Bank Loan or Invoice Finance

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

21:53 04 September in Blog

Bank Loan or Invoice Finance

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

Do You Really Need a Loan?

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

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

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

Advantages of Single Invoice Finance

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

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

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

Contracting Business Efficiently and Profitably

Grow Your Contracting Business Efficiently and Profitably

17:58 22 July in Blog

Business Efficiently and ProfitablyHave you considered making an investment for growth, but don’t feel that your company is quite ready?

Capstone Capital Group, LLC and Trend Consulting Group have partnered to offer their clients an additional layer of financial and management support.  This additional support is designed to help their clients increase their scale of operations efficiently and profitably.

Our primary goal is to help our clients accelerate and achieve their growth initiatives on a profitable basis.  The two prong approach will sustain our client’s growth in the long term.  To accomplish sustainable long-term growth most companies require competent management and additional capital.  Our additional layer of support provides both essential ingredients to our clients’ success.

Today’s Real Estate and Construction Markets require a high level of performance from contractors.  With elevated performance levels our client’s resources are stretched thin.  We have found that without proper funding and management support most growing contractors are left with two options neither of which should be acceptable to companies that are trying to grow profitably

ONE

Turn down new business and increased demand from existing customers because your company is at capacity and does not possess the capital, internal process, nor the project management in the field to confidently deliver on your contractual obligations.

TWO

Accept more new business than your company can handle only to realize your existing clients will suffer and that you’ve set your company up for losses, negative brand impact, and a reactive business model which typically leads to insolvency or in some cases much worse!

 

The Goal of our partnership is twofold:

1. To give our growing clients access to the funding they need when they need it through Capstone’s flexible single invoice factoring and funding solutions.

2. Deliver effective project management outsourcing solutions through Trend’s comprehensive reporting, process, documentation, and effective field management model.

This one two punch of strategic resources is designed to ensure you are well prepared to grow your business effectively and profitably while boosting your company’s brand and reputation.

Capstone deploys Single Invoice Factoring Programs to fund General Contractors and Subcontractors to ensure on time performance of tasks. Capstone specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. We provide flexible, no contract invoice purchases in exchange for working capital. Our highly experience construction professionals are on staff to facilitate the purchase of construction related accounts receivable.  They have operated on job sites as project managers, so we understand how critical it is to have available funds for payroll, suppliers and operating expenses. Knowing that Capstone will purchase your invoices provides you with the confidence to bid on new jobs and grow your business.

Trend strives to improve our client’s overall experience while engaging in a new construction project(s). Our goal is to change the “USUAL” way construction projects are managed and improve the process through our comprehensive project management services. We put a heavy focus on process and documentation while managing our client’s projects.  This is accomplished by incorporating our cloud based project management software to help boost overall project efficiencies.  Our service also includes automated reporting capabilities to ensure all parties are well informed every step of the way throughout the duration of their project.

We look forward to hearing from you.

Invoice Factoring

Understanding Invoice Factoring

18:42 20 May in Blog

Invoice factoring is a common practice that enables businesses to receive immediate payment in exchange for selling accounts receivables at a discount to their face value. Once an invoice is“ “Factored” and it is time for the customer pays for a product or service, the payment is forwarded to the factoring company. One of the most significant advantages of factoring is that businesses can receive immediate cash flow with no additional debt that appears on balance sheets.  Therefore Factoring is an off balance sheet transaction. Factoring can also be advantageous for businesses looking to obtain initial working capital without having to demand immediate payment from their customers.

The Invoice Factoring Process

Factoring is a rapid process that usually takes less than 24 hours to complete. The factoring process starts after a business delivers a product or service and sends an invoice to their customer. A copy of the invoice is then sent to the factoring company, which will purchase the invoice in exchange for an immediate cash payment. Most factoring companies offer up to 80 percent of the invoice value with the balance going into a reserve account. Once the purchase of the invoice has been completed, businesses can have the money, minus nominal fees, sent directly to their bank account.

Advantages of Factoring

Many businesses choose to use factoring because it can provide a predictable, immediate revenue stream than can be used to fulfill an order. While many businesses request prompt payment, they can rarely expect it in the real world. Even when discount incentives are offered, many customers will still choose to pay later. These problems can be especially challenging for newly established businesses that struggle to convince customers that they can deliver. Businesses that use factoring can receive immediate revenue without having to demand upfront payment or incur excessive risks.

Additional advantages of factoring with Capstone include:

  • Insurance against customers that fail to pay.
  • No penalties for failing to meet a minimum invoice sales volumes.
  • No contractual restrictions on how funds can be used.
  • Practically unlimited financing that scales with business growth.
  • Additional working capital with no additional debt.
  • Take advantage of supplier discounts by paying early.
  • Add more value to customers though attractive payment terms.

How Factoring Affects the Bottom Line

Factoring fees are an average of about two percent, which many business owners argue can add up to a lot of money in the long run. In reality, most businesses that use factoring can earn several times more than the factoring fees that they pay. Studies indicate that a majority of businesses can scale their production capacity by more than 25 percent without increasing fixed costs. Since limited capital is the primary constraint for most businesses, immediate payment can enable businesses to operate at full capacity and earn several times more than the factoring fees.

Business Requirements for Factoring

As with any other credit service, businesses will need to be pre-qualified. Factoring services are only available to legal business entities that sell business-to-business services to governments or other companies. Businesses will need to have customers with good credit to qualify for a factoring service.   It is also important to have no outstanding invoice leans. Most businesses that meet these basic requirements can be approved to take advantage of invoice factoring services.

Aftermath of the Dodd-Frank Law

The Aftermath of the Dodd-Frank Law

21:42 07 April in Blog

Aftermath of the Dodd-Frank LawIn 2008, when the American housing market crashed, it created a ripple effect in financial institutions. When the Dodd-Frank law went into effect in 2010, its purpose was to “promote the financial stability of the United States by improving accountability and transparency in the financial system.” Since being passed, only one new bank has opened in the United States. To show some perspective, in the 30 years prior to Dodd-Frank, over 100 new banks opened.

The new regulatory requirements are the reason behind this. Banks have had to hire full-time compliance employees in addition to purchasing new software and computing systems, as well as creating regulatory reports. FDIC state examiners are cracking down on banks and thoroughly investigating software systems that are within regulatory restrictions for loan reviews, IT, anti-laundering practices, cyber security and low-income borrowing procedures.

In looking at the impact this has caused, it’s clear that due to increased expenses, no startup banks want to take a risk when the odds are stacked so highly against them. In a statement earlier this year, Senate Banking Committee Chairman Richard Shelby said that improvements to rules impacting small banks should be made. However, if changes aren’t made, what does the future of startup banks look like? Furthermore, what will lending options look like for small business owners?

Fortunately, no matter what the future holds, Capstone Capital Group, LLC can be your capital partner. For years, we have helped growing businesses get the immediate cash they needed without the typical red tape that most banks require. We provide you access to capital through one of our customized funding programs, allowing you to scale your business instead of worrying about finances. For more information on invoice factoring, purchase order factoring, give us a call today at (347) 821-3400 and speak to a representative.

CFPB be Reformed by Neugebauer's Bill

Could the CFPB be Reformed by Neugebauer’s Bill?

14:50 25 March in Blog

CFPB be Reformed by Neugebauer's BillOver the past few years, there have been attempts to change the composition of the Consumer Financial Protection Bureau (CFPB), even its name. Now, a new bill might truly pass Congress.

Introduced by Republican Representative Randy Neugebauer for the state of Texas, H.R. 1266 would create a five-member commission structure to lead the CFPB, which is currently headed by Director Richard Cordray.

Neugebauer’s proposed bill lays out the framework for creating a bipartisan commission leadership structure. Included in the bill is a provision that no more than three commissioners can be members of one political party. This is so that there are not coinciding vacancies when terms end.

Additionally, Neugebauer’s bill readjusts CFPB executives’ pay to the federal scale as well as creates an official seal for the agency. There is also a proposal to change the name of the CFPB to the Financial Products Safety Commission.

Much support has already been garnered for Neugebauer’s bill. The legislation was introduced with 20 initial co-sponsors, all Republicans and all members of the House Financial Services Committee, on which Neugebauer serves.

A coalition of banking and business groups including the American Bankers Association and the U.S. Chamber of Commerce expressed their support in a letter that read, “We believe that a five-member commission, as Congress originally intended, will better balance consumer access to financial products with the need to ensure a fair marketplace.”

Because Republicans control the Senate, a bill passed by the House is expected to pass even without Democratic backing. However, a coalition of more than 300 interest groups is in strong opposition to the bill, defending the CFPB.

Capstone Capital Group, LLC has eliminated the bank red tape by offering small to mid-sized businesses Single Invoice Factoring (“Spot Factoring”). Businesses can now get the immediate cash they need in exchange for working capital from Capstone Capital Group. For more information on Capstone’s Single Invoice Factoring call us today at (347) 821-3400.

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

How the Dodd-Frank “Too Big to Fail” Legislation Hurts Small Banks

21:28 16 March in Blog

We have written numerous times about how the Dodd-Frank “Too Big to Fail” legislation is hurting smaller banks and interfering with loan approval for your small and medium-sized businesses.

Much of the regulation was designed to stop large money-center banks from taking depositor’s money and executing risky investments or engaging in risky transactions, which would thereby place the public at risk as well as the US financial system.

However, the unintended consequence of the law has created significant regulatory pressure on small and medium-sized banks, which has caused the regulators to take a one-size-fits-all approach to bank regulating. We can all agree the risks facing small and medium-sized banks are different than those facing the large money-center banks.

Compliance costs alone eat into the profits of the smaller banks, whose scale is smaller and has less profit than more major banks. The portfolios of the smaller banks are vastly different than those of larger banks as well. Most small banks lend into their communities and can assess the economy and risk related to their portfolio first-hand. This is not possible for the larger banks, as their footprint spans either a region of the US or the entire US. This leads to centralized decision- making with computer aided modeling to ensure that the loans are underwritten as conservatively as possible. Though not a negative thing, it’s different from how smaller banks are chartered to operate.

In most cases, the three “C’s” are used in small bank lending because the small town banker knows his customer. Credit, Character, and Collateral are what the small town banker relies on. Federal regulations do not see it the same way, causing conflicts between operation and management. The best way to manage it is to reduce the amount of loans and use the most rigid standards, which do not help the community that these smaller banks are chartered to help.

Congress has been listing to these smaller banks and indicated they would enact legislation to reduce the regulatory burden so they could operate like they should. It is important to note that very few smaller banks were affected by the financial crisis. The Republicans are attempting to provide relief for smaller banks while Democrats require that all of the Dodd-Frank provisions be in place for every bank regardless of size.

The Fed supports the changes for small and regional banks. However, it does not seem that these smaller institutions will be released from the “Too Big to Fail” category any time soon. As the economy continues to grow, and your need for working capital increases, please remember to call or email Capstone Capital Group, LLC at (347) 821-3400 or [email protected]

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