Case Study Interior Design Firm: Purchase Order Financing & Single Invoice Factoring

20:03 08 June in Case Studies

COMPANY CHALLENGES

The main challenge this company faced was that they did not have to working capital to meet the need of the shade manufacturer, who required payment in November to cover a 6-8 week lead time. The shade manufacturer’s terms included a 25% deposit, 50% upon delivery and 25% upon completion. Additional payment arrangements were required for three other vendors.

BACKGROUND

In November 2014, Capstone Business Funding met with a successful WMBE company

• The company was awarded a six-figure bid from Bristol-Myers Squibb

• Job entailed the replacement of a shade system for cafeteria skylights with custom shades

• The schedule for the job was a February start and completion

• Terms of payment were Net 30 days from job completion

• Capstone provided a Purchase Order Financing facility so the company could purchase the custom shades, cover the cost of installation & rent equipment

• In addition, Capstone provided a Single Invoice Factoring Facility enabling the company to provide payments shortly after the customer was invoiced

PROGRESS & FUTURE OUTLOOK

Job performed was a great success for both the owner and Capstone leading to repeat business

• The company is confident it can bid on larger jobs even those it does not have capital

• Capstone looks forward to assisting the company in the future and fueling their growth

CAPSTONE’S SOLUTION LEARN MORE TODAY

Call: 212-755-3636 or (212) 755-3636

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Small Businesses, beware the “Advance-Fee Loan Scheme”!

21:04 05 June in Blog
The “Advance-fee loan scheme”, as the scam is more commonly known, has been around for years.  However scammers have recently intensified their efforts in part due to the current financial crisis in addition to tighter underwriting requirements in regards to small business loan financing created by Dodd-Frank (Too Big To Fail ) Legislation.
 
The scam is fairly straightforward.  By way of telephone, email or internet communication , these so called  “loan broker” con artists target small business owners and entrepreneurs by promising them they can secure a sizable business loan for them and all they have to do is pay the loan broker a fee “in advance”.  According to Alabama Securities Director Joseph Borg, businesses with $1 million to $50 million in revenue are the most common targets because under the new legislation banks have the most difficult time lending to these microcap companies. 
 
What happens next is that the small business owner will pay a substantial upfront fee up to the loan broker with a loan never actually materializing.  The small businessman is ultimately met with dozens of unanswered phone calls and unresponsive emails, with the con man eventually leaving town.  According to Federal Trade Commission (“FTC”), this type of scam has been happening with more and more frequency. In 2013, the FTC booked a record 53,833 complaints about advance-fee loans filed by entrepreneurs and consumers.  This number is up from 43,070 in 2012 and 44,504 in 2011. 
 
As mentioned above, these scams typically target desperate business owners who feel like they have no other options.  Paying a broker a fee in advance without any guarantees of success is not the wisest of business moves.  If you are a small business owner looking for additional capital and have been denied a loan by your bank, it is not the end of the world.  Alternatives, such as invoice factoring offered by Capstone Capital Group, LLC, exist which can provide you with the capital you need to get your business back on track and do not require the advancing of upfront fees with the hope your loan will be approved and funded, if at all. 
 
For more information on Capstone’s services, please email at [email protected] or call (212) 755-3636 to speak with a representative today.

Let the Borrower Beware

20:38 29 May in Blog
Capstone Capital Group, LLC prides itself on providing funding for its clients that run viable businesses but are in need of working capital and will grow as a result of funding.  Unfortunately, there are new lenders who pop up every day to take advantage of the latest trends in high yield lending that do not always have their client’s best interests at heart.

 

The most recent trend is called “Merchant Cash Advance”.  This segment of the lending industry dates back to the early 1990’s, but did not hit widespread acceptance until about five years ago.

 

When the Merchant Cash Advance business began, it was a method of providing liquidity to retail businesses that did not have significant assets that could be pledged to a bank in exchange for a line of credit.  The idea was to make an advance to a business in exchange for an assignment of the credit card receipts that were typical for the business.  For example, if a restaurant had monthly sales of $500,000 and needed $300,000, the Merchant Advance lender would structure a payment of $15,000 to $17,000 twice a week for 12 to 16 weeks.  These payments did not starve the company of its cash flow and as long as business was consistent and stable, the business owner who could not get a loan anywhere else had access to a willing lender.  If all went well, the lender would be paid back and the restaurateur could return to the lender at a later date and borrow again.  If the lender was not paid back, the company would be pursued by the lender to the extent the lender thought it prudent. With this method, more than the entire portfolio losses on one account could be covered by gains on many other accounts.

 

18 years later the business has now morphed into a high risk high return lending process with full recourse.  In the Sunday Bergen Record, the newspaper highlights the trials and tribulations of borrowers who fall prey to unscrupulous lenders in this market.  Like all businesses, there are those who operate ethically and those who are only in it for the money.  The Bergen Record article highlights what the pitfalls are of getting in bed with the bad apples of the industry. The article also explains why so many companies are entering the space and what their backgrounds might be.

 

Capstone Capital Group, LLC prides itself as a factor whose objective is to help its clients grow.  Unlike the merchant cash advance companies, we are able to factor sums from millions to hundreds of thousands with no personal guaranties or the pledging of real property, automobiles, etc.

 

Capstone specializes in Single Invoice Factoring (“Spot 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.

 

The next time you are looking for business funding solutions, be careful.  Our process may take five business days while theirs only takes one hour, but we will help you grow your business through our funding process.  Depending on whom you contract with in that business could mean the end of yours.

 

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

Celebrating the 100th Anniversary of the Bronx

20:40 15 May in Blog
Claritza Wilshire, Business Development Officer at Capstone Capital Group, LLC attended the Sixteenth Annual Bronx Banker’s Breakfast.  The meeting was hosted by the Business Initiative Corporation of New York (BICNY) and BronxBorough President Ruben Diaz, Jr.
The meeting focused on revitalization of the Bronx’s economic activity and financial projections. The event was part of the several ceremonies commemorating the 100thAnniversary of the Bronx.
Capstone Capital Group, LLC attended with the following institutions: Citibank, Popular Community Bank, Rite Check, Capital One Bank, Hudson Valley Community Bank, Bethex Federal Credit Union, JP Morgan Chase, Ponce De Leon FSB, Spring Bank, Webster Bank, Wells Fargo, Apple Bank, Flushing Savings Bank, M&T Bank, Signature Bank, IDS Corporation, Monroe College, US Small Business Administration, SBDC at Lehman College and SCORE.
Capstone Capital Group, LLC is committed to supporting the development and redevelopment of Bronx infrastructure projects thru its funding programs.
Subcontractors who are winning bidders can rely on Capstone Capital Group, LLC factor programs to assist them in meeting their contractual obligations, working capital needs and supplier credit facilities.
Is it time for your company to partner with Capstone and arrange a factoring facility for your working capital needs? Call us today at (212) 755-3636 or visit our website at www.capstonetrade.com.
View our photos from the Sixteenth Annual Bronx Banker’s Breakfast:
Marlene Cintron, President of BICNY and Claritza Wilshire, Capstone Business Development Office
Bronx Borough President Ruben Diaz, Jr. and Claritza Wilshire, Capstone Business Development Office
Madeline V. Marque, VP of BICNY, Claritza Wilshire, Capstone Business Development Office and Ruben Diaz, Sr.

Fed Up or Fed Down?

19:37 08 May in Blog
On May 7, 2014, Fed Chairwoman, Janet Yellen, testified before Congress and provided information on a host of issues relevant to all of our businesses.
 
Ms. Yellen found that business is rebounding at a fast pace and making up for the loss of business in the first quarter of 2014 which was down primarily due to the harsh weather experienced during that time.
 
Ms. Yellen would not comment on when interest rates would be raised.  However, the point is that interest rates will continue to remain low for the foreseeable future.  Obviously with budget deficits as large as they are within the Federal Government, it will be difficult to pay a higher rate on government debt should rates rise with so much short-term government debt outstanding.
 
Ms. Yellen was bullish on the stock market and indicated that there is no bubble as a result of the Fed’s policies.  She did indicate that certain sectors may be reaching historic highs, but there is no risk to the overall financial system or the stock market from these pockets that may have higher than normal price-earnings ratio and valuations.
 
Ms. Yellen extolled the benefits the Fed’s policy has had in the housing market.  She equated the Fed’s policy to bring back wealth to many citizens who are homeowners but were once underwater as a result of the financial crisis.  She expressed concerns about the job market because the unemployment rate, when combined with the labor force participation rate, demonstrates that the employment market is not healthy.  She sites that those unemployed for at least six months and those working part time but would prefer a full-time job, are at historic highs.
 
What does this mean to you as a small business owner?
  • Many opportunities are available to grow your business; the economy is making up for lost time due to the weather related slowdown in the first quarter of 2014.
  • There are plenty of workers out there looking for full-time jobs that pay well.  The labor force will support your expansion.
  • Low interest rates means that banks will not be taking on risks associated with funding to small businesses.  
Just for fun, what does this mean to you as a person?
  • If you don’t own a home maybe it’s a good time to buy one if you can afford it.
  • If you’re a gambler, try your hand at the stock market, as the Fed will continue to support it with excess liquidity.
Now is the time to arrange a spot factoring facility with a company like Capstone Capital Group, LLC for your working capital needs to fund your expansion and increased staffing costs.
 
To view the full hearing click here

Let the Games Begin!

19:00 01 May in Blog
The Federal Reserve (“Fed”) has now entered into its fourth month of reducing the impact of quantitative easing on the economy. 
The original theory behind quantitative easing was that if the Fed purchased bonds, it could sustain lower interest rates for borrowers. Therefore, more companies would borrow, which in turn, would help the economy with import finance.  Once small businesses started borrowing, they would expand their plant and equipment, hire new employees and have more profit.  However, the theory of quantitative easing did not work that way in a practical sense. 
What actually happened was the banks lent the money they could borrow from the Fed back to the Fed by depositing funds with them in return for an interest rate with no risk to their capital, unlike a small business loan. These business funding solutions were done at such high levels (i.e. tens of trillions of dollars) that the banks have been able to restore their capital base without having to pay any interest to their depositors (we don’t consider a quarter or one percent per year interest to a saver “interest”.) 
Without banks having to pay significant interest rates to their depositors, there was no driving force to encourage the underwriting of small business loans and take the risk.  The Fortune 1000 and companies of the sort that were cash rich over the last six years could borrow all they wanted from banks. However, those companies decided to go to the bond market where they could negotiate better terms. Because of this, the banks made loans to this group of companies and very few of the companies actually needed the loans and thus did not down on their credit facilities.
Because of the reduction in quantitative easing, the pundit and economists are projecting a mere 3.5% growth for the economy.  The Fed is lowering its quantitative easing by $10 billion per month (no typo here.)  The theory is that the banks will now begin to make small business loans because the Fed is no longer their biggest customer.  Interest rates will start to tick upward so the banks can price the new small business loans commensurate with the change in credit from the Fed to the mom and pop operator around the corner from your house.
But just in the nick of time, Dodd-Frank banking regulations have become effective which require the banks to do the exact opposite of what the reduction of quantitative easing should bring to the economy – growth.
Dodd-Frank is also known as the “Too Big to Fail” legislation.  This legislation was designed to reduce the impact on taxpayers when banks take risks with their depositor’s money.   Just when the Fed took a step to help the economy, Dodd-Frank will be applying the brakes again to small businesses.  For this reason, we have been trying to reach out and explain why factoring your accounts receivable with Capstone Capital Group, LLC to generate working capital is a step forward to accomplishing your business goals for 2014 and beyond

Get By With A Little Help From Your Friends

20:30 24 April in Blog
Big Firms Fill Funding Gap was the headline on April 22, 2014’s CFO Journal section of The Wall Street Journal.  The article confirms our predictions that the unintended consequence of Dodd-Frank is the reduction of capital available for small companies.  The article describes how large companies who rely on smaller companies are financing their expansion of plant and equipment to supply their larger counterpart with goods under a long term supply agreement.  Typically, the supply agreement provides the capital to payback the loan made by the larger company to the smaller company.
The article goes on to describe how accounts receivable factoring has become a mainstream method of financing the working capital needs of small business.  At one time, factoring was a financing methodology only used by desperate companies.  Dodd-Frank has changed all of that.  At Capstone Capital Group, LLC we have seen our factoring business grow exponentially over the last 18 months.
One of our factoring clients has made a great case study that proves the benefits of both factoring and a large company financing a small company.  The company is located in the Midwest and is a co-packer for fresh and frozen bakery products for major name brand food products companies.  Last year, the company entered into a new contract with a multi-billion dollar company.  Our client did such a great job as a co-packer their client came to them and offered to purchase equipment that would enhance their production facility.  Our client’s management agreed and the food company made an interest free loan for the new equipment which will be paid back over 18 months.  The payment plan requires no money, just a discount off of the case price of a product they will sell to their customer.  The incremental increase in business each year will be a minimum of $2,000,000 per month.  That is a home run.
There are no strings attached.  Our client can produce a similar product with a different recipe for other clients.  This, combined with the invoice factoring program we have put in place, has enabled the company to increase its employees, operate more efficiently and increase their gross margin.
In business, there are times when out of the box solutions are necessary to accomplish your goals.  Factoring with Capstone Capital Group, LLC may be the out of the box solution you need to get you to the next level.  Once your customers see the direction you’ve set for your business, they too will offer out of the box solutions to increase your business and create benefits for both of you.  Start Spot factoring your receivables today and continue to pursue your business goals.  Once you have committed them to paper one way or another you will find out how to attain them even if it is with a little help from your friends.

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