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.

How Much Time Do You Have?

19:00 10 April in Blog
Now that you’ve assessed your progress to date upon the close of the first quarter, its time to determine how much time you have to get going.
In an article in the Wall Street Journal from April 1, 2014 entitled, “Creating A Path To Bankability,” the author discusses the various finance tools available to small businesses looking to expand.  The main point of the article is that while many alternative lenders exist for the sole purpose of preying on small businesses that do not have the financial stability to acquire more affordable financing, there are lenders that provide alternative lending solutions which put the company in a better position than where they started.
The reality behind inexpensive financing and SBA loans is that they require a significant amount of time, and as the old adage says, “time is money.”  How long can you afford to wait to grow your business while you shop your loan around to various lenders who will take months to review stacks of paperwork that will be required of you?  My guess is, if you’re looking for financing you’d like to get it as soon as possible.  Any time spent with your application on someone’s desk is time spent NOT growing your business.
Capstone Capital Group, LLC’s approach to this problem is very straightforward.  Within minutes of receiving an application, we are running searches and reaching out to you to acquire the information we need to make a fast decision.  We are as eager to do business with you as you are to do business with us.  Our process can be summarized with two very simple questions:
  1. Do you have accounts receivable to sell?
  2. Do you want to grow your business?
If you answered yes to both of these questions, there is no reason to let opportunities continue to pass you by.  The best part about working with Capstone is that there are no long term commitments and we are willing to work within any bank relationship you may already have in place!  Better yet, continue to work towards getting that SBA loan you have your heart set on and factor your invoices with Capstone to bridge the gap between applying for and securing your SBA loan.
Contact Capstone today to find out more about our invoice factoring and trade finance solutions.  Stop waiting, you’re running out of time!

MTA Rebuilding Infrastructure & Resiliency – Opportunities for NY Contractors and MWDBEs

19:00 03 April in Blog

 
Capstone Capital Group, LLC attended the Fix & Fortify Sandy Recovery Work conference for DBEsand NYS Certified MWBEs held on March 28, 2014 at Club 101 in New York City.  Over 300 participants related to the construction, transportation, financial, and municipal industries attended the conference as representatives from the MTA (Metropolitan Transportation Authority) in conjunction with the US DOT (US Department of Transportation) unveiled their contract opportunities for the LIRR, Metro North, and NYC subway systems.  These MTA projects mean big opportunities as small businesses in New York have been invited to submit bids on the projects. 
From rebuilding entire subway stations to replacing vital components in the majority of the 656 miles of track and tunnels affected by flooding, to implementing preventative initiatives for maintaining resiliency, the “Fix & Fortify” program has created an unprecedented amount of projects for small businesses and MWDBEs (Minority Woman and Disadvantaged Owned Business Enterprises.) 
The Fix & Fortify conference follows right on the heels of Governor Cuomo’s unveiling of a $4.9 Billion Coordinated Transportation Resiliency Program on March 27, 2014.  The US DOT has pledged approximately $3.8 billion in funding allocated for Sandy recovery and resiliency projects. The resonating message throughout was “Fix & Fortify”; rebuild stronger and smarter to prevent future destruction. 
A speaker at the conference, Alphonso David, Deputy Secretary for Civil Rights of the New York State Governor’s Office spoke of the importance of identifying barriers for small businesses and MWDBE contractors to overcome.  Over the years and through many clients, Capstone has been able to identify unique barriers that small businesses and MWDBEs face, the main one being lack of access to sufficient capital to expand their businesses. 
Capstone has been able to structure a business funding platform specifically to support the working capital needs of these types of businesses and we have pledged our support for businesses who successfully bid on these transportation projects. Now is the time to secure your working capital with Capstone.  Take advantage of this unprecedented opportunity with the MTA and bid with confidence!  

1st Quarter Self Assessment – Business Goals and Objectives

16:47 27 March in Blog
The end of the first quarter of 2014 is upon us. It’s time to evaluate your business goals and objectives against actual performance.If you wrote your goals down as was suggested in Are You Better Off Today Than You Were A Year Ago?, you have the means to objectively analyze where your business stands and what you achieved over the first three months of 2014.
If you exceeded your goals, analyze why:
  • Were you too conservative when you established them?
  • Did you line up your resources properly and did everything else fall in place?
  • Did you get lucky?
Fun fact: do you know what the definition of Luck is?
Laboring Under Correct Knowledge – people make their own luck by being prepared!
We advised on hiring retired executives to assist with growth plans, using temporary employees to fill gaps upon receiving that larger contract and lining up financing or funding through a company like Capstone Capital Group, LLC.With these three tools at your command, you should have met or exceeded your goals.

Reasons Why You Didn’t Reach Your Business Goals

For those of you who have not met your goals for the first quarter of 2014, let’s analyze why:
  • Were you overly optimistic about the establishment of your goals?
  • Did you line-up the proper resources to succeed and to accomplish the goals?
  • How close or far away were you from achieving your goals?
  • Did you line up the staffing and funding to support your growth for cash flow?
The key here is NOT to get discouraged but to be honest with yourself and fix the obstacles that are holding you back immediately.
Today Capstone received a call from a subcontractor, and we would like to share the story here:
Back in October 2013 when Capstone first met this subcontractor, we discussed the establishment of a funding facility through accounts receivable factoring to support his growth. He was anticipating the award of a few government contracts.This subcontractor was successful in obtaining the contracts and started the jobs however he has unfortunately run out of cash.
Part of this subcontractor’s strategy is the exact formula for success – he probably worked for several years to convince the general contractors to develop confidence in his ability to deliver. The contract awards were received and there was appropriate staffing for the project however he failed to line-up a funding facility.
Now, guess what his next move was? He called the office in a panic and asked how quickly Capstone could put a funding facility in place using his accounts receivable to factor. Capstone will move as quickly as possible to support him, but it’s more important to take a look at the added stress this subcontractor has taken on because he did not plan properly.
Construction and Professional Services jobs are leading the economic recovery. Many of Capstone’s clients are taking advantage of this growth. Where do you stand?

JOBs, JOBs, JOBs

17:12 13 March in Blog
Last Friday the US Jobs report for January 2014 was published.  The economy created 175,000 new jobs in the month of January.  Economists expected this figure to be lower because of severe weather throughout the United States.  If the figure was smaller, the typical cycle of the economy losing steam in the Spring would have been predicted.  This cycle of the economy losing steam each Spring has been going on for at least five years.
Economists are now predicting that the growth they projected for 2014 is sustainable and will continue throughout the year.  Let us hope that by the end of March they do not revise the January jobs number downward.  Typically, what happens is the job numbers are often adjusted negatively or downward 45 to 60 days after they are published.  This gives the economists the opportunity to revise their forecasts.  But more importantly, at this point who cares? 
How is your economy doing?  Our clients at Capstone Capital Group, LLC seem to be doing very well.  Each month we are setting records in terms of business funding solutions and new client origination.  Regardless of what the US Jobs report says (or their revised versions), our clients will grow substantially in 2014.
We are fortunate to operate in a micro economy where the macro economy has significant influence but it doesn’t stop those entrepreneurs who are constantly seeking out opportunities to attain their goals.  We continue to advocate that you should ignore the economic forecast lest they color your view of the opportunities that are within reach.  Last week we discussed “getting into the game” by finding a small business funding source to support your company’s growth and bid opportunities in Get in the Game!.  This week, the economic data supports that view and if you are too slow at jumping in you may get left behind.
Sarah E. Needleman writes a column called the Accidental Entrepreneur for The Wall Street Journal.  Last week she published an article entitled “When Banks Won’t Back Your Startup.”  In the article, she interviewed a company who availed themselves of a Factor because no other financial institution would provide funding.  Through the use of the factor, the company was able to cover operating expenses while waiting for customers to pay.  The company grew significantly and eventually raised $250,000 in investor funding. 
To quote the owner of the company “Factoring is an amazing strategy when you can’t go to a bank and you are trying to get a product out there.” 
To sum it all up, the economy is coming back, Get in the Game!, get some new contracts, and get a Factor to fund them  If you are a construction subcontractor we are waiting for you!

Get In the Game!

19:00 06 March in Blog
Last week, we wrote a funding support letter for one of Capstone Capital Group, LLC’s clients who submitted a bid on an opportunity with the Port Authority of New York & New Jersey (“Port Authority”).  The company submitted their bid along with a letter of funding support to prove to that they had sufficient access to capital to complete the work.  The company unfortunately lost the bid to another firm who submitted a bid at 50% of the company’s bid.  As a public institution, the Port Authority has to take the lowest bid, but it is not practical for one union contractor to under bid another by such a large margin.  The client was not disappointed by losing the bid because the company bid the work at their best price and at a gross margin that would ensure the survival of his company, which is a fair way to conduct business.
The client is “in the game” because they have a construction factoring facility with Capstone.  The owner is positive about the company’s future because he knows he has the skills to provide customers with the best construction services available in the market along with funding to grow the business.  The client was also aware that this is one of many bids the company will be participating in. 
There is no point in taking low margin work that will hurt your company in the long run.  Many contractors submit low margin bids during slow periods to keep cash flowing and to keep employees on jobs.  The end results are:
·        increased accounts payable
·        liens on jobs
·        an overall loss of reputation 
This happens time and time again. 
At Capstone, we have a policy:
If the gross margin on a job is too small, the related accounts receivable will not be factored. 
Why does Capstone do this?  It is only a matter of time before the owner of the project puts their foot down and stops paying due to the use of substandard materials or workmanship.  There is no opportunity for the client to come out of the job stronger than they went into it without sufficient profit.  Accordingly, if the client cannot make money Capstone will not want to participate in a transaction that will result in a loss of capital even if we get paid in full.  It is not good business for the client or for Capstone!
We have observed that many disadvantaged business enterprises (DBE, MBE, WBE, etc) flounder following the receipt of their designation from the respective state or federal agency.  There is an expectation that work will come rolling in once the designation is granted. 
Without funding support from a working capital facility, an Invoice factoring facility or a company like Capstone, who understands their business model, disadvantaged business enterprises have limited options.  These entities are NOT in the game and are missing opportunities everyday. 
Get in the game! Find a Business funding solutions that will support your growth and bid on opportunities within your skill set.  Opportunities will be won and lost however you’ll always be able to deliver the highest level of service or product possible.  The frustration will be replaced by exhilaration due to company growth.
Take that first step and Get in the Game!

I’ll Have a Large Digital Pie, Hold the Anchovies

14:01 13 February in Blog
Last Friday there was a Wall Street Journal article entitled “Apps Are Wrecking Mom-and-Pop Pizza Shops.”  The primary reason why independent pizza shops are losing business is their failure to develop methods of communicating with online and mobile technology.  Essentially, with purchase order factoring and invoice factoring in the mix, the chain and franchise pizza retailers have developed digital communication systems that allow a buyer using a smart phone to order a customized pizza, pay for it and 30 minutes later or so it appears at their doorstep hot and ready to eat.  A Mom-and–Pop restaurant requires a phone call, the customer must travel to the pizza store, pay for the pizza and pick it up. Large chain and franchise pizza retailers such as Domino’s, Papa John’s, and Pizza Hut now attribute at least 40% of their sales to digital orders while independent Mom-and-Pop restaurants procure none.
This illustration of the economy shows a failure to adapt to technological platforms that customers now take for granted as part of their life.  Customers simply don’t understand why anyone would order pizza by phone, go to the pizza store, pay for it and pick it up.  They are correct.  Why should they pick up a phone and speak to someone when they want a simple thing like a pizza when they do almost everything else that is important to them on-line?  The Mom–and-Pop’s primary barrier is the cost of having an IT solution capable of handling online orders or a similar smart phone app.  Independent pizza shops on average have reduced sales by 20% to 30% due to this failure to adapt.  The bigger issue is that they are failing to maintain their current customer base as customers find it more convenient to order pizza over the internet.  Additionally, an age implication may be that younger customers are just as discerning as the older ones however they expect business to be conducted in a certain way for a business to expect their participation as customers. According to a 2013 State of the Pizza Industry Report, core pizza consumers aged 25 – 34 are more likely to utilize an online ordering option than not.
One would think that the cost of creating a digital market place for a Mom-and-Pop pizza purveyor would be relatively simple and could be executed through a website.  The cost to develop the website would be quickly recouped by a sustained increase in business.  This is a very common problem.  Technology lags, businesses lose their customer base and eventually a life’s work goes by the wayside.  Just think of the New York Stock Exchange; it was once a place where hundreds of people executed a wide range of spot factoring trades by screaming orders across the room.  Having a seat on the exchange was once expensive and prestigious.  If you didn’t sell your seat at the right time it lost tremendous value.  Now, computers trade faster and with more accuracy.  Floor traders are rare these days.
While independent pizza shops are losing market share to more technologically advanced competitors, your business may also be faced with similar issues.  Reference Capstone Capital Group’s blog dated January 16, 2014 regarding temporary employees and how they can help you grow your business.  On that same subject they can also help you increase your digital footprint.  Newly minted MBAs who are actively searching for employment are banding together in “cells” to accumulate their experience and expertise in a variety of business disciplines to assist small companies develop and implement their business plans at a fraction of their true cost..  These MBAs are keeping their skills sharp while at the same time you could be benefiting from these experienced well trained professionals who are available.  There are a couple of websites to post your needs on and a group of MBAs will bid on the work.  A few of the companies that provide these services are as follows:  Hourly Nerd, Inc., MBA & Co., and Skillbridge, Inc.
Now there should be no excuse if you do not grow your business.  You have your goals and business plan in place, Funding from Capstone Capital Group, LLC should you need it and access to some of the best talent available for whatever your needs are to support the growth of your business.  Take advantage of the changes in employment and technology to keep your company growing and profitable.  Create opportunities for your business instead of opportunities for your competition by staying on the cutting edge!

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