Market Woes Affecting Online Lenders - Capstone

Market Woes Affecting Online Lenders

11:54 08 January in Blog

Market Woes Affecting Online Lenders - CapstoneThere’s a great deal of uncertainty in the market right now. The Fed has already increased their target short-term rate from 0.25% to 0.5%, and they’re planning on increasing it incrementally throughout 2016. In recent years, online platforms like LendingClub Corp. and Prosper Marketplace, Inc. have challenged banks’ hegemony in the lending industry. Today, we’ll discuss how the rate hike and other developments have had a negative effect on online lending platforms and ask whether or not they’re here to stay.

Online Lenders Arrive on the Field

Online lenders find borrowers and sell their loans to investors. Using comparably low operating costs and working with investors with low yield expectations, they’ve had considerable success. According to a Wall Street Journal analysis of securities filings, marketplace loan funds raised $8 billion in 2015, over six times the amount raised the year before. Recent market woes are pinching the numbers, however, and putting online lenders’ niche at risk.

Online Lenders Forced to Raise Rates

Funding for consumer loans has started to show signs of damage. Among the recent ills are delayed deals, increased funding costs, and declining prices for securities backed by the loans. Many online lenders will require borrowers to pay higher borrowing costs. LendingClub Corp., for example, raised their interest rates by 0.25%, matching the increase by the Federal Reserve in their short-term rate. Citigroup Inc., which has sold over $1 billion in loans from Prosper, is now offering higher and higher yields to entice investors to buy. The end result will either be rising costs for borrowers or diminishing margins for investors and the lending platforms they work with.

Growth of Online Marketplace Lending in Doubt

The volume of loans made by online platforms like Prosper and LendingClub have surged in recent years, and investment vehicles that buy marketplace loans have grown as well. Now, experts are wondering if the growth will continue. In October, Stockholm-listed P2P lender TrustBuddy collapsed after serious misuse of client money. Poor stock performance by several major U.S. platforms is another cause for concern in the industry—as is the pullback of credit that has forced some high yield mutual funds to halt or close redemptions. In the end, it remains to be seen whether the recent poor performance by online lenders is an aberration, or something here to stay.

Financing with Capstone

Capstone uses unique underwriting strategies to provide accounts receivable invoice factoring, PO financing, and trade finance to small businesses, subcontractors, licensees, and distributors. For more information, please visit our homepage.

Winners and Losers from Fed Rate Increase - Capstone Financing

Winners and Losers from Fed Rate Increase

18:32 22 December in Blog

Winners and Losers from Fed Rate Increase - Capstone FinancingThe last seven years have been painful for consumers, homeowners, small business owners—indeed for all Americans. The financial crisis of 2007-2008 was the worst economic downturn in the United States since the Great Depression in the 1930s. It was caused by a number of factors, including a burst housing bubble, the selling of high-risk financial products, regulatory failures, and the drying up of bank and insurance liquidity. The result was thousands of closed businesses, evictions, and foreclosures, as well as a decline in consumer wealth in the trillions of dollars. Globally, the Great Recession was the worst financial disaster since World War II. Throughout it all, Capstone worked with small businesses to provide financing when they needed it most. Today, we’ll tell you what you need to know about the Fed increase.

Fed Interest Rates

In response to the recession, the government enacted legislation like the Dodd-Frank Act and lowered interest rates. As of December 16th, the Federal Reserve made it official that it is raising key interest rates for the first time since 2006. With the Fed creating a new Federal Funds rate target of 0.50%, all kinds of lending will be affected, from business loans to auto loans, mortgages, and credit card rates. Many are wondering how the long-anticipated rate increase will affect small businesses. Who are the winners and losers? The lending experts here at Capstone would like to give their two cents.

The Winners

When it comes down to it, the winners are the big banks. They will charge more interest for their loans, but not pass on the increase to any of the savers. Savers are unlikely to receive any significant difference in the interest paid to their accounts. The investment firm Charles Schwab Corp., for example, made $1.8 billion in net interest revenue over the last year. Net interest revenue refers to the difference between interest earned on lent assets and interested paid on deposits. With short-term interest rates higher, companies like Charles Schwab are likely to see a huge increase in net interest revenue. When interest rates were low, big money-market fund players like Fidelity, Goldman Sachs, and Morgan Chase & Co. were forced to eliminate many investor fees—resulting in hundreds of millions of dollars in losses. If the rate continues to rise over the next year above .50%, many in the money-market fund industry would be able to remove the damaging fees.

The Losers

The stock market has been falling in recent days. Liquidity in the market was already on the decline prior to the interest rate adjustment, and now it’s likely to decline even more. The losers are those who invest in equities and long-term bonds. Some also predict that the increase will negatively affect homeowners with mortgages, but this is probably overstated. Mortgages are long-term loans, and they are more heavily affected by economic growth and inflation expectations than short-term rates.

Working with Capstone

Capstone works with small businesses, subcontractors, licensees, and distributors with accounts receivable factoring, PO financing, and trade finance solutions. We have a diverse array of underwriting strategies that allow us to lend based on the creditworthiness of our clients’ customers, not our clients. For more information, please visit our homepage.

Banks Threatened as Lending Leaders - Capstone Financing

Banks Threatened as Lending Leaders?

16:21 07 December in Blog

Since time immemorial banks have been the default institution for lending, but online lending sites, together called FinTech companies, are now posing a threat to bank’s hegemony.

FinTech Companies a Legitimate Threat to Banking?

Though there are many FinTech enthusiasts, some believe this is simply a phase that will fizzle out, much like the peer-to-peer lending craze did several years ago. The difference between FinTech companies and peer-to-peer lenders is that FinTech companies get their funding from institutions rather than individuals. This makes them legitimate marketplace lenders.

Others think fintech companies are here to stay. Marketplace lending has expanded rapidly in recent years. According to the Harvard Business School, the portfolio balances of online alternative lenders have doubled every year since 2005. In 2014 alone, they lent $7 billion to individuals and $5 billion to small businesses.

Where is it Headed?

All signs point to the trend of alternative loans continuing. LendingClub, a leader among FinTech companies, plans to lend $7.6 billion in the coming year—about as much as the previous eight years combined. With demand high and alternative lenders taking just 1.1% of consumer-based loans and 2.1% of small-business loans, there’s lots of room for growth. Despite these promising numbers, FinTech companies face rising sales-and-marketing expenses as they try and take on the big lenders like Morgan Stanley and Goldman Sachs Group.

Banks to Compete with Alternative Lenders

Traditional lenders aren’t simply going to let FinTech companies creep in on their share of the marketplace. Big lenders have shown willingness to compete for credit-card loans. They’ve also invested significantly in marketing to tech-savvy consumers who would be drawn to FinTech lenders. FinTech detractors predict that the unprecedented growth of marketplace lenders will slow by 2017. Many FinTech companies have lowered their rates despite increasing demand, which is a sign that traditional lenders are gaining back some of the market share.

Choosing Capstone for Alternative Sources of Funding

Demand for alternative loans is high because they fulfill a consumer need. Capstone provides small businesses, subcontractors, licensees and distributors with construction accounts receivable factoring, PO financing, and trade finance. Despite the pressure from big lenders, we’re confident there’s plenty of room in the marketplace for FinTech companies and alternative lenders like Capstone. We provide the flexibility that big lenders simply can’t offer. If you’re running a business and you need an advance of funds before an invoice is paid, Capstone should be your number one choice. For more information on our services, please visit our homepage.

Banks Attempt to Finance Small Businesses Fall Short - Capstone Funding

Banks Attempt to Finance Small Businesses Fall Short

16:31 24 November in Blog

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

Banks Trying to Support Small Business

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

Problems with Supply-Chain Financing from Major Lenders

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

Capstone’s Diverse Financing Options

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

Capstone to Appear on Worldwide Business News

Capstone to Appear on Worldwide Business News

18:19 05 November in Blog

Capstone Capital Group, LLC’s Managing Member Joseph F. Ingrassia will appear on Fox Business Network’s Worldwide Business with Kathy Ireland® on November 15th to discuss how Capstone has taken factoring, funding, and financing to a whole new level. Below is a brief summary of what you’ll hear on Worldwide Business on November 15th at 5:30 p.m. ET.

Concerns about the Financial Industry

The number one complaint we hear from clients is about the lengthy approval process of traditional loans. Traditional loans rarely offer the necessary capital to capitalize on business opportunities when they come along.

Why should a company consider factoring their accounts receivables?

We customize funding to our clients’ needs. Unlike a bank, which has very few ways of lending, we have a variety of strategies. Most banks lend against a company’s balance sheet, but Capstone focuses on sales. This allows us to lend more capital to growing companies with large, credit-worthy customers than if we were to lend to them directly.

With advanced credit underwriting, we’re able to offer capital at critical moments. If their customer doesn’t pay, that’s our loss, not our client’s. Capstone looks forward and invests in potential.

Construction Lending

While most lending companies shy away from contractors and subcontractors, Capstone favors the construction industry. We factor all subcontractors and all trades with progress billing. We help minority contractors get the appropriate working capital to participate in lucrative contracts. With payment coming at project completion, some companies can’t expect payment for several months. To get around this, Capstone allows companies to bill monthly and create cash flow.

Capstone Advantages

Capstone is more flexible and responsive than traditional funders. Our services require less paperwork, and we may provide ongoing support when projects run into overages. By partnering with Capstone, our customers can negotiate from a position of strength and win valuable contracts. This changes the dynamic of negotiations considerably. We can work with our client’s banks or replace them. We’ve allowed companies to maintain their lines of credit and work with us to improve their balance sheets. We do not offer government-guaranteed programs that take 6-9 months for approval.

The Process

To begin, Capstone performs due diligence. We collect accounts receivables information, contracts, insurance information, and perform searches for liens. The process takes anywhere from 48 hours to 5 business days. We’ve established strategies that allow companies with under 20 million a year in sales to compete and thrive. If you’re interested in our diverse financing options, visit our homepage or give us a call to speak with a representative.

Don’t forget to see the Joseph F. Ingrassia’s complete interview on November 15th on Fox Business Network at 5:30 p.m. ET.

Bank Loan or Invoice Finance

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

01:53 12 October in Blog

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

Do You Really Need a Loan?

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

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

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

Advantages of Single Invoice Finance

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

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

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

Funding Your Startup

The Pros and Cons of Funding Your Startup through Credit Cards

20:38 06 October in Blog

Is funding your startup through credit cards a viable solution? After all, not every aspiring entrepreneur is lucky enough to qualify for a business loan. We’ll tell you the risks of funding your startup with credit cards and some alternative strategies you can explore.

Tempting Low Cost

In some cases, for $5000 to $10,000 you could launch a startup and it can be a tempting motivation for using credit cards. Several successful startups have gotten their start this way, including the Tropolis group. In the recent economic climate, many starting entrepreneurs find themselves without the collateral to start a business, and credit cards seem to be the only option. However, building a business that relies on funding from clients can be risky when using credit cards, because a late payment from a client can lead to a late credit card payment. Interest payments could accrue.

Organization is Key

Funding your startup through credit cards also requires a high level of organization if you want to keep your debt low. To ensure you do not get in over your head with debt, you’ll have to pay the credit card bills in full every month to avoid accruing interest payments. It may seem like common sense, but organization skills are key to remaining out of debt – it’s easier said than done.

Transitioning to Sustainable Funding

Even if you’re starting your business by relying on credit cards, your long-term strategy needs to change. You should plan to rely on revenue from customers. Using credit cards to fund long-term infrastructure, or even salaries for employees is a good way to end up in debt. Pay off your debt. Potential investors are not keen on seeing it.

Ultimately, the choice is up to you. Just know that there are better options out there, like purchase order financing and trade financing, both of which are available at Capstone.

For more information on lending options that are tailored to your business needs visit our homepage. Check back in on our blog from time to time for more industry news and analysis.

Purchase Order Factoring

Is Purchase Order Financing Good for Business Loans?

21:37 22 September in Blog

Even if you don’t qualify for a traditional business loan, there are options out there. Purchase order financing is just one of them. As you’ll see, certain kinds of businesses might want to make purchase order financing their first choice. We’ll tell you what it is, how it works, and what kinds of businesses should make it their first choice for lending.

What is Purchase Order Financing? 

Let’s say you’ve got an interested client, but you don’t have the funds to fill their order. For growing businesses, that first big order is incredibly exciting. It’s the kind of thing that can propel you from startup territory into a stable business. If you don’t have the money to fill the order when it is placed, purchase order financing is what you need.

Purchase order financing is an advance that allows business owners to make an important transaction, fill a shipment, or deliver a service. And a contract guarantees that the business owner will use part of the returns from the transaction, shipment, or service to repay the advance.

How Does it Work?

Here’s what you’ll need to do to qualify for purchase order financing.

1.    Obtain a verified purchase order or contract from the customer.

2.    Estimate the amount it will cost you to fill the customer’s order.

3.    Present the verified purchase order or contract to Capstone as collateral

4.    If approved, you’ll receive a contract from Capstone and get the funds to fill the order

5.    Once the goods or materials are delivered, and the customer has paid, you repay the premium and any pre-arranged interest.

Below are benefits of purchase order financing and examples of businesses that tend to use it instead of traditional minority business loans.

Benefits of Purchase Order Financing 

●    Technically, purchase order financing isn’t a loan, meaning it will not appear on your company’s balance sheet.

●    Your supplier will be paid, and your customer will receive their goods when they need them.

●    Purchase order financing allows small businesses to fill lucrative orders and establish working relationships with large customers.

●    Purchase order financing does not require A-1 credit.

What Businesses Benefit from Purchase Order Financing?

Some companies will find purchase order financing incredibly convenient and profitable. It is popular with manufacturing and shipping businesses with credit-worthy customers who have large orders to fill. The expected profit margin from the order should be at least 20 percent.

If purchase order financing sounds like the right fit for your business needs, visit the Capstone website. If you’re interested in any other kind of loan, check out our blog.

Benefits of Trade Financing

Four Undeniable Benefits of Trade Financing

18:14 17 September in Blog

The trade financing market is valued at around 10 trillion dollars. The question is: how do you align your business to profit from it? More importantly, what is trade financing, and how does it work?

What is Trade Financing? 

In today’s global economy, having an international clientele can mean the difference between business success and business failure. Trade financing is a kind of loan that provides the credit needed to fund international trade.

Here are a few examples of how it works. Let’s say you identify a growing market for your product in Europe, but don’t have the funds to fill orders there. A trade financing agreement will allow you to do it. What if you find a cheaper supplier in Asia, but the shipping costs are too expensive? Trade financing solutions will allow you to start buying the goods right away and repay the loan with the earnings from your new international partnership.

Other Benefits of Trade Financing

1.    Flexibility

Nothing is worse than seeing an opportunity and not being able to take it. Trade financing gives your business the breathing room it needs to grow when the opportunity presents itself. As such, payments can be made to the supplier in their local currency. And repayment is also tailored to the borrowers’ needs. Some agreements call for repayment in 30 to 60 days, while others allow up to four months.

2.    Convenience

Unlike a traditional bank or business loan, trade financing requires very little documentation. Trade financing contracts are clear-cut and straightforward, so you won’t end up getting surprise fees at the end of the transaction. When you work with Capstone, we focus on providing a convenient, excellent experience.

3.    Security

Making transactions with foreign companies may be outside your usual scope. Capstone has years of experience connecting domestic and international businesses, and we’ll be able to give you all the guidance you need.  Both you and your client will have the peace of mind of working with a security guarantee from a renowned financial institution.

4.    Transaction Flow

Funds are available almost immediately, which means you can improve your transaction flow. You’ll be able to keep your inventory or stock without having to pay large amounts upfront. The trade financing credit can be maintained on your books as working capital, not as debt.

For more information on alternative business loans and commercial financing, visit the Capstone homepage. Our previous blog entries have more industry news and analysis.

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