a true sale of an asset so therefor there is no meaningful APR to be calculated and there is no defined transaction term. A factoring fee is charged which is not the same as a typical finance charge in a loan type transaction. Payment on the accounts receivable is made by the client’s customer (account debtor) and not by the client.  Factoring is a completely different financial product with many variables.

There are many important unresolved issues, including definitions, calculations, and thresholds. Required calculations are mathematically impossible to provide in certain instances, or too costly to generate.

Required Disclosures for Invoice Factoring Transactions

CFDRs generally require disclosures for the following:

• Funding provided – The amount financed: This is how much the provider will disburse when the client factors an invoice with the provider.
• Annual Percentage Rate – Calculation of APR: This is the estimated cost of the client’s business funding expressed as a yearly rate. APR seeks to include the amount and timing of the funding the client receives, the fees the client pays, and payments made to the provider. 
• Finance charge – Total finance charge: The calculation of the finance charge, with the amount and description of each expense (e.g., factoring fee, origination fee, etc.) that is included in the finance charge.
• Payments – Amount, frequency, and method of payment.
• Estimated term – Term of transaction: A short explanation describing how the provider calculated the term.
• Prepayment terms – Description of prepayment policies and how the prepayment amount is calculated.

There are also general disclosure requirements, including formatting, font size, columns, rows, and mandatory language.

Disclosures must be included when the provider communicates a specific offer directly to a client or to a broker with the expectation that the broker will share the offer with the client.

These regulations also include provisions for fines, penalties, and cease and desist orders. Willful violations may actually be considered a crime. Each state with disclosure regulations has not released an actual template for the disclosure, which is telling, and it has also been extremely difficult for commercial finance companies to obtain guidance.

Brokers/ISOs Need to Work with Knowledgeable Financial Service Providers

Because the disclosure regulations are so new, much interpretation will come later, which is not a comfort to providers or brokers who need to start complying now.  Brokers/ISOs need to stay up to date on CFDRs to be in compliance, and be able to explain required documents and language to clients. Working with a knowledgeable financial service provider can help you understand the requirements of the new disclosure regulations so you may continue to grow your book of business. 

Please contact Capstone today at (212) 755-3636 to see how we can help you to better serve your clients and navigate the newest requirements in commercial finance disclosure regulations.  

Broker Resources: Getting the Most for Your Minority-Owned Business Clients

If you have a client that is a minority-owned small business, you may have learned the hard way that equal opportunity may not always apply to ease of access for business funding options. Minority-owned small businesses, also known as Minority Business Enterprises (MBEs), grew by 79% between 2007 and 2017, to approximately 11.1 million businesses, about 10 times faster than the overall growth rate for U.S. small businesses during the same time period.

Despite the rapid growth and significance of MBEs in the U.S. economy, these business owners continue to have more difficulty accessing traditional financing, capital, and other resources for their small businesses. MBEs are much less likely to be approved for small business loans than businesses that are not minority-owned, and if they are approved for financing, MBEs are more likely to receive lower amounts and higher interest rates. This can be due to a few reasons, including lower net worth, lack of assets, a business located in an underserved area, weaker credit history, and other tangible or intangible barriers.

In this article, we’ll cover a few organizations and resources that can help your MBE clients obtain the assistance they need to grow and prosper and discuss why alternative business funding may be the right solution to their working capital needs.

Resources and Funding Alternatives

Some resources and funding alternatives available to MBEs come from a variety of sources in a number of forms, including:

Federal Resources

Minority Business Development Agency (MBDA) – This agency was created to encourage the creation and growth of MBEs.

The Small Business Administration (SBA) – The SBA is an agency of the Federal Government and one of the largest loan guarantors in the U.S. They offer several programs aimed at helping small businesses, including the SBA 8(a) Business Development Program and SBA 7(A) loans. SBA 7 (a) loans are the most common type of SBA loan. They are low-cost loans of $5 million that can be used for working capital, equipment purchases, etc.

Another SBA loan program is the Community Advantage (CA).  Community Advance is a pilot loan program that is designed to meet the needs of businesses in underserved communities that may not meet the requirements for a traditional loan.  Loans range up to $250,000 from lenders such as community organizations, certified development companies, microloan program intermediaries, as well as nonprofits.  The SBA guarantees loans up to 85% of the amount.

Grants and other Federal Assistance – There are many government grant programs available for MBEs to take advantage of.  They include:

• Grants.gov
• USDA Rural Business Development Grants
• The Coalition to Back Black Businesses
• USDA Water & Waste Disposal Loan and Grant Program
• Minority Business Development Agency

Local Government Centers

Many states and cities have business programs and centers with minority-oriented financial education and networking programs.

Minority-Owned Small Business Associations and Organization

Asian Business Association (ABA) – organization representing divergent groups of Asian American business owners that offers business training and education to its members.

Black Business Association (BBA) – advocacy organization that offers networking and procurement resources to Black-owned businesses.

National Hispanic Business Group (NHBG) – association that provides networking and business opportunities to its Hispanic members.

Private sources such as ACCION, a microfinance organization that supports Hispanic and other MBEs through micro-loans of up to $50,000.

Alternative Financial Resources for Long-term Success

Commercial loans and revolving lines of credit from banks or other traditional lenders may not be an option for MBEs because they lack the assets required for collateral, have limited or poor credit history, and often may be located in underserved communities. 

Therefore some MBEs may seek out financing through friends and family. They may even feel pressured to reach out to private investors and offer a piece of equity in their business or seek business funding through hard money lenders, credit card advances, and merchant cash advances (MCAs).  These options may be available to the business owner but, in the long-run, could potentially damage the business financially as they typically come with high-interest rates and create a never-ending cycle of debt. 

There are other options that MBE business owners can consider including invoice factoring and purchase order (PO) financing.  Both have the potential to provide working capital on relatively short notice.  The conversion of accounts receivable into immediate cash flow through invoice factoring makes sense for MBEs from a practical point of view. Here are some reasons why:

• No new debt on their balance sheet
• No need to give up equity in the business
• Personal liability is limited
• The MBE business owner retains control and flexibility – can factor all their invoices or only specific ones
• The fastest method of obtaining working capital for immediate business needs
• Approval is based primarily on the financial strength of the MBE’s customers, not the credit profile of the client 

While traditional financial institutions prefer to lend to businesses with only positive financial performance, stable cash flows, and predictable revenues, invoice factoring 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.  The approval process is simpler and faster than the underwriting process at a bank or traditional lender. 

Financial brokers/ISOs can help their MBE clients to grow and prosper by making them aware of the other resources and funding alternatives available to them including solutions through Capstone.  Capstone is a leader in customizing business funding plans for businesses in wide range of industries to help them meet their working capital needs.  For more information on how to join Capstone as a broker and referral partner, call us at (212)-755-3636.  

Understanding Client Due Diligence

A key component of being a successful financial broker or independent sales office (“ISO”) is understanding the process that prospective clients go through once you identify and refer a client to a factoring company. 

The process, known as due diligence, is key in qualifying a client for an invoice factoring program and continuing to fund a client’s working capital needs on an ongoing basis. Understanding this process will ensure due diligence requests are handled smoothly, thereby increasing the likelihood of the client being approved and also saving you time, and helping you close more transactions.

In this article, we’ll review what due diligence is, what it entails, and why it is important to brokers for new and existing client relationships.

What Is Due Diligence?

Due diligence is the term given to an investigation that provides reassurance that a financial transaction is fair and true before completion.  Due diligence in invoice factoring involves the review of prospective clients’ financial, legal and other relevant business information to determine if they meet the factoring company’s criteria for funding their working capital needs.

Due diligence can differ depending on the type of business funding required. Clients may have gone through other due diligence processes for business loans, real estate mortgages, or other types of financing. The due diligence process for invoice factoring is less complicated and time-consuming than the process for other forms of funding.  Prospective clients should understand this difference. It will help them overcome concerns they may have and make the process easier for everyone concerned.

What Does Due Diligence for Invoice Factoring Entail?

With invoice factoring, due diligence represents one of the most important preliminary steps before proceeding with a transaction.  There is no one size fits all approach for client due diligence so certain aspects of the process may vary depending on the amount of funding required, the client’s industry, the complexity of the transaction, and other associated risks.  

The process begins with a client submitting the documents requested by the factoring company, in this case, Capstone. The documents requested usually include the following:

• Factoring application – The application should be filled out as much as possible, without errors, and include any additional forms with all necessary supplemental documentation to avoid delays
• Legal documents – The documents should include business formation documents, information on incorporation, lawsuits the client is a party to, outstanding judgments, tax issues, and liens
• Business owners – Information on individuals that own the business/ are officers of the company, including copies of driver’s licenses or other personal identification.
• Business offices, warehouses, and manufacturing locations – Addresses, descriptions, and other relevant information
• Accounts receivable and accounts payable aging reports
• Customer list – Information on contacts, location, sales volume, and payment history. The credit history and background of customers are reviewed. Customer credit history and financial strength are key factors in determining whether a factoring program is approved
• Copies of invoices to be factored
• Copies of contracts or purchase orders to match the invoices – Including supporting backup, bonds, and shipping document samples
• Other information – Depending on the client’s industry and the complexity of the transaction, this may include a professional license, proof of insurance, etc.

Upon receipt of the application packet, due diligence material, and due diligence fee, Capstone will begin legal documentation due diligence, account underwriting, and file a UCC-1 lien on the business. 

Company searches and background checks are done to look for issues that may be problematic and require additional steps to resolve. Accounts receivable liens, bankruptcy, tax issues, and legal problems are examples of items that may require further action to clear them so that a factoring program can move forward. 

Capstone will review the nature of the client’s business and transactions along with the customers that are served. The client’s invoices must be for B2B transactions with creditworthy entities in order to be eligible for factoring. A verification step is also performed on the invoice to confirm the validity of the account receivable.   

Certain types of transactions may also not be eligible for factoring, including sales that are contingent on the client’s customer reselling the merchandise or being paid for the product and guarantees to return unsold inventory. In these situations, agreements with customers will need to be revised for the invoices to be factored.

Due diligence can be completed in a few days or require a week or more. It all depends on the state of the client’s business is formed in, the complexity of the client’s business or industry, and how prompt the client is in providing complete information and responding to questions.

Importance of Due Diligence

Due diligence in invoice factoring is essential for several reasons. Determining upfront if a client is suitable for invoice factoring saves brokers/ISOs from wasting valuable time onboarding prospects that cannot be approved. It also reduces the likelihood that clients will have problems after approval, which may require additional attention beyond the normal demands of an invoice factoring relationship. Understanding what due diligence entails will increase the speed and efficiency of the process, which can improve the likelihood of the client being approved. This is especially important if the transaction or client’s need for business funding is time-sensitive.

Factoring companies rely on due diligence to avoid problems and financial losses from relationships with clients that are not suitable for invoice factoring. The due diligence process is not designed to be harmful to either the client or the factoring company. Negative information found is very often shared to give the client the opportunity to explain what happened.   

Due diligence helps identify red flags, prevents fraud, reduces the risk associated with the transactions, and also helps to keep factors financially healthy so they can continue to provide working capital funding to qualified businesses. Identifying problems and risks and devising solutions to these issues helps manage the risk involved.

Due Diligence Is an Ongoing Process 

Due diligence is part of the ongoing healthy factoring relationship with a client. After a client is approved for an invoice factoring program, circumstances may change. Economic recessions, natural disasters, geopolitical events, pandemics, and other factors can negatively impact a client’s business and financial health. 

Factoring companies use a number of resources to monitor a client relationship on an ongoing basis. Keeping track of clients helps to ensure a healthy factoring relationship and alert factors to situations that may require actions to help the client.

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Due diligence is an initial and ongoing process of reviewing a client’s financial, legal, and other critical business information to ensure a healthy factoring relationship.  As a factoring broker, your deal referrals will flow smoothly when you understand the deal submission steps and due diligence process.  Capstone has experienced personnel who will work with you and the prospective client to be sure the qualification, due diligence, and onboarding processes are handled professionally and efficiently every step of the way.  Please review our broker resources and give us a call at (212) 755-3636 to learn how we can help you close more deals.

The Impact of Fintech on Financial Brokers

If you are a financial broker or ISO, fintech has undoubtedly shaped your brokerage’s business practices as more financial service providers incorporate new technologies to alter how they interact with clients as well as originate and fund transactions.

In this article, we’ll discuss what fintech is, where it is headed with new technology and applications, and the emerging challenges and opportunities on the horizon for financial brokers and ISOs.

What Is Fintech?

Financial technology (more commonly known as “Fintech”) is a catch-all term for technology used to automate, streamline, digitize or disrupt traditional financial services.

Fintech has been around for ages however it wasn’t until the 2000s that it really picked up momentum and, in the modern sense, came to refer to software, algorithms, and applications for devices connected to the internet, including computers, tablets, and smartphones. Fintech platforms facilitate day-to-day tasks such as routine banking transactions, money transfers, bill payments, and online trading of securities to name a few. Fintech also enables technically complex transactions, including online personal and business loans, mortgages, real estate purchases, and sales, peer-to-peer (P2P) lending, and cryptocurrency exchanges.

Electronic payments, money transfers, wealth management, loans, mortgages, real estate transactions, insurance, cryptocurrency, and many other financial transactions have been impacted by fintech. 

According to Ernst & Young’s latest Global Fintech Adoption Index, 64% of the world’s population was using fintech applications in 2019, up from 16% in 2016.  Fintech has leveraged software and hardware technology tools to reduce the time required to complete financial transactions and slashed cost, making them more accessible for vast numbers of individuals and businesses around the world.

The Future of Fintech

Fintech will continue to be driven by new and improved technology that will further accelerate the speed of financial transactions, increase efficiency, reduce processing costs, and improve client and customer experience.

Some developments on the horizon include:

• Further digitization of financial transactions, particularly in the banking sector.
• Use of blockchain technology in financial transactions.
• Smart contracts which digitize contract signing, language, and execution of contract terms.
• Additional use of artificial intelligence (AI) predictive capabilities in decision-making processes and automated suggestions to speed transactions and improve client and customer experience.
• Peer-to-peer matching of users of financial products and services with financial sources.
• Further use of cryptocurrencies in financial transactions.

These advances will pose challenges that financial brokers and ISOs must adapt to prosper in a rapidly evolving financial landscape.

Challenges for Financial Brokers and ISOs

Financial brokers and ISOs will face increased challenges from disintermediation, technology, and regulation as a result of fintech development. 

Disintermediation

Advances in fintech will continue to make it easier and less costly for financial service providers to go direct to clients and customers instead of through an intermediary.  This will gradually eat away at a broker’s client base and will leave some brokers scrambling to position themselves as the go-to intermediary.  Intermediaries may find they have to adjust their business practices by leveraging technology and catering to their clients’ changing needs and preferences to remain relevant. From chatbots and mobile apps for loans, to peer-to-peer crowdsourcing, many financial service companies are looking to connect directly with customers in new ways. These changing points of client contact are redefining the industry and increasing competition.

Technology

With significant technological changes within the financial services industry, there is no doubt a shift towards the use of digital platforms.  The rise of fintech technology is set to see brokers transforming themselves to match changing client expectations as clients expect faster service and faster products. Brokers will continue to play a role in financial transactions, however fintech may eventually eliminate their need as financial service providers incorporate these new technologies for originating and funding transactions.  The speed and efficiency of client applications have been accelerated by integrated software and AI tools that facilitate the underwriting process.  

Regulation

With the regulation of fintech increasing, brokers face the risk of being excluded from transactions or the additional costs and roadblocks will make them uncompetitive.

Despite these challenges, there are also opportunities for financial brokers and ISOs to continue to play an important role for financial service providers.

Opportunities within the New Competitive Landscape

In order to retain their role, financial brokers and ISOs will need to adapt to the new competitive landscape where change is the norm and they will need to coexist with financial sources to fill the niches where brokers can add value to transactions on a competitive basis. 

No matter the level of innovation and digital transformation brought about by fintech, there will always be the need for a human element.  Financial brokers can provide the human element that will be needed in some transactions to facilitate complex transactions involving subjective judgments and human interaction. 

The human element is key as brokers offer their clients piece of mind. Some clients fear new technology and are late adapters of fintech applications.  Financial brokers will be able to fill a niche by facilitating transactions that financial sources will not be equipped to handle.

Let us not forget fintech advances have enabled brokers to better serve clients, coordinate smoothly with financial service providers, increase business volume, improve efficiency, reduce costs, and efficiently operate their businesses.  With the increased efficiency brought about by fintech, financial brokers will also free up time to do what they do best – that is supporting their clients.  The ability for their brokerage to be more consultative and personal will be the driving factor in their success.  Financial brokers are and will remain an essential part of the fintech ecosystem.  

Partnering with Capstone

Advancements with fintech will continue to alter the competitive landscape for financial transactions. Financial brokers and ISOs will need to be flexible and willing to adapt, filling niches where they can add value to a transaction.

If you are a factoring broker or ISO and need a partner you can trust to help you remain competitive and build your business volume, now is a great opportunity to partner with Capstone! The support we offer factoring brokers speaks to our commitment to your success and we take care of those who refer business. 

What makes us different from so many other companies who offer commercial financing is we review each client’s assets, consider their resources, and when necessary combine them with our advanced logistics platform. Using all the tools at our disposal, our final goal is a positive client outcome. For you, this means more satisfied clients, and another avenue for successfully closing deals. As you close more deals, success follows.

Capstone is a leading commercial finance company that provides a range of financial products designed to meet the cash flow and working capital needs of nearly any type of business, including trade financing, invoice factoring, and PO financing.  Get in touch today at (212) 755-3636.

How Financial Brokers And ISOs Can Help Their Clients Recover From Natural Disasters

In the aftermath of major earthquakes, hurricanes, and wildfires, the recovery process generally requires a well-coordinated response and partnership between insurers, governmental agencies, aid organizations, financial institutions, service providers, and businesses to help the people and businesses affected rebuild their homes, businesses, and lives.  The following is how financial brokers and ISOs can help in the recovery from natural disasters.

Economic Losses from Natural Disasters on the Rise

Global economic losses from natural disasters reached $270 billion in 2021 and, unfortunately, are only expected to increase.  Most recently, we witnessed the destructive power of Hurricane Ian, a catastrophic Category 4 storm that made landfall on September 28, 2022, with initial damage estimated between $41 billion and $70 billion. As of October 2022, 471,581 insurance claims have been filed, with 431,702 reported in Florida. Nearly two-thirds of the Florida claims are homeowner and business claims (272,465), and the remaining are personal automobile claims (151,892). Hurricane Ian was the 5th strongest hurricane to hit the continental United States with the winds and flooding from the storm impacting areas including Florida, Georgia, Alabama, the Carolinas, and Puerto Rico.

Financial assistance for affected individuals and businesses is available from a number of sources. If you have clients that a natural disaster has impacted, you can help them understand what financial assistance and relief are available.

Financial Assistance and Relief Available to People and Businesses

Financial assistance and relief for losses not covered by property insurance is generally available through a number of sources, including:

• Federal Emergency Management Agency (FEMA) – Funding from the federal government in designated disaster areas to help businesses and individuals with temporary housing; debris removal; infrastructure restoration – roads, bridges, communications, electricity, and other utilities; remediation, construction, and other expenses.
• Small Business Administration (SBA) – Long-term, low-interest loans to repair or replace damaged property. Home Disaster Loans are available to homeowners and renters to repair or replace disaster-damaged real estate and personal property, including automobiles. Businesses of any size may obtain Business Physical Disaster Loans to repair or replace disaster-damaged property owned by the business, including real estate, inventories, supplies, machinery, and equipment. The SBA also offers Economic Injury Disaster Loans (EIDLs) of up to $2 million to meet expenses the business would have paid if the disaster had not occurred. FEMA also provides recovery grants to small businesses, but only through referral upon completion of the SBA loan application.
• State and local relief programs – Programs for small businesses are limited, and state governments often appropriate emergency funds only after a disaster declaration is made, which delays immediate assistance.
• Private debt, loans, or lines of credit from banks and other lenders – Securing a loan or line of credit requires collateral, but a disaster can limit the ability of business owners to pledge their homes that may be damaged from the disaster.
• Alternative funding sources – Provide funding solutions, including invoice factoring and purchase order (PO) financing, to quickly increase cash flow and working capital. They are less difficult to apply for than a bank loan. 

The ability to obtain funding for cash flow and working capital, and to obtain it quickly, is critical to your client’s ability to supply and provide services to customers in disaster-ravaged areas.  That said, if your client has been directly impacted by the natural disaster, they may find themselves in need of critical cash flow to aid in their recovery efforts.

How To Help Your Clients

The best way to help your clients is by partnering with a funding source that has experience in funding emergency preparedness and natural disaster relief projects.  Since Capstone’s founding, we have specialized in finding working capital solutions for small to mid-sized businesses and have funded many critical disaster relief projects and transactions.  We look for client-specific solutions to enable us to help as many businesses as possible meet their business funding needs no matter level of urgency.

Earlier this year, a disaster relief transaction came to us through a client that had been awarded an emergency purchase order to supply the State of Louisiana with 250 trailers related to continued Hurricane Irma recovery efforts. Capstone provided funding via invoice factoring and purchase order (PO) financing facilities. The transaction would not have been possible without Capstone’s ability and know-how to structure the transaction and efficiently (and quickly) deploy business funding, as the trailers had to be delivered within five days of receipt of the PO. 

Fast forward to recovery efforts stemming from Hurricane Ian, Florida officials are aware of how our client could perform and deliver on time and may use them to supply trailers for emergency housing in Florida. Organizations and businesses in hurricane-ravaged areas are also reaching out to Capstone for assistance in funding disaster recovery initiatives, as they are aware of our past performance and experience with such initiatives.  

What makes Capstone different from so many other companies who offer business funding is we have the experience and knowledge in structuring transactions. Capstone understands the complexities involved and has the relationships, necessary capital, and ability to rapidly deploy capital to clients that provide products and services to organizations and businesses serving those affected by natural disasters. 

Typically, the situation’s urgency requires funding sources that can quickly act quickly and structure a transaction.  Traditional (institutional) financing and funding methods may not be an option because of their lengthy application and approval process. 

Clients that work with flexible and fast funding sources with disaster recovery project experience can be more responsive and successfully perform. As a consequence, they have the ability to take on larger projects and provide a better quality of service.  These clients are awarded more and larger projects and become preferred vendors/service providers during natural disasters.  

Capstone provides a range of financial products designed to meet the needs of nearly any type of business, including trade financing, invoice factoring, and PO financing.  If you have clients in any area devastated by natural disasters that need quick access to working capital and cash flow, contact Capstone today.