Banks Ease Lending Standards Regardless of Regulations

21:31 17 July in Blog
In a recent report issued by the Office of the Comptroller of the Currency (OCC), certain areas of concern were highlighted which identified where banks took on more risk in pursuit of profits: high-yield loans issued to more speculative borrowers and indirect auto loans issued by banks to through car dealerships.  Similarly, banks are also easing lending standards on commercial loans.  

With demand for financing still at an all-time high, a finite pool of lending opportunities, low interest rates, intense competition, slow growth and increased governmental regulation, banks are feeling the pressure to increase revenue in today’s current economic climate. According to the report, the increased risk taking comes as banks continue struggling to generate strong profits in the aftermath of the 2008 financial crisis. The industry’s overall net income set a record in 2013, rising 12% from a year earlier to almost $108 billion.  The previous record was in 2006, and the fact it took the industry seven years to top that reflects “the weak nature of the banking recovery so far”.

Current regulation, brought about by the Dodd-Frank legislation, which capped the amount of commissions and fees banks can charge for originating loans have seemed to create a scenario where banks are now taking on higher risk loans in order to compete and make a profit in this new era of extreme banking regulations.  It is clear that if congress had truly understood the marketplace, they would not have produced the income problems which Dodd-Frank has unfortunately created.

 

Capstone Capital Group, LLC understands the concerns of commercial borrowers who are considering bank financing.  Accordingly, we offer various business finance options, including “Single Invoice Factoring” which functions as a safer alternative to traditional, and often times unpredictable, bank financing.  Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group.

 

Give us a call today to find out how we can help you.  Our underwriting guidelines are simple, straightforward and not subject to stringent regulatory oversight and control. Capstone Capital Group, LLC specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Call Capstone at (212) 755-3636 or email [email protected] today and speak with a representative.


[1]Lenders Are Warned on Risk-Regulator Urges Caution by Banks About Standards Amid Competition, By Victoria McGrane And Gillian Tan

Keeping up the Pace: Embracing changes in technology in order to stay relevant in a digital marketplace

19:55 10 July in Blog
Is your company keeping pace with new innovation and technology?  If the answer is no, it is likely your company will not last very long.  In order to survive in a digital society, companies must embrace and keep pace with changes in innovation and technology.  According to some experts, keeping pace with change means testing new ideas and building new businesses within your organizations, as well as being aware that all media is social. 
 
Investing in IT and technology infrastructure, in addition to marketing expansion and new ventures is key to a company’s growth during uncertain economic times.  According to Futurist Jim Carroll, the top 10% of companies who survived and thrived during the “Great Recession” of 2007-2009, did so by specifically deciding to make bold moves to invest in world-class innovation, despite economic uncertainty. 
 
Soraya Darabi, Co-Founder of Zady and Social Entrepreneur gives five reasons why a company should embrace new media and technology.  The first reason is that understanding innovation as it evolves keeps your company relevant.  Darabi adds that not understanding innovation as it evolves makes your company irrelevant.  Next, Darabi states that by embracing new media and technology, companies create positive brand awareness.  Additionally, a company that evolves technologically will have a better ability to reach new audiences and new demographics.  There is also an opportunity for companies to generate additional revenue by utilizing smartphone app technology. 
 
As you can see, by investing in technology and new media, a company will have the ability to remain nimble, grow and ultimately succeed in a digital economic climate that shows no signs of slowing down. 
 
Capstone Capital Group, LLC wants to help your business succeed by getting you the investment capital you need to help your business grow and continue to stay relevant.  Capstone Capital Group, LLC specializes in Single Invoice Factoring (“Spot Factoring”), purchase order factoring for firms in need of immediate cash. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group.

Capstone Wishes You a Safe and Happy 4th of July!

18:51 03 July in Blog
The 4th of July is dedicated to honoring our great nation and taking the time to appreciate and celebrate our independence and freedom.

 

Thanks to all of our loyal customers and partners, we continually work together to help this country thrive. Together we build, fund and grow better businesses that benefit our economy and our country as a whole.

 

Look to Capstone Capital Group, LLC, to help your business start, grow and thrive. Capstone prides itself as a factor whose objective is to help its clients succeed. Our partnership, along with optimism and dedication in our free market society, is the catalyst which spurs economic growth and a more prosperous U.S.A!

 

Thank you for your continued loyalty and support. We wish you all a safe and happy 4th of July!
For more information on how to partner with Capstone, please email [email protected] or call (212) 755-3636 to speak with a representative today.

Now Trending! Outlook is Good for Start Up Businesses in the U.S.

19:16 26 June in Blog
According to a recent report detailed in a publication entitled “Global Entrepreneurship Monitor”, 2013 was an optimal year for start up businesses. The report was based on a survey of adult American entrepreneurs between April and June of last year.  The report reflected a steady increase of new business creation since the recession leading up to 2014.
 
A Washington, D.C. economist attributed increases in business creation with access and availability of startup capital, whether from banks, angel investors or family members.  Likewise, in a downturn where credit markets are frozen and capital is more difficult to come by, this consideration is reflected in the overall number of startup ventures in any given period.
 
While the above reflects an optimistic outlook for budding entrepreneurs ready and able to start new business ventures, a different study, conducted by the Ewing Marion Kauffman Foundation (“Kauffman study”), painted an entirely different picture. 
 
The Kauffman study, which based its data from the U.S. Census Bureau and the Labor Department, concluded a lesser percentage of new business startups were created in 2013; and an even lesser amount of startups were created in 2011 and 2012.  A researcher for Kauffman attributed the conclusions of the study to the lower number of “new entrepreneurs coming out of unemployment” or “necessity-driven entrepreneurs” who, out of sheer necessity, are forced to start businesses because they are unable to find full time employment. 
 
Despite the disparity between the two reports, there does appear to be a trend towards economic recovery in the U.S. and an aim by the government, factoring companies like Capstone Capital Group, LLC, and others to help new business start, grow and thrive. Capstone prides itself as a factor whose objective is to help its clients succeed. As your factoring partner, we offer commercial financingsingle invoice factoring, which can provide you with the capital you need to accelerate your cash flow and help your business continue to grow and thrive in today’s market on a more flexible basis than other factoring companies.

 

Optimism in a free market society seems to be the catalyst which spurs economic growth in most cases.   Let’s hope the optimism continues to grow and investment capital remains steady in years to come.

 

For more information on how Capstone can help, please email [email protected] or call (212) 755-3636 to speak with a representative today.

 

Feds Streamline Lending Standards: A Good Idea Or Will History Repeat Itself?

18:35 19 June in Blog
In an effort to assist minority entrepreneurs to borrower funds for business ventures, the federal government recently announced it would be streamlining its lending standards in connection with Small Business Administration (“SBA”) Loans.  In order to increase the percentage of loans made to African American business owners, the SBA will no longer require lenders to perform an analysis of cash flow or debt service coverage on loans of $350,000 or less.  The changes will begin starting July 1, 2014 and according to the SBA, these modifications in qualifying guidelines are aimed at simplifying and streamlining the lending process in an effort to incentivize banks to do more small-dollar loans in order to get more loans into the hands of traditionally underserved entrepreneurs. 
 
We at Capstone Capital Group, LLC find this change in criteria alarming.  As a private financial institution that assists its clients in accelerating their cash flow through Factoring accounts receivable it is our goal to increase access to capital for all qualified business borrowers.  However, providing access to capital to unqualified borrowers who do not have the ability repay will ultimately cause further problems down the line.  Once these no cash flow loans begin to default, Congress will have to act because taxpayer money is at stake.  The laws they ultimately will put in place will end up hurting small businesses access to conventional bank financing as Dodd-Frank has.
 
If history has taught us anything, it is that relaxing underwriting guidelines in an effort to extend loans to “underserving” individuals is not necessarily a good idea.  Like sub-prime commercial lenders in the past that offered small balance, stated income/stated asset with no debt service coverage, commercial loans to business owners who would not necessarily qualify for traditional financing, the government may be going down a dangerous slope with its new underwriting guidelines on SBA loans aimed at what they term as “underserved”.  The government lowering its lending standards to spur loan demand is a recipe we have seen all too often in this country, which ultimately has led to defaults and often times foreclosures. 
 
Recent events in the student loan market support the ultimate end game using relaxed standards.  Prior to the government handling student loans they were administered and underwritten by banks.  Now college graduates are graduating with mountains of debt because the ability to repay is not taken into account.  The tax payers will ultimately bear the burden of paying all of these poorly underwritten student loans back as more and more graduates are under employed and cannot pay their debts.
 
Further, and even more unsettling, is that commercial banks aren’t given similar consideration as they are prohibited from doing the same under Dodd-Frank.  As much as the government may believe loosening lending standards on SBA loans to spur lending to the undeserved is a good idea, these loans may very well be like the recent student loan crisis the government has created. 
 
Capstone Capital Group, LLC prides itself as a factor whose objective is to help its clients grow. As an alternative, we offer purchase order factoringsingle invoice factoring which can provide you with the capital you need to accelerate your cash flow and get your business back on track without undertaking debt you are unable to repay.

 

For more information on how Capstone can help, please email [email protected] or call (212) 755-3636 to speak with a representative today.

 

Considering funding your business by financing your home with a HELOC? You may want to reconsider.

19:17 12 June in Blog
As banks have tightened up lending standards making it more difficult for small to mid-sized businesses to acquire the necessary financing they need in order to sustain and/or grow their organizations, business owners have considered alternative financing options.  One such alternative is the pledging of the equity in their own homes as collateral for the extension of a loan.  It may seem a bit drastic, but business owners will do anything to save and grow a business.  Especially ones they have devoted their blood, sweat and tears into.
 
Business owners who have been denied a small business loan by their bank, will quite often look at taking out secondary financing against their home to save their struggling business.  One such vehicle which will allow them to do this is a home-equity line of credit, more commonly referred to as a (“HELOC”) loan.  Business owners believe these loans are just the life line they need to keep their business afloat.  Nothing may be further from the truth.   
 
Despite the sluggish economic recovery, home prices are again on the rise and banks have once again begun to increase HELOC lending.  Some business owners may be thinking a HELOC is the way to go for their business capital needs.  They may want to rethink this and consider their options-here’s why:
Risks involved with HELOC loans
There are significant risks involved with relying on a HELOC to save your struggling business.  The major risk with HELOCs is its exposure to interest rate adjustment and fluctuations.  All HELOCs are adjustable rate mortgages (ARMs), but they are much riskier than standard ARMs. Changes in the market impact a HELOC very quickly. If the prime rate changes on April 30, the HELOC rate will change effective May 1. An exception is HELOCs that have a guaranteed introductory rate, but these hold for only a few months.  Standard ARMs, in contrast, are available with initial fixed-rate periods as long as 10 years.
HELOC rates are often tied to the prime rate, which some argue is more stable than the indexes used by standard ARMs. This is a misconception however, due to the fact that the prime rate doesn’t change from day to day. In 2003, it changed only once, to a low of 4% on June 27. However, it changed 17 times in the next three years-.25% each time, reaching 8.25% on June 29, 2006.  In 1980, it changed 38 times, and ranged between 11.25% and 20%.
In addition, most standard ARMs have rate adjustment caps, which limit the size of any rate change;  and they typically have maximum rates 5-6% above the initial rates.  HELOCs generally do not have adjustment caps, and their maximum rate is 18% except in North Carolina, where it is 16%.
Recent problems with HELOC loans
More recently, the problems with HELOCs aren’t so much with interest rate fluctuations but instead have to do with the fact that a majority of these loans were interest only for the first 10 years before any principal was required to be paid.  A majority of these loans were made during the refinance boom in early 2000 when the value of real estate was at an all-time high.  A good number of these loans are set to recast within the coming year which means that the borrower’s monthly payment is likely to increase substantially.  
A business owner who decided to take out a HELOC against his home 10 years ago may be in for the shock of their life when his or her monthly payment jumps from say, $250 to $560.  That additional $310 could have been used to purchase additional equipment for the business, or to take the family on that long awaited vacation.  In addition, because a HELOC’s rate is adjustable, there is a likelihood the monthly payment could increase even more if the interest rate moves up.  
Should the borrower want to refinance the first and second HELOC loan in order to reduce his payment shock, there may be enough equity in the property to do so.   Thus the borrower is stuck with the higher payments until such time the HELOC is substantially paid down and/or the value of the property increases enough to justify a refinance.

 

With the uncertainty of the market, and constant fluctuations in the interest rate, as well as corresponding increases in the monthly payment, a HELOC loan doesn’t really make good business sense in the long term.  There are much better alternatives for business owners such as “Factoring” which can give a small business the necessary influx of working capital it needs to sustain and grow.  Capstone Capital Group, LLC specializes in Single Invoice Factoring for firms in need of immediate cash. Single Invoice Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group, LLC.
 
For more information on how Capstone can help, please email at [email protected]or call (212) 755-3636 to speak with a representative today.

 

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