How the Federal Interest Rate Increase Could Affect Small Businesses

14:29 15 March in Blog

For the second time in a decade, the Federal Reserve raised the target interest rate by 0.25%. The current range is now 0.5%-0.75%. Rates are still much lower than they were in the mid-2000s, though there is likely to be a series of gradual increases over the next couple of years.

For small business owners in need of capital, the question is, how will this affect your business?

What Does a Rate Hike Say About the Economy?

When the Fed raises rates, it is generally a positive commentary on the state of the economy. When rates were raised in December 2015, after 9 years with no increases, it was taken to be a sign of a growing economy. Specifically, continuous growth in the GDP and decreasing unemployment numbers help embolden the Federal Reserve.

This year’s rate hike is viewed as confirmation that the economy continues to be healthy. Recently published unemployment numbers showed an unemployment rate of 4.6%, a decrease, a 0.3% decrease from the previous month.

This is good news for small businesses. A good economy means consumers are more willing to spend. It allows for price increases if necessary and provides a positive outlook for the future. Consumers who have pushed off home projects, for example, may be more emboldened to hire a contractor now that the economy appears to be more stable.

Will Banks Lend More?

Higher interest rates on loans means banks will be able to make more on a loan. While the last rate increase did not appear to have a positive impact on bank lending for small businesses, there is a chance that the possibility for increased margins will encourage banks to originate more loans for small businesses. However, because so few business loans are currently being made, many businesses in need of cash flow will still be left behind.

This isn’t the whole picture, though. With an upcoming change of administration and discussion about deregulation, there is a chance that bank lending for small businesses will increase in the future. For those who are currently in need of capital, it is necessary and wise to seek other options.

Alternatives to Bank Loans

With a high rejection rate and a lengthy application process, applying for a bank loan or SBA loan can be disheartening and time-consuming. Thankfully, bank loans aren’t the only option for small businesses and contractors.

To stay competitive and fund growth, small business owners should investigate alternative options such as factoring and purchase order financing. Thinking outside the traditional “loan” model and investigating credit groups can provide opportunities to fund your business so you can focus on what you love to do and not how to pay for supplies.

Overall, this is only a small interest rate increase, and it is likely that 2017 will bring more. It’s unnecessary to worry, however, it is wise to plan to ensure your business will have the cash flow it needs to succeed.

If you’re ready to create a plan and learn more about single invoice factoring and purchase order financing, contact Capstone Capital Group. A trained professional will provide you with the information you need to determine if our services are a good fit for your company.

Construction factoring explained by Capstone

Preparing for Increases in the Construction Sector

14:25 14 March in Blog

Rebuilding America’s infrastructure has been a popular political topic of late, with both parties stating a commitment to the fixing the nation’s roads, bridges, railways, and more. The country’s aging infrastructure has long been a thorn in the side of commuters and a focus on modernization will not only make bridges safer, allow for a better transport of goods, and increase quality of living, but will also increase employment in the construction sector.

Since the recession, employment in the construction sector has seen a boom. According to the Associated General Contractors of America, approximately 1.6 million jobs have been added in the past six years. Currently, both parties have plans to fund infrastructure projects totaling $1 trillion. For the construction industry, this poses two important considerations: hiring and cash flow.

Hiring and Cash Flow Considerations

In order to be competitive for bids and to ensure that jobs will be completed in a timely fashion, construction companies must be prepared and fully staffed. Staff will also need to be properly trained. Too often, increased projects in the construction sector lead to needless accidents because of poor hiring or overworked staff that is stretched thin. Part of ensuring that safety is a priority is putting in place appropriate hiring practices and focusing on continuing education. Construction companies that are able to show that they complete their projects in a timely fashion and that they value their employees’ safety may be better positioned to apply for and win bids from the government.

In addition to hiring and training, it will be necessary for construction companies to ensure they have enough cash flow to grow and to take on more projects. When companies are sidelined because of open invoices, it can be difficult to increase productivity. One way that many construction companies have found to effectively grow is through factoring.

How Factoring Can Help

Factoring, which allows construction subcontractors from all trades to receive working capital against their unpaid invoices, can be a quick way to increase cash flow in order to purchase materials, pay staff, and continue to deliver their work on time and on budget.

While some companies may turn to banks for a line of credit, they will likely find that lending to small business remains slow despite a growing economy. Rather than dealing with the mountains of paperwork and untold amounts of time that bank loan applications and decisions require, companies who are looking for a more streamlined process should investigate invoice factoring.

Partner with Capstone Capital Group, LLC

At Capstone Capital Group, LLC, we value our partners’ time. We understand that the hours spent filling out banking forms would be better invested in our business. We offer pre-approval to prospective clients so you can better understand your chances of approval.

When your business is in need of funding, you shouldn’t have to wait. That’s why Capstone Capital Group is committed to quickly helping businesses. With flexible structuring and multiple options available, our factoring programs are designed to provide our partners with the assistance they need to move forward and grow their businesses.

If you’re ready to investigate whether factoring is a viable option for your business, don’t hesitate to give us a call at 212-755-3636 or apply now.

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

Will Repealing Dodd-Frank Make Borrowing Easier

08:15 13 March in Blog

The Dodd-Frank Wall Street Reform and Consumer Protection Act, known commonly as Dodd-Frank, was enacted in 2010 under President Obama as a response to the financial crisis that led to the Great Recession. The ultimate goal of the legislation was to safeguard the economy and protect consumers by implementing financial regulations. Several components have drawn the ire of the financial world and many have wondered whether Dodd-Frank’s restrictions have actually made it harder to grow the economy.

More Than Just Two Sides

Proponents who believe Dodd-Frank should be repealed say that the measures implemented by Dodd-Frank were overly restrictive and limited banks too much, forcing them to decrease their lending and ultimately harming the nation’s economy. For example, the Volcker Rule, which has received some airtime recently, limits how banks can invests. Those who are against Dodd-Frank and the Volcker rule, in particular, believe this has curtailed the financial abilities of banks and hindered their abilities to be more profitable.

Some economists believe that Dodd-Frank would benefit from additional reforms to ensure that consumers remain protected but that oversight committees monitoring the activities of banks and financial institutions are more diverse.

Those who are against repeal believe Dodd-Frank’s protective measures are necessary for ensuring that the country does not enter into another recession because of high-risk financial activities that put consumers at risk. They believe the committees established by Dodd-Frank to monitor financial institutions and to protect consumers are necessary and may even need to be made stronger to ensure their survival.

As with any piece of legislation, there are many differing opinions. The current administration is poised to tackle Dodd-Frank and appears ready to both reform particular aspects and scrap others through both executive orders and legislative action. But what could this mean for small business?

The Economic Future for Businesses

For businesses, repeal of Dodd-Frank may mean a changing lending landscape. While some believe that reduced regulations will lead to more loans for small businesses, others are right to be wary. Citing that the amount that small businesses often need to borrow is generally too small for large banks to concern themselves with, some businesses do not expect any change to large banks’ small business lending activities.

How much repeal of or amendment to Dodd-Frank will help small businesses remains to be seen, however, history has shown that regardless of the state of the economy or financial legislation, many banks are reticent to lend to small businesses. It is likely that those same banks will continue to fund only a small percentage of small business loans, leaving millions of small business owners without the capital they need to grow their businesses.

Bank Loans Aren’t the Only Option

Thankfully, other options like factoring and purchase order financing help fill the gap by providing small business owners with vital cash flow quickly.

Capstone Capital Group, LLC, specializes in providing business owners with multiple business funding solutions. Our invoice factoring and purchase order invoicing services allows qualified business owners to gain access to necessary cash flow faster so they can remain competitive. In today’s marketplace, that’s essential for a business to remain viable. If you’re ready to learn more about the options available to you, call us today at 212-755-3636 or contact us online.

Small Business Funding Crunch - Capstone business financing

The Small Business Funding Crunch

11:07 15 October in Blog

According to a new study, there should be no doubt about how strapped for cash many small firms are today.

Small Business Funding by the Numbers

JPMorgan Chase Institute’s think tank relied on data collected from their in-house bank to work up an analysis of the current state of the small-business sector. They found that the small-firm landscape is less likely to be home to the future Ubers and Googles of the world and more likely to be filled with lots of tiny businesses living month to month.

The companies JPMorgan Chase Institute looked at may be small, but they represent a surprisingly large portion of the American economy. The Small Business and Entrepreneurship Council (SBEC) reports that small businesses account for nearly half of the national GDP and more than half of all new job creation in the U.S. — the latter being a metric that the Fed watches closely to determine whether or not the economy can cope with financial constrictions. But even though they’re contributing a great deal to the economy, JPMorgan Chase said, there remains ignorance about their financial outlook.

The Big Picture

On average, small firms surveyed in the recent study had just 27 days’ worth of cash reserves, which is defined as money needed to cover expenses if inflows suddenly stopped.

Restaurants typically hold the smallest cash buffers, with just 16 days of reserves, while the real-estate sector boasts the largest, at 47 days.

Small businesses looking to expand (or at the very least stay afloat) are finding it hard to build up reserve cash, with daily income exceeding expenses by only $7, according to the JPMorgan study.

The findings in the report arrive as optimism in small businesses begins to stagnate. The Small Business Optimism Index, maintained by the National Federation of Independent Business fell 0.2 percent in August. Currently, at 94.4, the index is well below its 42-year historical average (98.0).

Political Uncertainty Weighs

According to a chief economist from Bloomberg Intelligence, another expert quoted in the Bloomberg News story, political uncertainty stemming from the upcoming presidential election could be adding a little extra distortion to the current outlook on the small business sector.

Nearly 40 percent of the small business owners surveyed did cite political uncertainty as one of their biggest reasons for delaying expansion. That number represents an all-time high.

The JPMorgan Chase Institute says that it hopes small business owners focus more on factors over which they have control, rather than regulatory changes, taxes, and other things that are out of their hands.

JPMorgan’s advice to small businesses? Focus on having a clear sense of your liquidity picture. That’s the factor that is likely to have the most immediate impact on their livelihoods that they can act on.

Get in the Game with Capstone

For qualified clients, Capstone provides purchase order factoringsingle invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. To learn more about our services and how we serve small businesses, please visit our homepage.

Small Banks Get a Big Break - Capstone Financing

Small Banks Get a Big Break

10:37 29 September in Blog

Banks with less than $250 billion in total assets may soon be seeing a relief in their federal obligations. A proposed alteration from the Federal Reserve could mean that smaller regional banks who do not conduct significant nonbank or international business would be exempted from certain parts of the “stress tests” on their economic resilience.

Issue Background

2010’s Dodd-Frank Financial Reform Bill compels any banking institution with over $50 billion in assets to undergo yearly assessments designed to measure their viability against periods of financial stress. The ultimate goal is regularly ensuring that the system is strong enough to withstand widespread economic turmoil like that seen in 2008’s Great Recession.

The tests encompass a wide variety of stressors, from overall adequacy of the organization’s capital to structural stability to whether planned capital distributions are viable in a variety of scenarios. This is a rigorous and exhaustive process that can take up significant staff time and organizational funds.

More than 30 banks across the country take this test every year, but for smaller institutions, the cost outlay can be significant — particularly for those close to the $50 billion line. In a recent statement at Yale University, Federal Reserve governor Daniel Tarullo indicated that the organization would be moving to a more risk-sensitive, customized testing model.

Model Alterations

Tarullo’s statement indicates that banks that fit the aforementioned criteria (greater than $50 and fewer than $250 billion dollars in assets, limited international or nonbank business) would be exempt from the “qualitative” portion of the stress test, which deeply investigates the organization’s risk-management systems. However, all affected banks will have to demonstrate that they can survive a potential recession with adequate capital reserves to maintain lending operations, as well as additional scrutiny around mortgage and money-laundering rules.

Systemic Importance

The Fed is also reportedly considering a separate proposal that would raise the capital requirements for banks considered “systemically important.” In short, the modifications aim to create regulatory measures that are more stringent for financial organizations of greater importance, while relaxing non-essential requirements for smaller firms.

Single Invoice and Full-Contract Factoring from Capstone

For qualified clients, Capstone provides purchase order fundingsingle invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

S&P 500 Profit Slump Extends into Sixth Quarter - Capstone financing

S&P 500 Profit Slump Extends into Sixth Quarter

09:53 16 September in Blog

Expectations are falling, and the idea that the third quarter would mark the return to growth for U.S. companies has fallen flat. Companies in the S&P 500 will report earnings in the coming weeks, and the expectation is that they will once again report declines. The current slump of 6 consecutive quarters of shrinking earnings is the longest since FactSet began tracking the date in 2008 – leading many in the market to wonder how long stocks can rise while corporate earnings continue to fall.

Some Improvements, but Not Enough

Two factors – failing oil prices and a strengthening dollar – that have hurt corporate earnings in recent years have subsides in 2016, yet the recession in earnings continues. Despite the slight uptick in oil prices, the energy sector is expected to report the largest year-over-year decline in earnings of all S&P 500 sectors – a whopping 66% drop.

Stock Prices & Earnings: The Disconnect

Although earnings have dropped steadily, stocks have remained on a near-unprecedented bull run. This oxymoron can be explained by revised expectations: by lowering earning expectations shortly before they are released, analysts give companies a better chance to beat expectations. Investor confidence rises, money flows in, and the stock price continues to rise, even though the company did not really outperform expectations. Another factor that has kept this atypical bull run on track is the (in)activity of the central bank, which has not carried out any of the four planned interest rate hikes that were scheduled for this year.

Market Explanation

Faced with a situation where the entire market — not indices and individual stocks – is overpriced, many investors now point to quarter four as the turning point. They point to the fact that the market is hovering near all-time highs as evidence that a resumption of earnings growth is right around the corner.

Accelerate Your Working Capital with Capstone

For qualified clients, Capstone provides Purchase order factoring, single invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Made in USA - Capstone Financing

Indianapolis Manufacturers Express Concern Over Presidential Trade Platform

16:03 15 August in Blog

In a state where manufacturing is an economic support beam, Indiana businesses are growing more and more concerned over the presidential race’s implications for trade.

Former IN Governor Mike Pence ran his 2012 gubernatorial campaign on a strongly pro-trade platform and voted for every available free trade initiative during his House of Representative’s tenure. However, his alliance with presidential running mate Donald Trump — who has strongly condemned international trade agreements — now has businesses skeptical of his commitment to their interests.

The other side of the aisle presents little comfort, given Democratic nominee Hillary Clinton’s recent sharp trade critiques. In an August statement to The Indianapolis Star, local international sales manager Nate LaMar expressed a concern that both presidential candidates wanted to “turn back the clock” on trade systems.

The big question is this: what impact would revisions to long-standing international trade deals like NAFTA have on small businesses and manufacturers – especially those in states like Indiana.

Local Economics to National Concerns

Indiana has the highest distribution of manufacturing professionals in its workforce among American states. It also owes a great deal of its post-Great Recession recovery to a rebound in exports in products like pork, corn, and soybeans. Economists say that the state’s high level of factory competitiveness led to this advantageous performance after the North American Free Trade Agreement (NAFTA) opened up Mexican markets.

Changing Tides

Pence’s pro-trade convictions have taken on some damage in recent months, beginning with Indianapolis heating giant Carrier Corp.’s relocation to Mexico. After accepting the Republican vice-presidential nomination, Pence receded from his previous stance: he has now backed away from both NAFTA and the Trans-Pacific Partnership (TPP), an agreement that would lower trade barriers between America and a host of nations. For Indiana exporters — many of whom are owned or invested in by Japanese entities — this reticence signals a worrying lack of concern for his former constituency’s best interests.

Pence explicitly distanced himself from the TPP on the Laura Ingraham radio show, stating that it was time to “rethink” NAFTA’s implications and “hit the brakes” on TPP, dealing with Asian and Pacific Rim countries on a case by case basis to “promote growth.”

As a more “isolationist” wave sweeps the nation, manufacturers across the country will have to hope for the best, but prepare for the worst. For now, all eyes are on the presidential election.

Accelerate Your Working Capital with Capstone

For qualified clients, Capstone provides single invoice factoring, purchase order factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Number One Threat to Long-Term Economic Growth - Explained by Capstone

This is the Number One Threat to Long-Term Economic Growth

12:10 07 August in Blog

Amid positive job reports and a surging stock market, one factor still presents a major obstacle to long-term economic growth in the US: a persistent slackening of productivity. We are currently in the midsts of the longest downward slide in worker productivity since the 1970’s, an unfortunate asterisk that should accompany the latest round of job reports. It’s also likely to keep the Fed from raising interest rates any time in the near future.

Productivity by the Numbers

Productivity — the measure of what goods and services a worker produces each hour on the job — fell 0.5% at a seasonally adjusted rate during the second quarter, according to the Labor Department. That marks the third consecutive quarterly drop in productivity, the longest streak since 1979. What’s worse, the trend shows few signs of abating; productivity growth rang in at just 1.7% from 2007 to 2015, half that of 2000 through 2007.

Why Worker Productivity Matters

For business owners, the importance of worker productivity can’t be understated. The equation is simple: less productivity means more expenses and less profit. On a macro level, productivity is a key gauge in measuring wage growth, prices, and overall economic output — which have all been falling as well.

What’s Killing Productivity?

According to numerous studies, lagging productivity has several culprits. Among the most important are businesses unwillingness to invest in new equipment, machinery, and equipment — the raw materials that translate directly into job growth, wage growth, and gains in worker efficiency and productivity. While the exact cause of lagging productivity is difficult to nail down, it’s worth noting that fixed nonresidential investment, the meat and potatoes of business spending, has also dropped the last three quarters along with productivity.

That lack of investment has lead to a decline in new orders for nondefense capital goods on a year-over-year basis for much of the last year and a half.

What’s the Solution?

As we mentioned in our most recent blog, the majority of US manufacturers are small businesses — and many find themselves sorely lacking the working capital needed to invest in their businesses, jump-start productivity, create backlogs, and grow. As a low-risk remedy, manufacturers and other small businesses with strong demand for their products use invoice factoring to boost their cash flow. That’s where Capstone can help!

Grow Your Business with Capstone

For qualified clients, Capstone provides purchase order factoring, single invoice and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

About US Manufacturing - Capstone Financing

4 Things You Didn’t Know about US Manufacturing

09:37 15 July in Blog

As we discussed in a recent blog, US manufacturing is alive and well—despite what many people may think. Following up on that piece, we are happy to give yet another positive update from the manufacturing sector.

The stars have aligned for US manufacturing in July, with domestic demand strengthening and offsetting the relative strength of the US dollar. US manufacturing activity hit a 9-month high in July, dispelling fears that the UK’s decision to leave the EU would hurt the already poorly performing sector. Factors that are boosting US manufacturing activity include a strong housing market, strong automobile demand, and solid consumer spending: all of which help to increase spending on manufactured goods.

US Manufacturing: Down and Out or Just Different?

It’s true that today’s manufacturing landscape is quite different from that of 1950. It’s even changed significantly since the year 2000, having shed 5 million jobs since the turn of the century. But what many people don’t realize is that it’s not only US manufacturing that’s being transformed. Technological advancements have made it possible to increase production with fewer workers. The end result is a strong (albeit much quieter) manufacturing sector that increasingly relies on tools like invoice factoring to increase working capital and expand business.

Surprising Facts about US Manufacturing

Here are four things you probably didn’t know about US manufacturing.

  1. Most US manufacturing firms are small; 75% have less than 20 employees, and 99% have less than 500.
  2. The US boasts 12 million manufacturing workers —9% of the entire workforce
  3. The average manufacturing worker earned over $4 more an hour than the US average — $25.58 compared to $21.32.
  4. Many manufacturing companies use invoice factoring to boost cash flow and expand their business

Boosting Working Capital with Capstone

For qualified clients, Capstone provides single invoice and contractor factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Stake for Small Business Owners this Election Season

What’s at Stake for Small Business Owners this Election Season

19:40 29 June in Blog

Stake for Small Business Owners this Election SeasonU.S. presidential elections are a marathon, not a sprint, and this race has been exceptionally grueling—both for the candidates and the public at large. But more concerned than the average U.S. citizen are small business owners, who have responded to the uncertainty by delaying new hires, forgoing new equipment orders, and avoiding all but the most essential investments. We’ll tell you why confidence is slipping and what small businesses can do to buck the trend.

An Unprecedented Election Season?

Every presidential election captures the nation’s attention, but this year’s race seems to have no precedent. Whereas most Americans tune into the race after the primaries are over and the Republicans and Democrats have chosen their respective nominees, both parties saw unconventional candidates challenge the status quo during the primaries and capture the attention—and votes—of millions. Now that the primaries are over and Donald Trump and Hillary Clinton are set to face off in the general election, the future and the direction we’re heading remains as unclear as ever.

Small Business Owners Uncertain

According to a survey conducted by the Wall Street Journal and Vistage Worldwide Inc, one-third of business owners report that uncertainty over the coming election is negatively impacting their business.

Though small business owners are responding in different ways, the overarching theme is this: they have opportunities to grow their businesses, but they’re hesitant to spend the money. It’s not just the election causing concerns—there’s also global concerns, like the recent exit of the U.K. from the European Union, which threw global markets into a brief tailspin and the tenuous state of the Chinese economy. Closer to home, there’s also uncertainty over the timing and impact of future interest rate hikes.

Small-Business Confidence, by the Numbers

Given the picture we’ve just painted, it’s no surprise that small-business confidence fell to its lowest level since November of 2012 this month. Even industries that consider themselves ‘immune’ to political drama, like real estate, construction and development, are seeing activity dwindle. In the end, small businesses off all types face higher cost of capital than their larger counterparts, and that’s why they bear the lion’s share of the burden when uncertainty prevails and consumers reduce spending.

Luckily, there are several tools that small businesses can use to seize opportunities for growth—regardless of the prevailing political and economic climate.

Capstone Helps Small Businesses Boost Working Capital and Grow

For qualified clients, Capstone provides purchase order factoring, single invoice factoring, and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

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