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

12:38 14 March in Blog, Broker Resources

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.  

Growth Strategies for Minority Entrepreneurs

12:03 22 February in Blog

Minority-owned business enterprises (MBEs), have played an important role in the growth of the U.S. economy. Over the last 10 years, small businesses owned by minorities, women, and veterans  accounted for more than 50% of the two million new businesses started in the United States and created 4.7 million jobs. There are now more than four million MBEs in the U.S. with annual sales of approximately $700 billion.

Despite the rapid growth, these business owners continue to face disparity when it comes to access to capital, contracting opportunities, and other business opportunities for MBEs. Minorities make up 32% of the U.S. population, but MBE ownership constitutes only 18% of the population. In addition, even though MBEs have grown 35%, the average gross receipts for those companies dropped by 16%.

Sadly, many of these entrepreneurs are left wondering how to fund operations and facilitate business growth which often times leads to business stumbles or failures without sufficient planning.

Challenges and Obstacles Facing MBEs

If you are a minority small business owner, you probably have encountered the same challenges and obstacles that many MBEs face as they try to either start or grow their business.

The lack of access to sufficient financing options is a major challenge which can stunt the growth of your business. This can be due to a few reasons including: 

  • Lower net worth
  • Little to no collateral and weaker credit history 
  • Limited time in business or lack of business experience
  • Limitations with quality standards
  • Business located in an area underserved by big banks
  • Other tangible and intangible barriers 

MBEs that are starved for working capital don’t have the funds they need to invest in their businesses and to compete successfully. Capital constraints also limit the ability of MBEs to compete in an environment where average contract/project sizes are increasing rapidly with inflation.

These challenges and obstacles make MBEs more vulnerable to business slowdowns, economic downturns, tight money, inflation, labor shortages, supply-chain problems, seasonality issues, and other operational difficulties.

What Businesses Are Classified as MBEs?

Businesses that have the following characteristics are classified as MBEs.

  • A minimum of 51% of the voting stock of the business is owned or controlled by one or more minority group members.
  • A minority individual or group must control the policy-making process, and direct the daily operations of the MBE.
  • The minority individual or group owner is a U.S. citizen of Black, Hispanic, Native American, Asian-Pacific American or Asian-Indian American heritage.

Minority owned businesses may have a layer or vulnerability not deemed present with other companies. In a broader sense, businesses that are classified as diverse are operated by an individual that is considered both socially and economically disadvantaged. They include women-owned businesses, veteran-owned businesses, minority-owned businesses, and LGBTQ-owned businesses. These businesses and other disadvantaged business enterprises are also collectively referred to as MWDBEs. 

Minority-Owned Business Certification

MBE certification is a key credential that all minority-owned businesses should have and is used exclusively by local and federal governments. The criteria for eligibility includes the MBE characteristics identified above in addition to other certain requirements depending upon the state they are located in. 

Some of the potential benefits to MBE certification include:

  • Certification acts as a marketing tool to increase business visibility and present a favorable public image for customers.
  • Provides strategic access to new markets and government programs as well as access to diversity bidding opportunities, grants, and specific loans.
  • Can help the business compete for larger contracts in both public and private sectors – corporations and federal and state agencies all want to do business with MBEs. Often times the ability to procure or bid on certain job opportunities is set aside specifically for certified MBEs.
  • Better chance of landing a government contract that can be worth thousands, hundreds of thousands or even millions of dollars.  The government has goals related to MBE participation and a certain % of contract dollars needs to be awarded to them.  MBEs also help larger business enterprises secure large government contracts because of this as well.
  • Access to leads and client databases, networking events, seminars, webinars, and business fairs.
  • Training and education workshops and mentorships.

The National Minority Supplier Development Council (NMSDC) can assist with the certification process and is the largest certification organization for MBEs. The NMSDC has a network of 12,000 certified MBEs that can be connected to more than 1,400 large corporate members. NMSDC certification is widely recognized in government circles, with many states and cities using NMSDC certification to help with public-sector contract selection.

The SBA also offers a diversity ownership certification known as an 8(a) certification. Businesses with 8(a) certification are eligible to win federal contracts that are reserved for “small disadvantaged businesses.”

Planning for Growth

Overcoming the challenges and obstacles as a small business owner requires planning and strategizing to grow and develop your business.  Here are a few things you can be doing:

  1. Get your minority-owned business certification – Become a certified MBE and leverage the resources and connections that it opens up for you. This certification is key for many grants and loans, business opportunities both private and public, as well as for other programs.
  2. Seek out business opportunities set aside for MBEs Seek out opportunities to procure or bid on jobs that have been specifically set aside for MBEs. For example, in New York state and communities, commodity procurements greater than $25,000 and construction contracts more than $100,000 are subject to Article 15-A of the Executive Law, The Minority and Women Owned Business Enterprise Program, which regulates and promotes business opportunities on state contracts for minorities and women.
  3. Diversify your business – Seek to expand and diversify your customer base, products and service offerings to grow and avoid the risk of putting all your eggs in one basket. Your business can be gone in a flash – think back to the pandemic and businesses that were deemed “essential.”  Doing this will ensure your business is able to transition and move on in the event of a major business disruption.
  4. Focus on existing customers – Convince your existing customers that you should be their preferred source of goods or services. Inquire with customers and see if there are any other products or services that you can offer to add value. Customer loyalty and consistent branding are valuable tools in retaining your credibility in the industry. Expand your geographical footprint if you are able to.
  5. Join minority-owned small business associations/ organizations for networking and training – Link up with agencies, other businesses, councils and industry associations that offer professional development and networking opportunities. 
  6. Apply for business grants – Apply for grants designated for small MBEs. Grant applications can be daunting so take advantage of any assistance available in filling them out. Remember, grants, unlike loans, do not have to be paid back.
  7. Tap into additional programs and resources for MBEs – There are many programs and resources out there to assist MBEs.  For example, the Minority Business Development Agency, a part of the U.S. Department of Commerce, was created to provide greater access to capital and resources to MBEs. 
  8. Utilize your marketing and advertising outlets – Utilize your website, social media, email outreaches, and other online platforms to draw potential clients and resource providers to your business. If you’re on a limited budget, get creative and find new ways to help get your name out there and attract new customers. Celebrate your status as a certified MBE and what makes your business unique. Black History Month 2023 is a great backdrop for Black MBE owners to showcase their businesses.
  9. Develop a financing network – Seek out and develop these relationships to draw on for resources, advice and business funding that includes lenders and alternative funding sources. Planning ahead will put you at an advantage over less prepared businesses.


Join Capstone’s Diverse Funding Program

Back in 2012, Capstone created its Diverse Funding Program which is designed to give minority, women, veteran owned, and other disadvantaged business entities the financing tools they need for growth and to be successful.  

Capstone understands the unique challenges faced by these business owners and are able to structure a business funding program specifically tailored to support their working capital needs through Factoring Services, Purchase Order (PO) Financing, as well as Domestic and International Trade Financing.  Over the last ten years, Capstone has funded in excess of $100 million to qualified disadvantaged business enterprises. 

In addition to providing flexible working capital programs that are often faster and easier to obtain than loans Capstone provides their clients with access to financial and professional development support, including:

  • One-on-one business consulting and mentoring
  • Customized training, leadership, and executive development
  • Procurement guidance
  • Relationship building between MBE clients and larger corporations as well as access to government and municipal markets.
  • Non-legal contract review
  • Budgeting and forecasting development & support, and more

If you are part of one of these groups, we encourage you to contact Capstone to discuss your specific financial needs and learn more about our program. 


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

09:27 14 February in Blog, Broker Resources

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:

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.  

How to Generate Business in a Down Economy

11:19 30 January in Blog

Even during an economic downturn, your business can generate revenues and experience growth.  While some businesses struggle as the economy drops, those with a plan can thrive and position themselves to capture market share. 

When the market fluctuates, your business practices need to adjust with it. Here are a few things you can be doing to prepare and increase your staying power.

Preparing for a Recession

The key to growing your business during periods of economic uncertainty is all about preparedness and cash flow management.  If you think an economic downturn or recession is likely in the near future, start to take action to minimize the impact on your business as soon as you can. Preparations that will help your business weather a down economy include:

Accelerate Cash Flow

Use electronic invoicing to speed up the cash conversion cycle if you have not already done so. Provide more ways for customers to pay on time with credit cards, electronic funds transfers (EFTs), and fintech payment processors like PayPal and Google Pay, in addition to payment by check. Offer customers cash discounts for early payment. Review payment terms and eliminate extended terms if possible. Negotiate payment plans with past-due accounts.

Review Inventory Practices

Too much inventory in a business downturn ties up cash that will be needed to fund operations.

Bring days of inventory on hand in line with estimated sales requirements. Shorten your supply chains to reduce inventory levels. Reduce order quantities, and liquidate slow-moving and obsolete inventory for cash.

Manage Accounts Payable to Conserve Cash

Ask suppliers/ vendors for better payment terms. Discontinue paying early to earn cash discounts. Don’t pay your accounts payable any earlier than necessary. If necessary, stretch payments so long as it doesn’t negatively impact your relationship, trigger a credit hold, or affect your credit rating.

Reduce Expenses

Cut general and administrative expenses, but avoid making reductions to sales, marketing, and product program expenses. These programs are the link to your customers as well as the marketplace and your source of future growth.  By resisting the urge to make cuts in these areas, your business will be positioned to capitalize on the economic downturn and potentially scoop up market share left by competitors. Focus on core competencies and what is a necessity, not on what is nice to have. Protect key programs that are vital to your future and remember – cut fat, not bone.

Maintain Quality Standards

It is important you also maintain the quality of your products and services. Your customers expect the same level of quality regardless of your financial circumstances. This will help you to not lose your customer base because you went with cheaper suppliers. Maintaining sales volume is critical to cash flow and working capital management.

Protect Personal and Business Credit Ratings

Your personal and business credit ratings are very important for obtaining additional working capital facilities. If you and your business have good credit ratings, protect and maintain them. If your credit ratings are weak, review what can be done to improve them.

Work with an Invoice Factoring Company

You can also use an invoice factoring company to accelerate your cash flow.  Invoice factoring involves the conversion of your accounts receivable into immediate cash instead of waiting 60 days or more to be paid.  Adequate cash flow will allow you to maintain operations and provide business funding for programs to gain news customers or enter new markets. 

Increase Working Capital Facilities

Sufficient access to working capital and the right type of facility are critical.  Take steps as soon as possible to obtain the working capital your business will need.  Increase current limits on banking and other revolving lines of credit.  

Expand your working capital facilities with an accounts receivable factoring program and purchase order (PO) financing facility.  PO financing can be used to purchase inventory and supplies for new orders.  These programs are easier to obtain than a bank loan and they don’t reduce credit availability under existing credit facilities. Approval is based primarily on the creditworthiness of your customers, not the financial strength of your business. It will be more difficult to increase working capital facilities during a recessionary period, so it is better to act before a business slowdown accelerates.

Generating New Business in a Down Economy

Reducing expenses, accelerating cash flow, and increasing working capital are critical to weathering a business slowdown, but you also have to find ways to generate business to offset decreases in revenues. Here are some ideas for generating business in a down economy:

Existing Customers

Don’t forget about your current customers. Protect the business you have, and try to increase your share of customer business. Convince your customers that you should be their preferred source of goods or services. Keep in mind that if your business growth has stalled, your customer behavior may have changed so you will need to adapt with it.  Inquire with customers and see if there are any other products or services that you can offer to add value. Customer loyalty and consistent branding are valuable tools in retaining your credibility in the industry.  

New Markets

Strategize how you can expand your customer base and even pick up business from competitors. Your competitors may lack sufficient planning and be struggling during tough economic times.  If they have cut quality or reduced product/ service offerings this will become an opportunity for you to pick up market share.

If there is an international market for your business, review opportunities that would be a good fit. The growth of integrated logistics providers and assistance available from government agencies make it easier for small companies to tap into international markets. The defense industry and federal, state, and local governments use a vast array of products and services, and volume is often not impacted by the general economy. See what you need to do to become an approved supplier to these markets.

If you only do business in your local area or region, contact sales reps, state and local government agencies, and industry associations to see what would be necessary to expand your geographic footprint.

New Channels of Distribution

E-commerce has become a major B2B channel for manufacturers, wholesalers, and service providers to reach customers directly. If you have a limited web presence, consider developing an integrated internet strategy, including social media, to pull customers to your website, place orders directly, and communicate with your company.

Ease of Doing Business

Make it easier to do business with your company. Review your business terms and practices to see if there are things that can be changed to make it easier for existing and prospective customers to do business with your company. Consider reducing order minimums, improving freight terms, expanding office hours, improving communication channels, and upgrading your company website.

Marketing and Advertising

Typically one of the first things cut when money is tight is the marketing and advertising budget. Resist the urge to do this.  If you’re on a limited budget, get creative and find new ways to reach new customers.  Social media postings, email outreaches, your company’s website, and improving SEO are all cost effective ways that can all be utilized to help get your name out there and attract new customers. Keeping these channels open will allow you to be better positioned to scoop up market share that competitors may have left.

Bargain Shopping and Negotiations

Many vendors may be offering price concessions or willing to negotiate better rates/ terms while demand is low.  Bargain shop and take advantage of reduced costs.  This includes discounted rates for products and service offerings, commercial rents, deals on fixed assets and equipment, as well as hiring more qualified personnel that may have previously been out of your reach. Take the opportunity to upgrade and make improvements where possible as this can position you better in the long run.

When a business downturn is on the horizon, prepare early to protect cash flow and working capital. Reduce expenses and manage the components of working capital to minimize the possible effects on your business. Work with an invoice factoring company to accelerate cash flow and expand working capital facilities to weather the slowdown.


Successful companies evolve when market fluctuations occur.  As a business owner, you can thrive during an economic downturn and take advantage of opportunities by preparing ahead and implementing the above strategies.  You will also avail yourself of more options when you are not operating in crisis mode and when the financial health of your business is at its strongest.   

No matter an economic slowdown or a full-fledged recession, Capstone is here to help you stay focused on what you do best – running your business.  We have the experience and resources to custom-tailor invoice factoring and P.O. financing programs for you.


Understanding Client Due Diligence

11:56 10 January in Blog, Broker Resources

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.


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.

Debt Factoring: What is it, and how can it help?

12:37 27 December in Blog, Business Funding

Debt factoring, also known as invoice factoring or accounts receivable factoring, is an alternative source of working capital funding. It is not a loan. Business owners sell their outstanding invoices to a third party known as a factoring company (“factor”) and receive an immediate advance as a percentage of the invoice amount.

Debt factoring is widely used by small and medium-sized companies to accelerate cash flow to pay operating expenses, pursue a growth opportunity, or purchase inventory and supplies to fill customer orders. Some companies decide to factor their accounts receivable because of a pressing financial obligation or when their customers require extended payment terms.  It is faster, more flexible, and easier to obtain than a loan.

How Debt Factoring Works

The debt factoring process is straightforward and easy for any size business to use.

  • You invoice your customer as usual for the goods or services rendered to that business.
  • You set up an account with the factoring company of your choice.
  • The outstanding invoices/ progress payments for work completed are submitted to the factoring company for verification with your customer.
  • The factor reviews the invoices and once verified/ approved, transfers an advance amount to your bank account.
  • The invoice amount is collected by the factor directly from your customer when due, which is usually 30 to 60 days.
  • The factor issues a rebate for the remaining invoice balance, less the factoring fee, to your bank account. 

Types of Factoring

Factoring can be a program to purchase all of your eligible accounts receivable, so you have continuous and reliable cash flow. The factoring company works with you and your customer to develop a seamless process that dovetails with your business model.

In some situations, single-invoice factoring, more commonly known as “spot factoring,” may be a better solution. This is particularly useful for business owners that have a reliable cash flow stream but occasionally have a large invoice that would disrupt cash flow if they needed to wait 60+ days for payment. In these cases, you can use factoring to convert a single invoice to cash to fill the gap in your cash flow. This is the ideal solutions for businesses simply in need of immediate cash.  There is no multi-year contract required.

The most common form of factoring is recourse factoring. Recourse factoring requires business owners to purchase back any non-performing accounts receivable. This means that your business is ultimately responsible for the payment of the customer invoices if they remain unpaid past their due date.

However, with non-recourse factoring, the factoring company assumes the credit risk and liability of non-payment on the factored invoice. Since the credit risk is borne by the factoring company advance rates may be lower and factor fees may be higher when compared to recourse factoring.

Regardless of the type of factoring you choose, there are a number of advantages that make it a better solution for working capital funding for many small and medium-sized businesses.

Advantages of Debt Factoring

There are a number of advantages to debt factoring that make it an excellent solution to fund working capital needs, including but are not limited to:

  • Accessibility to cash flow: When you utilize debt factoring, you have immediate access to business funding. You don’t have to wait 60+ days to be paid, and there is no need to chase customers for payment. Cash flow is available to pay for things such as operating expenses, a business growth opportunity, or for the purchase of inventory and supplies to fill customer orders.
  • Flexibility: Debt factoring is more flexible than other business funding solutions. Factoring programs can be custom tailored to fit your company’s business model.

Factoring companies work with you to dovetail transactions with your business processes. You don’t have to do work arounds to fit your business processes into a one-size-fits-all transaction.

  • Easier to obtain than loans: Loans can take weeks or even months to be approved and closed, and credit approval is based on your company’s financial strength and collateral. With debt factoring, credit approval is primarily based on your customer’s financial strength and credit history, instead of your company’s credit profile. As a result, the approval process is easier and faster than a loan.
  • Reduces the need to draw on existing credit facilities: Utilizing debt factoring instead of drawing down upon existing bank lines of credit or other credit facilities leaves them available to fund other working capital requirements.

Adding debt factoring to your mix of business funding resources expands available working capital funding, and avoids the need to increase existing credit facilities during a business downturn.

  • Makes it possible for you to pursue new business opportunities: With debt factoring you can pursue new business opportunities that might not otherwise be possible if a loan is required.

New business opportunities can arise at any time, even during a business downturn. Debt factoring can be used to quickly convert accounts receivable to cash to pay the operating expenses and buy the inventory and materials to fill a new order.

  • Can be combined with purchase order (PO) financing: Debt factoring can be combined with PO financing to provide seamless business funding of a transaction from the purchase of pre-sold inventory through the conversion of accounts receivable to cash.

You don’t have to wait to buy the inventory needed to fill and order. Instead, you can fund the purchase of inventory and pay for the inventory with proceeds from the customer’s invoice when the order has been delivered.

  • Reduces credit and collection costs: With debt factoring, you can reduce credit and collection costs. The factoring company follows up with your customer for payment, allowing you to conserve resources to grow your business.

It is important to understand that not all factoring options are alike.  Capstone knows that every business is unique with its challenges, and each deserves an individualized approach to solving their cash flow shortfalls. With flexible factoring structures, Capstone will customize a program specific to your business that will help you achieve your business goals. By utilizing debt factoring, you can shift your focus from waiting on cash to working on your next project without the stress of inconsistent cash flow.

The Impact of Fintech on Financial Brokers

17:03 12 December in Blog, Broker Resources

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. 


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.


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.  


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.


Strategies to Get Customers/Clients to Pay Invoices Faster

14:17 14 November in Blog

Do you want to improve your invoice collection process and get paid quicker? Small and medium-sized businesses depend on prompt payment from their customers/clients to support their working capital and cash flow needs.  They oftentimes lack the proper tools to effectively manage their accounts receivable which makes collecting on outstanding invoices difficult.

If your business is looking to accelerate the collection of your accounts receivable, there are several strategies you can use:

Review Credit Policies and Procedures

Credit policies and procedures may not address changes in the market and industry your business serves. Your payment terms may be too liberal or not competitive. Credit requirements for new customers may need to be adjusted. Credit reviews of existing customers must be performed periodically, and credit limits must be adjusted accordingly. Customers with past-due invoices may need to be contacted earlier and more frequently.

Credit policies and procedures should be reviewed with your accounts receivable personnel to ensure they understand them. Customers should receive a copy of your credit policies and payment terms periodically.

Know Your Customer and Evaluate Credit Criteria

The best defense against late payments or bad debts is to know your customer. During times of an economic downturn or recession, you’ll be able to better judge the credit risk a customer poses. Purchasing business credit reports from credit bureaus, such as Dun & Bradstreet, Experian, or Ansonia, are a good tool for evaluating credit risk and will typically include a monitoring feature for you to be notified if there are any fluctuations with a credit profile.   Additional credit information can be obtained by requesting trade/ bank references and financial statements from customers or even by simple internet searches.  Information for public businesses may be more accessible on the internet by using YAHOO Finance or EDGAR on the website, as these companies are required to submit public filings and financials.

Timely Invoicing and Automation

If you invoice manually, don’t batch and hold supporting documents until it is convenient to process them. Invoice the same day upon completion of a service, project, or fulfillment of an order.  Getting invoicing to your clients/ customers faster will allow them plenty of time to process payment within terms. Use invoice templates or invoicing software to expedite the process and reduce billing errors. The best practice, however, is to automate invoicing so there is no delay. Automation will accelerate the cash cycle helping you get paid faster and more efficiently.

Companies that automate their invoicing and collection processes reduce their Days Sales Outstanding (DSO) by up to 12 days. This means that, on average, customer payments are received up to 12 days faster with automation.  Lower DSO increases cash flow and reduces credit risk.  Utilizing an online customer portal will further reduce late payments.

Collection Procedures

Increased customer contact reduces late payments. Use automated email reminders and frequent calls to let customers know that you follow up for payment. Be polite but persistent. You are more likely to be paid before other suppliers that do not make frequent customer contact. On large orders, contact customers shortly after the invoice has been issued to make sure it has been received and there are no problems that will delay payment. Add a payment reminder just before the due date, and shorten the time between past-due payment reminders. In collections, the squeaky wheel gets the grease.

Resolve Disputes and Billing Errors Quickly

Disputes and billing errors are major sources of payment delays. Often businesses don’t become aware of them until an invoice is past due and the customer is contacted for payment. It can then take weeks to resolve the problem and receive payment. Whether the problem is due to a shipping error, quality issue, or invoice discrepancy, make it a priority to resolve the problem ASAP.

Discounts for Early Payment

Discounts for early payment are a good option to consider to accelerate cash flow.  If your standard terms are Net 30 Days, and you change to 1% 10 Days, Net 30 Days, the opportunity cost to your customer of not paying early to get the discount is an 18.2% return on the cash. Customers will often pay early to take the discount if they have the cash available. Make sure you have the profit margins to absorb the cost.

Payment Plans

Even the best customers can sometimes get behind on invoice payments. It’s better to be flexible and work with a customer on a payment plan than get no payment at all and lose future business. In some cases, businesses release a certain amount of orders for every payment received as long as current invoices are paid on time, e.g., $1,500 in orders released when a $1,000 payment is received.

Make It Easy for Customers to Pay

Offering multiple alternatives to pay invoices will accelerate customer payments. Increasingly, customers do not want to pay using paper checks because of the cost to process and mail, and their accounting processes are automated. Make it easy for them to pay you faster by accepting credit cards, fintech payment processors such as PayPal or Google Pay, ACH, e-checks, and other methods. Automated invoices also help by eliminating mailing and processing time, and a hyperlink can be included on an electronic invoice to facilitate faster payment.

Invoice Factoring

Invoice factoring is widely used by small and medium-sized companies to accelerate cash flow to fund operations or pursue growth opportunities. It involves selling your unpaid invoices for immediate cash to a third party, known as a ‘factoring company’ and can be provided for a single invoice or as a program for all of your accounts receivable.

Invoice factoring is fast and flexible, providing almost immediate cash flow from customer invoices. Invoice factoring is easier to obtain than a bank loan, and credit approval is based on your customer’s financial strength, not the creditworthiness of your business.  It’s an excellent solution for companies needing immediate funding for their accounts receivable.

How Capstone Can Help

Collecting your outstanding invoices is difficult, but it doesn’t have to be.  You work hard to generate the sales and deserve to be paid for it. With the inclusion of the above strategies into your invoice collections process, you will be able to accelerate cash flow and get paid faster.

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. Contact Capstone to learn how invoice factoring can accelerate the conversion of your accounts receivable into immediate cash.


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

11:59 04 November in Blog, Broker Resources

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.

Getting Business Funding with Bad Credit

09:33 27 October in Blog, Business Funding

If you own a small business, you know how difficult it can be to obtain the credit you need to supplement your cash flow and working capital. Vendors, suppliers, banks, and other lenders are reluctant to extend credit to small businesses, especially if they have bad credit, forcing them to live hand to mouth to meet payroll, pay suppliers and fill orders. Yet many small businesses survive and grow even when business is tough. They can do this by securing business funding that is flexible and works with them, even if they have bad credit.

Securing Business Funding with Bad Credit

Small businesses that have cash flow problems and find it difficult to obtain funding for their working capital needs usually have a number of the following characteristics:

  • Bad business credit or no credit rating 
  • Limited operating history
  • Limited working capital and cash flow
  • Few business assets that are not already encumbered by liens from lenders 
  • Limited or poor credit rating of the business owner 
  • Limited personal assets to pledge as collateral

Unfortunately, these characteristics are strikes against you when you apply for a loan from a bank or other lenders. Banks have limitations on the number of loans they can make to businesses with bad credit and they have to set aside additional capital in case of credit losses which does not earn a return.

Obtaining a small business loan with bad credit is even more difficult when the economy is weak, and the Federal Reserve is raising interest rates. In this environment, banks and other traditional lenders tighten their credit requirements and focus on larger customers with greater financial strength.

Fortunately, there are alternative funding solutions that small to mid-size businesses, including those with bad credit or no credit, can work with to obtain the working capital they need.

Alternative Funding Solutions 

Alternative funding sources, such as invoice factoring companies, do not have the same limitations as traditional lenders. They are more flexible and can work with clients to custom-tailor programs to support their business model. 

A key alternative funding solution for small to mid-size businesses, including those with bad credit, is invoice factoring. The cash you have invested in generating accounts receivable can be freed up with invoice factoring to increase cash flow and working capital. Even if your accounts receivable has a lien from another lender, a factoring company can often successfully negotiate an agreement with the lender to carve out accounts receivable for a factoring program. 

Invoice factoring accelerates the conversion of accounts receivable into cash, providing immediate cash flow and working capital. Funding is not dependent on the creditworthiness of your business. Instead, the creditworthiness of your customers is used for determining whether you can factor your invoices.

Typically, businesses are forced to wait 60 days or more before they are paid for the products or services they provide. Factoring turns those invoices into 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 a traditional lender for a line of credit.

Advantages of Invoice Factoring

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 expected to continue.
  • Strengthen or repair your credit profile – With sufficient cash flow, you can meet vendor and supplier payment commitments. As you build up a positive credit history by paying in full and on time, it will gradually boost your business credit score. Invoice factoring helps to strengthen your credit profile using the strength of your customer’s credit, not the bad credit of your business.
  • Streamline credit and collections – Invoice factoring eliminates the hassle and expense of chasing customers for payment. It also provides credit and background checks on your customers, and online reporting is available 24/7 to help you manage your invoices and cash flow.


Qualifying for Funding

Even if you have been turned down for a business loan or line of credit, you can convert your open invoices to cash almost immediately with invoice factoring. Qualifying for funding is relatively easy. The key requirement is to have unpaid invoices that are payable by dependable and creditworthy customers. Whether you need immediate capital or regular access to cash, invoice factoring can help you meet your financial obligations even if you have bad credit.

Customized Solutions Work Best

This is one reason more businesses are turning to Capstone. Regardless of what your business credit situation is, your financing needs are not the same as every other small business. We don’t take a one-size-fits-all approach to fund working 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 work with you to develop a customized solution for your business funding 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 cash need to secure a contract or you need 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.

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