2022 State of the Factoring Industry Report

17:26 22 August in Blog, Broker Resources

The factoring industry has undergone radical changes, and a growing number of concerns exist which overshadow the outlook for the factoring market in the second half of 2022 and 2023.   Despite these concerns, there are opportunities that factoring brokers and independent sales offices (ISOs) can capitalize on to grow their business pipeline and meet their client’s working capital needs.   

In the two short years since Capstone’s 2020 Global Factoring Report, the U.S. and the world have experienced upheaval from the COVID-19 pandemic, an economic recession with unemployment not seen since the Great Depression, massive fiscal stimulus packages including direct payments to individuals and loan guarantees for businesses, the worst inflation in four decades, a rapid increase in short-term interest rates, the war in Ukraine, and the onset of another economic recession.

Not surprisingly, factoring and trade finance volume fell 6.5% globally and 23.0% in North America in 2020 and rebounded strongly in 2021 with increases of 12.6% globally and 45.7% in North America. The global factoring market is expected to grow further at a CAGR of 6.08% during 2022-2027, from $3,109 billion in 2021 to $4,430 billion in 2027.

Concerns Overshadowing Alternative Funding Sources

The U.S. economy is slowing and may be in a recession after two consecutive quarters of negative GDP growth. Inflation may moderate but will likely remain at persistently elevated levels for some time. Persistently elevated inflation rates will give the Federal Reserve reason to continue raising short-term interest rates until the Fed’s inflation target is reached.

The war in Ukraine and growing friction with China may develop into wider conflicts that could disrupt economic growth further.

Overreaching state and federal regulations and disclosure requirements pushed upon alternative funding sources may create a credit crisis with businesses having fewer financing options as more alternative funding sources consolidate or go out of business. As of 2020, more than 90% of all domestic invoice factoring was done by small and medium-sized businesses. These business owners often struggle with cash flow, and as a consequence, they have the greatest difficulty in obtaining traditional financing.

The difficulties many businesses have encountered obtaining traditional financing have increased the number of prospective clients with SBAs, senior liens, and MCAs, making it more difficult to approve new clients if Subordination Agreements or Inter-creditor Agreements cannot be obtained.  

Despite these concerns, there are opportunities factoring brokers and ISOs can capitalize on to benefit both themselves and the prospective client.

Trends that Factoring Brokers and ISOs Can Capitalize on:

Stretched payments – During an economic slowdown, businesses “stretch” their accounts payments on their accounts receivable. This creates a cash flow problem for many businesses and an opportunity for factoring brokers and ISOs to work with alternative funding sources, such as Capstone. The key to surviving an economic slowdown is cash flow management.  Businesses caught in a cash flow “squeeze” are more receptive to using invoice factoring as a cash flow management strategy to accelerate their cash flow.  When the economy is in a decline, businesses have used invoice factoring to help them survive.

Tighter lending standards – Small and medium-sized businesses may find it harder to obtain loans from traditional financial institutions as banks tighten their lending standards, raise their risk thresholds, and focus on their larger, well-heeled customers. This increases the number of potential clients that will need alternative financial products.  Capstone offers custom-tailored alternative funding solutions, including invoice factoring, purchase order (PO) financing, domestic and international trade finance, and pre-exporting financing programs, which can be integrated into any business model.  

Underserved businesses and industries – In Capstone’s experience, businesses in the following industries, as well as MWDBEs, are underserved by traditional funding sources, including:

  • Construction – General Contractors and Subcontractors
  • Manufacturing
  • Coal Mining
  • Oil and Natural Gas
  • Suppliers/ Distributors
  • Renewal Energy and Environmental

These types of businesses and industries have a significant number of potential clients for including invoice factoring and PO financing.  Capstone understands the unique challenges faced by these businesses and has the experience necessary to structure a successful funding strategy to support their working capital needs.

Prior SBA loans, senior liens, and MCAs – Many prospective clients may have prior SBA loans, senior liens, and merchant cash advances (MCAs).  It is important when working with these clients to also work with the right alternative funding source.  Negotiating a Subordination Agreement or Inter-creditor Agreement with senior lenders requires experience and skill.  Fortunately, Capstone has a track record of successfully negotiating the proper agreements for their clients.  As the economy weakens, there will be more businesses in this situation that may benefit from invoice factoring.

Decline of government-backed loans and relief programs – When looking back to 2021, the biggest competitor for the factoring industry was the U.S. government with economic injury disaster loans (EIDL), Paycheck Protection Program loan forgiveness, and other government stimulus programs. When the businesses that took advantage of these programs burn through the liquidity they received, traditional lenders will start weeding out the companies that don’t meet their more rigorous credit criteria. This will be an additional opportunity to develop these businesses as prospective clients for a funding solution through Capstone. 


The United States continues to be one of the largest markets in the world for invoice factoring.  While the outlook for the remainder of 2022 and 2023 is uncertain, there are several variables in play that can both positively and negatively impact the economy and the volume of invoice factoring over the near term – recession, inflation, rising interest rates, government regulations and disclosure requirements required of alternative funding sources, and geopolitical events.

At the same time, these macro-level factors will create a business environment where small and medium-sized businesses will need invoice factoring and PO financing more than ever to provide the working capital financing to survive a recession and the impacts of inflation and higher short-term interest rates.  Capitalizing on the above trends will help you increase your business pipeline and meet your client’s working capital needs.

Infrastructure Investment and Jobs Act Funding Distribution Delays

14:56 22 July in Blog, Business Funding

2021 Infrastructure Investment and Jobs Act Funding Distribution Delays

The Infrastructure Investment and Jobs Act (IIJA) was signed by President Biden on November 15, 2021. It was intended to provide funding for projects to repair, improve and create new infrastructure across a broad swathe of the economy. The IIJA includes spending for traditional infrastructure projects (roads and bridges) and new categories in technology and environmental infrastructure.

The approximate $1.2 trillion legislation is intended to address the woeful condition of existing infrastructure and provide funding for new infrastructure. It appropriates $550 billion for new spending over five years to modernize roads, bridges, ports, airports, and mass transit; increase high-speed internet access; modernize the electric grid, and expand renewable energy installations and the nation’s network of electric-vehicle charging stations among other objectives.

Despite the importance of this legislation and its favorable reception, the distribution of funds for IIJA projects has been inexplicably slow. 

Contractors Hurt by Slow Funding Distribution

Delays in funding IIJA projects have hurt many contractors. Projects scheduled to start in 2022 have been delayed, and plans for projects to start in 2023 have been put on hold. Contractors that staffed up in anticipation of the additional work and ordered materials, supplies, and equipment so they could hit the ground running when funding was received have been left holding the bag. They now have to manage their businesses to cope with delays impacting on their businesses and working capital.

What Caused the Delays in Funding?

Funding delays have been caused by: the complex and archaic methodology used to distribute funding from the Federal Government to infrastructure projects, funding legislation issues at the Federal level, and a lack of coordination and direction at the state and local levels.

Complex and Archaic Funding Methodology

The Congressional Research Service’s report dated April 26, 2022, provides an informative overview of funding methodology in Figure 1. Examples of Federal Spending Streams. Funding may go through four or more levels of distribution before a contract is finally awarded.

The Federal Government usually funds major surface infrastructure legislation through the Transportation Department, which issues grants to states. In many states, transportation officials or state legislatures issue a list of their top projects to be funded and then work their way down as funds become available. They don’t typically disclose in detail the criteria used to rank projects. This “opaque” process requires local officials, community groups, and businesses to closely follow the ranking to see which projects have been approved.

Federal Funding Legislation Issues

Congress has often had delays in passing appropriation bills, as it did earlier this year. When delays occur, Congress uses a Continuing Resolution (CR) that temporarily maintains funding based on the previous year’s funding while it works to authorize new spending. Operating under a CR, which generally does not authorize new spending, hindered the ability of the Department of Transportation to release IIJA funds for highways and other infrastructure projects. The IIJA was not fully funded until President Biden signed the Consolidated Appropriations Act, 2022 on March 15, 2022, four months after the IIJA was signed into law.

State and Local Delays

Further delays occur at the state and local levels because there is often a lack of clearly defined criteria and methodology to allocate funds to projects. The consulting firm McKinsey pointed out several other reasons why delays will occur:

  • Unprecedented levels of funding: Some programs will receive more funding in the next five years than in the previous 25 years combined.
  • New energy technology requirements.
  • Many stakeholders to coordinate.
  • For many programs, states are required to match 10%-40% of the total award.
  • High labor and supply chain costs.

In January 2022, Mitch Landrieu, President Biden’s infrastructure czar, sent letters to all 50 governors asking them to name dedicated task forces that would include a chief point person. As of April, only Delaware, Arkansas, and New Mexico have done anything of this sort.

What Actions Can Contractors Take?

Contractors can do a number of things to help accelerate the distribution of IIJA funds, track distribution of funds, and protect their businesses against the impact of further delays.

  • Contact state legislators and governors

Contact state legislators and governor to express concerns regarding delays in IIJA and the negative impact they are having on your community, jobs and business. Request that they take action to name a dedicated task force that would include a chief point person to expedite distribution of funds from the Federal Government. The contact information for legislators including links to message or email them is available on the following websites for New York Senators & Committees | NY State Senate (nysenate.gov) and New Jersey New Jersey Legislative Roster of Members | NJ Legislature (state.nj.us).

Contractors outside of New York and New Jersey can find the contact information for their state senators using the following U.S. Senate: Contacting U.S. Senators.

  • Contact all your local governments, agencies, non-profits and general contractors that manage contracts for infrastructure projects, and ask them what you can do to help expedite distribution of funds.
  • Make sure your company is an approved bidder for all the organizations that let infrastructure projects.
  • Closely monitor the distribution of infrastructure funds in your area through all the sources of information available to you. Two sites that may be helpful in your monitoring efforts include A Guidebook To The Bipartisan Infrastructure Law For State, Local, Tribal, And Territorial Governments, And Other Partners BUILDING-A-BETTER-AMERICA-V2.pdf (whitehouse.gov) and Government Spending Open Data | USAspending.
  • Obtain the working capital financing your company will need to finance infrastructure contracts and provide the resources to handle delays in funding.  While you wait for your infrastructure project to start you may find that you do not have adequate working capital to sustain operations or to take advantage of growth opportunities through other construction projects.  Having adequate working capital and the right type of funding facilities is critical for any type of contractor.  Project delays not only increase the amount of working capital needed to fund a project, due to things like inflation as well as mobilizing and demobilizing on a job site, but also negatively impacts your cash flow.  You may have capital tied up with the additional staff you hired in anticipation for the infrastructure work or with materials, supplies and equipment purchased for the project.  Capital that could have been used more strategically elsewhere but is now tied up indefinitely with the delayed infrastructure project.   

Project Funding Through Capstone

Construction and infrastructure initiatives demand time and money.  Capstone understands the financial components associated with project financing and is focused on providing capital to support our clients’ goals. Invoice factoring through Capstone is an excellent cash flow management strategy for contractors looking to combat the negative effects of project delays.  

Contractors can obtain the additional working capital needed to finance projects as well as the cash flow for operations. Factoring can be provided for a single invoice/ payment application, or as a program for all of your accounts receivable.  Approval for funding is based on the financial strength of your client, instead of your credit profile.  Invoice factoring can also be a more convenient alternative to other types of third-party funding sources and traditional loans for contractors requiring faster approvals and access to funds.

If you are a contractor experiencing project start delays with an infrastructure project and potentially need additional working capital, you should apply now with Capstone.  Contractors will avail themselves to more funding options when they are not operating in crisis mode and when the financial health of their business is at its strongest.   

Business Funding Available to Companies with Current SBA Loans

10:43 12 July in Blog, Broker Resources

Factor brokers and independent sales organizations (ISOs), did you know your clients with outstanding Small Business Administration (SBA) loans can still qualify for funding with a factoring company? Don’t let a SBA loan prevent you from pursuing invoice factoring and PO financing opportunities with clients that need to increase their working capital funding.

In this article we’ll discuss SBA loans, and how factoring companies (factors) work with SBA lenders that have first (senior) lien positions on assets, to qualify your clients for working capital funding. 

What Is an SBA Loan?

With the arrival of stimulus programs including CARES Act and the Paycheck Protection Program (PPP), government-backed loans have become extremely popular for businesses over the past couple years.  These loans are commonly known as “SBA loans” and are business loans guaranteed in part by the Small Business Administration, an agency of the Federal Government. SBA loans are designed to help small businesses obtain the financing they need to weather adverse business events, such as the pandemic, as well as for growth as their business expands. Since the onset of the pandemic, the volume of SBA 7 (a) loans, the most commonly used SBA loan, has risen dramatically from $22.5 billion issued in the fiscal year ended July 31, 2021, to $36.5 billion in the fiscal year 2022.

Features of SBA Loans

The SBA does not make loans directly. Instead, it works with lenders that process loan applications and issue loans. The SBA guarantees 50-85% of the loan amount.

The SBA sets the maximum interest that may be charged on an SBA loan. The rate charged by lenders is lower than it would otherwise be for a similar loan because of the SBA guarantee. SBA loans are easier to obtain than regular business loans due to the government guarantee.

SBA loans offer longer repayment terms than regular business loans, which makes it easier for small businesses to manage the cash flow needed to make loan payments.

SBA lenders must take a first lien position on the assets financed with loan proceeds, and typically a lien on all other assets of the company including but not limited to inventory, accounts receivable, equipment, general intangibles, real estate, etc.

Types of SBA Loans

There are a number of SBA loan options to fit a wide range of business needs ranging from export and disaster loans to loans for working capital, furniture, equipment, real estate, and business expansion.

The most commonly used loan is the SBA 7 (a) Loan. The proceeds can be used for just about any business need – working capital, furniture, equipment, and business expansion. The maximum loan amount is $5.0 million with repayment terms up to 25 years depending on the use of the proceeds. Standard 7 (a) loans can take a number of weeks to process.

For faster processing, there are SBA Express Loans with a maximum loan amount of $500,000 and 7 (a) Small Loans with limits up to $350,000.

How Factoring Companies Work with Lenders that Have First Lien Positions

SBA loans can be a good source of capital, but like any loans they don’t always provide all the working capital a company needs to grow. Invoice factoring and purchase order (PO) financing can provide the working capital financing clients need for growth. Experienced factors can help clients with SBA loans by working with their lenders to obtain the first lien positions needed to approve working capital financing programs.

How a Subordination Agreement Is Used to Obtain the Lien Position a Factor Needs

When a client has an SBA loan, the lender will usually have a first lien position on accounts receivable, inventory, and all other assets. This can be problematic because a factoring company needs to have a first lien position on general intangibles, accounts receivable and inventory to approve a prospective client. In order to resolve this situation, a factor must negotiate a subordination agreement with the SBA lender. 

A Subordination Agreement is handled with an Intercreditor Agreement between the SBA lender and a factoring company. The SBA lender agrees that the factor can have a first lien position in certain assets. The SBA lender subordinates its lien position to the factor and takes a secondary lien position. Subordination gives the factoring company the security it needs to fund a client’s accounts receivable and possibly finance its purchase orders. 

The challenge for the client is to convince the SBA lender to give up its first lien position. The factoring company, who is working with the prospective client, needs to convince the lender that subordinating its first lien position to the factor can provide the necessary working capital which will benefit the client, and make the SBA lender’s position on the other assets more secure.

In some cases, a factor may need to agree to limit the subordination of an accounts receivable lien to a maximum dollar amount or to certain accounts. This makes the SBA lender’s security interest subordinate to the factor’s security interest, but only up to the amount of the cap or in specific named accounts receivable.

SBA lenders may also not be willing to give up their first lien position in the client’s inventory. In some cases, the factor may need to negotiate a lien position that is limited to returned inventory related to factored accounts receivable only.

A Factor Company’s Experience in Negotiating with SBA Lenders Matters

Negotiating with SBA lenders requires experience and skill. It is important to work with a factor that has a track record of successfully negotiating with SBA lenders to obtain the proper Subordination Agreements needed for their clients.

When you have a client with a current SBA loan that needs additional working capital to grow their company, work with a factor that has the skills and experience needed to successfully negotiate a Subordination Agreement, so your client can obtain access to much-needed working capital.


Capstone Capital Group, LLC specializes in providing working capital programs that can be custom-tailored to support a client’s business model. Capstone has a proven track record of working successfully with SBA lenders to obtain the Subordination Agreements needed to fund invoice factoring and PO financing programs for clients. 

Contract Cost Analysis – How Much More Expensive Labor and Materials Impact Your Bottom Line

08:48 06 July in Blog

The surge in inflation we are currently experiencing occurred because of a number of disruptive events coming together to form a perfect storm of too much demand and not enough supply. The rate of inflation is the highest in over four decades. Contractors will need to take action to protect their bottom line and cash flow, and secure additional working capital to finance the higher cost of materials and supplies, payroll, and other operating expenses.

What Caused the Surge in Inflation?

The disruptive economic events began with the onset of COVID-19. Pandemic restrictions around the world resulted in record unemployment, the shutdown of non-essential manufacturing and production, and severe disruption of all forms of transportation. As a result, the U.S. and other major countries had economic contractions not seen since the Great Depression.

Several countries reacted with unprecedented fiscal stimulus programs and more accommodative monetary initiatives to provide liquidity and facilitate an economic recovery. The fiscal stimulus programs in the U.S. resulted in a record level of “excess savings” which helped fuel the imbalance in demand and supply when the economy began to open up.

After vaccines were rolled out, pandemic restrictions were eased, setting the stage for a tsunami of consumer spending in the U.S. and other advanced countries. The nascent recovery, however, was very uneven around the world. Major manufacturing and transportation centers could not ramp up to meet the surge in demand because of labor and materials shortages and transportation equipment that was not in position around the world. These events snarled supply chains globally.

Fuel costs, which had been already on the rise, were added to the fire with the war in Ukraine, further disrupting supplies of energy, commodities, and metals, causing prices to spike.

Is the Surge in Inflation Temporary or Will It Last for a While?

The wave of inflation we are experiencing has become pervasive, affecting consumers, manufacturers, transportation, distributors, service providers, and construction contractors. The prices of goods and services from gasoline, groceries, and airplane tickets to labor, No. 2 Diesel Fuel, copper tubing, and cement have increased significantly.

The disruptive events created shortages in key raw materials, commodities, metals, and labor, and bottlenecks in shipping and transportation, which drove up the costs for these goods and services. Producers, manufacturers, and transportation providers passed these additional costs along by raising prices to wholesalers, retailers, and contractors. Retailers in turn raised prices for the final consumer.

Inflation can be temporary when it doesn’t permeate the entire economy, and prices fall as demand drops and shortages ease. Take lumber for example. Prices rise and fall with demand from the construction industry. The price of lumber does not directly affect the entire economy and becomes embedded in the cost of many end products.

In other cases, inflation can last for a while when the supply of a number of key inputs is affected, and demand and shortages remain at elevated levels. Price increases permeate the entire economy and become embedded in the cost of many products and services.

Examples of this situation are No. 2 Diesel Fuel and labor. No. 2 Diesel Fuel is used extensively in transportation and construction equipment. It impacts the cost of many products and services. Its cost may remain elevated for some time due to geopolitical events and the transition to renewable energy. The cost of labor impacts the cost of all products and services. It may stay elevated for some time due to shortages caused by the pandemic and reduced labor force participation.

In addition, a paradigm shift in supply chains to avoid exposure to geopolitical risks, increase sources of supply, and shorten replenishment times may continue to increase costs for the foreseeable future.  

How Cost Increases Impact Contractors

Inflation will reduce your gross profit on contracts and increase the cost of overhead resulting in a smaller profit or even a loss. Additional working capital will then be needed to finance your business operations. 

Gross profit is eroded by higher costs for labor and material inputs. The following are examples of cost increases for construction material and labor reported by the Bureau of Labor Statistics.

Construction Material Inputs

May 2022 YTD 2021 AVG
Non-residential 12.5% 18.5%
Residential 15.5 18.3
No. 2 Diesel Fuel 70.2 79.8
Aluminum Shapes 17.4 25.0
Lumber/Plywood 15.4 41.1

Average Hourly Earnings All Construction Employees

Average Hourly Earnings % Change from Prior Year
May 2022 $34.56 5.8%
May 2021 $32.65 4.1%
May 2020 $31.27


Overhead costs are also increasing as inflations permeate the cost of goods and services throughout the economy. Salaries, benefit programs, insurance travel, utilities, and many other business goods and services are increasing. Unlike some construction material costs, which fluctuate with changes in demand and supply, overhead costs tend to become embedded in a company’s cost structure and are more challenging to reduce.

In addition, supply-chain issues may result in the need to carry more materials and supplies, further increasing the working capital needed to fund projects.

In an inflationary environment, you will need more working capital to fund purchases of materials and supplies and pay salaries wages, and operating expenses. In other words, you would need more money in the next 12 months to finance the projects you worked on in the last 12 months. 

Tips on Mitigating the Effects of Inflation on Gross Profit and Overhead Costs

Contractors can take a number of steps to mitigate cost increases with changes to contract language and operations, including:

  • Contract Language Changes
    • Mobilization clause – Negotiating this clause into the contract will demonstrate good planning and transparent communication that prompts customers to agree to advance a mobilization fee or deposit. This helps minimize timing issues created by mobilization costs. 
  • Price escalation clause – Add language to allow price increases under certain criteria such as increases in a construction cost index, or increases exceeding a cap or price range.
  • Uncontrollable events – Add language to allow changes in price due to uncontrollable events including changes in tariffs, duties or trade policies, epidemics, wars, and market conditions.
  • Force Majeure clause – Add language to protect against events or effects that cannot be reasonably anticipated or controlled.
  • Operational changes
  • Pre-order material and stock up on inventory.
  • Hedge forward purchases of commodity items.
  • Postpone or delay projects.
  • Fix costs as soon as possible.  Ensure the risk of price increases from subcontractors is mitigated by promptly binding subcontractors. 
  • Adopt new construction techniques that reduce labor and/or material content.
  • Automate business processes to reduce overhead costs.
  • Use technology tools to facilitate project management.
  • Adopt best practices such as Target Value Delivery to manage projects to bid targets.

How Invoice Factoring Can Help Contractors Manage in an Inflationary Environment

In an inflationary environment, the faster you convert accounts receivable to cash to purchase tangible assets such as materials and supplies, the easier it is to stay ahead of inflationary price increases.

Invoice factoring can help to accelerate the conversion of accounts receivable to cash. With invoice factoring, you can convert your outstanding accounts receivable to immediate cash instead of waiting 60 days or more for your customers to pay. The cash can then be used to accelerate your purchases of materials and supplies and help avoid price increases. 

Inflation will likely impact our economy for some time due to the perfect storm of disruptive events coming together to create shortages and increase demand. You can prepare your company by acting now to secure the additional working capital you will need with an invoice factoring program.

Vehicle Exporter Purchase Order Financing Case Study

03:11 05 July in Case Studies, Blog

Headquartered in Westchester, New York, this Client is a unique specialty export financing business involved with the sale of new and used vehicles such as BMW, Mercedes Benz, Audi, Porsche, and Range Rover. They finance the purchase of luxury automobiles and sports car in North America and Europe for export to independent car dealers and traders in China, Vietnam and other Asian countries.


  • The Client purchases luxury automobiles and sports car in North America as well as Europe for export to independent car dealers and traders in China, Vietnam and other Asian countries.
  • Payment for the vehicles is made via Irrevocable Documentary Letters of Credit with the Client as the beneficiary of the export letters of credit.

Company Challenges

  • The Client lacked the liquidity to purchase the vehicles required to fulfill the documentary requirements of the export letters of credit.

Capstone’s Solution

  • Established a pre-export PO Financing Facility based on the value of the letter of credit and the cost of the vehicle to be exported.
  • Capstone makes cash advances to the car dealer to purchase the vehicles which are then drop-shipped to the port for export to Asia.
  • The proceeds of the letter of credit are paid into a blocked account that Capstone has dominion and control over. Upon receipt of funds following the presentation of documents to the LC (letter of credit) issuing bank, Capstone recovers the advance and any accrued fees sending the net proceeds (Client’s profit) to the Client.

Progress and Future Outlook

  • Since 2019, Capstone has funded 282 vehicle exports transactions averaging $10MM in exports per year. 
  • The Biden administration has reduced U.S. sanctions on China opening up the export market more than during the previous Trump administration.
  • In early 2022, the Client renewed the Purchase Order Financing facility with Capstone for an additional two years.   



Wholesaler Master Factoring Facility & Purchase Order Financing Case Study

14:04 21 June in Blog, Case Studies

Wholesaler Master Factoring Facility & Purchase Order Financing Case Study

Based in New Orleans, Louisiana, this Client is a wood and construction products wholesaler. Formed in 2009, the Client was originally a wood products wholesaler however they built a disaster relief segment a few years ago in response to hurricanes and flooding in Louisiana, Texas, the Virgin Islands and Puerto Rico.


  • The Client primarily provides product procurement and related logistical assistance required for a particular disaster area. 
  • They are recognized as a high value-added niche player within the disaster relief industry, as they are able to handle all logistical matters in addition to sourcing and procuring the associated product required under very tight deadlines.

Company Challenges

  • The Governor’s Office for the State of Louisiana issued a disaster relief purchase order to the Client for the delivery of 250 recreational vehicles (RVs) to be given to residents displaced by Hurricane Irma.  
  • The RVs had to be sourced from 50 different vendors throughout the United States and needed to be delivered within five days of receipt of the $11MM purchase order.

Capstone’s Solution

  • Provided an $11MM Master Factoring Facility. 
  • Opened an $8MM PO Financing Facility to facilitate the purchase of the RVs.

Progress and Future Outlook

  • The Governor’s Office of the State of Louisiana was so impressed with their performance they are issuing the Client another purchase order for 500 RVs.



Tools to Increase Productivity and Profits for Factor Consultants and ISOs

18:15 14 June in Blog, Broker Resources

Do you feel like you’re working as hard as ever but not accomplishing what needs to be done to be successful as a factor consultant or independent sales organization (“ISO”)? 

Take a minute to do a quick assessment of how your business is doing.

  • Is your client list growing?
  • Is your volume increasing?
  • Are you contacting enough potential clients to keep your pipeline full?
  • Is your percentage of conversion of prospects into clients improving?

If the results of your assessment are not in the affirmative, then you need to take steps to increase productivity, business volume, and profits.

There are three actions you can take to improve your results.

  • Avoid distractions
  • Focus on value-added activities
  • Use technology tools to eliminate manual activities and improve productivity

Avoid Distractions

Email, text messaging, smartphones, and social media can be powerful tools for communication, but they can also become a source of distraction and reduce your productivity. It’s very easy to let yourself become a slave to answering emails and text messages, and fall into the habit of reading and responding to social media postings and surfing the internet. 

A simple internet search will provide a plethora of tips on how to use these communication tools without becoming addicted to habits that can sap your productivity. These tools should work for you, not vice versa.

Focus on Value-Added Activities

Value-added activities such as prospecting for clients, making presentations to prospects, onboarding new clients, and building volume with existing clients help to increase your business volume and profits. When you are distracted or your day is filled with busy work, you will not have enough time to devote to value-added activities. Planning is the best tool to use to focus on activities that will grow your business volume and increase profits.

An annual plan can help guide you to the areas you need to focus on to achieve your objectives. A weekly/monthly plan laying out what you need to do to keep on track can help to synthesize your annual plan objectives into the value-added activities you need to focus on in the near term. And of course, a daily To-Do list is always a helpful tool to use to maximize your focus on the value-added activities you need to work on.

When you develop plans, short-term or long-term, be realistic. Don’t try to do everything. Planning too many activities will reduce your productivity and you won’t do the activities as well as you should. Focus on value-added activities and work toward your plan goals.

Use Technology Tools to Eliminate Manual Activities and Improve Productivity

Time is a limited resource. You need to conserve time for value-added activities. Manual activities waste the limited time you have available. Technology tools can help you to minimize the amount of time you spend on manual activities.

Here are some technology tools that can help you be more productive.

Automate Business Processes

If you still have manual business processes, it is essential to automate them ASAP for two reasons. 

  • Your clients and business partners, e.g. factors, probably have fully automated business processes. It will be difficult for you to continue to do business with them if you don’t automate. And, they may not want to continue to do business with you if you don’t automate.
  • Manual business processes can consume a huge amount of your time that could otherwise be spent on value-added activities. List your manual business processes and estimate the amount of time you spend on them weekly/monthly. You’ll probably be very surprised at how much time you could save by automating your business processes.

Time Management

When you own a small business of any kind, including a consulting firm or ISO, the boundaries between your personal time and business time can be opaque, which makes time management critical to your success.

  • If you aren’t using a calendar software application such as Google Calendar or Apple Calendar which are free, or Microsoft Calendar for Microsoft users, you will probably do a better job managing your time by planning your week/month and benefit from the automated reminders they provide.
  • Use online retailers, consumer apps such as grocery shopping and delivery, and restaurant meal delivery to free up time to spend on your business. 

Marketing and Communications

The value-added activities you want to focus on revolve around identifying, attracting, contacting, and communicating with prospects and clients. Following are some tools that can help you be more productive in these areas.

  • Customer Relationship Management (CRM) software can increase your productivity by streamlining customer interaction. CRM organizes client profiles, history, and conversations in one location. It gives you a concise overview of your client interactions with dashboards that provide the information you need at a glance and also allows you to schedule and automate communication.  It is not uncommon for consultants to have several thousand client prospects and networking contacts so therefore you cannot effectively build relationships without this tool.
  • Email Management Software (EMS) applications can help you to manage large volumes of inbound emails. EMS helps you to track and respond to priority messages and quickly archive and retrieve emails.
  • Social Media Management (SMM) tools can help you engage with prospects and clients. SMM enables automated and real-time posting to multiple channels. It gives you the ability to monitor social media and learn about client preferences. SMM allows you to post to multiple platforms at once and can be used to consolidate a number of networks with just a few clicks.
  • File sharing tools can help with document management and the deal submission process.  It enables you to securely distribute, collect, and organize documents more conveniently with clients and other third parties.  This tool can be particularly useful in efficiently working with large clients or with complex transactions.  It also will expedite the underwriting process once the deal is submitted to the factor company. 

Technology tools, focusing on value-added activities, and avoiding distractions can improve your productivity and profits.  This will help you work efficiently and effectively with clients and will greatly improve the probability of approval by the factor company during the underwriting process.  Your business volume will grow and so will your profits.

Capstone works with factor consultants and ISOs to help them be successful. Capstone has the resources and experience to help you increase your business volume and profits. For additional information on resources to assist you, please read: consultant Resources – Capstone Capital Group (capstonetrade.com)

Minority-Owned Supplier Master Factoring Facility, Purchase Order Financing & Letter of Credit Case Study

14:41 08 June in Blog, Case Studies

This Client is a globally diversified supply-chain solutions company with offices in New York and Shanghai, China.  They provide all supply chain services from procurement, warehousing, distribution, fulfillment and transportation and has a broad portfolio of service offerings.


  • The management team has experience with servicing the world’s leading consumer product manufacturers. 
  • The Client is able to assist small businesses to large corporations with their supply chain needs.  
  • As a certified minority contractor, they have dedicated contracts from New York City agencies for materials required to conduct the City’s business and maintain and improve its assets.

Company Challenges

  • The Client received contracts totaling $2MM from the New York City Housing Authority (NYCHA) to supply generators.   
  • Two of the generators are manufactured in China.  The terms of the sale were 30% down payment of the COGS and 70% of the COGS upon shipment of the goods to the USA.

Capstone’s Solution

  • Provided a $2MM Master Factoring Facility. 
  • Opened a $1MM PO Financing Facility and issued two Letters of Credit to Chinese manufacturers for each generator.

Progress and Future Outlook

  • Based on the Client’s ability to issue letters of credit and arrange for the delivery of the generators, NYCHA has given additional orders.
  • The new orders are for materials required for construction and maintenance of the apartment buildings and related infrastructure owned by the City of New York.


Purchase Order Financing vs Invoice Factoring

02:36 06 June in Blog

Purchase order (PO) Financing and invoice factoring are two financial strategies that businesses can use to purchase inventory or materials and accelerate the conversion of accounts receivable into cash.  With so many financial products out there, it is easy for people to be confused about these financing tools, how they work, and their advantages. 

The two strategies are closely related but they are distinct.  Helping business owners understand the difference will allow them to be paired with the right financial strategy and will also make them more comfortable using these financial tools.

What PO Financing and Invoice Factoring Are Used For

PO financing (aka purchase order funding) and invoice factoring are both used to address cash flow issues and provide working capital, but they are utilized at different stages in a transaction cycle.

PO financing is used to purchase inventory, materials, or other resources related to specific purchase orders or contracts.  It provides funding to a business’s vendors or suppliers so they may fulfill an order or get started/ complete a project.

Frequently, small and medium-sized businesses are unable to obtain credit from suppliers or a loan from a bank to purchase inventory or materials due to varying circumstances.  It is important to note that in certain instances where the supplier is located outside the U.S., a letter of credit is usually required.  PO financing provides businesses with the ability to fulfill orders as well as perform work BEFORE they’ve invoiced and received payment for the invoices.  In essence, it’s an advance against the funds a business expects to receive once their customer’s invoice is paid and is meant to cover the cost of goods sold.

Invoice factoring, on the other hand, is a financial tool that businesses use to accelerate cash flow by selling their unpaid invoices for a completed order or project to a factor company at a discount. Businesses receive cash immediately for their unpaid invoices instead of waiting for their customers to pay.  This funding can then be used for things such as payroll, operating expenses, growing the business, moving on to the next contract or project, etc.

How PO Financing Works

Invoice factoring can be used by itself to accelerate cash flow without also using PO financing. However, when PO financing is used, invoice factoring is also used to complete the financing transaction.

The steps in a PO financing transaction include: 

  • Client receives an order or enters into a contract with their customer.
  • Client forwards the purchase order to their supplier and the supplier provides an estimate of the cost to fill the purchase order.  In cases when the client enters into a contract for a service or project, the client obtains estimates for materials or other resources from the respective vendors.
  • Based upon the need for funding, the client enters into an agreement with a factor company to fund the purchase of inventory, materials, or other resources for the specific purchase order or contract.
  • The factor pays the supplier/ vendor through cash proceeds (or with a letter of credit if the supplier/ vendor is located outside of the U.S.), and the client takes delivery of the inventory or materials.  The proceeds may cover up to 100% of the cost however the client may have to pay out of pocket to make up any difference.
  • Client completes and ships the customer order, or performs the work contracted for and invoices the customer.
  • Client assigns the invoice for the completed order or services to the factor. The factor purchases the invoice once the validity of the receivable is verified and makes a partial advance on it first deducting the supplier/vendor payment and fees.
  • Once the related balance under the PO financing facility is retired, the client is then eligible to receive the remainder of the factor advance amount depending on the terms of the factoring agreement.
  • Client’s customer will remit payment for the invoice directly to the factor.
  • The factor receives payment on the invoice from the client’s customer and deducts the factoring advance as well as factoring fees, and remits the balance to the client.

How Invoice Factoring Works

The steps in an invoice factoring transaction include:

  • Client enters into an agreement with a factor company.
  • Client completes and ships the customer order, or performs the work contracted for and invoices the customer.
  • Client assigns the invoice for the completed order or service to the factor. The factor purchases the invoice once the validity of the receivable is verified and makes an advance to the client depending on the terms of the factoring agreement.
  • Client’s customer will remit payment for the invoice directly to the factor.
  • The factor receives payment on the invoice from the client’s customer, deducts the factoring advance amount and factoring fees, and remits the balance to the client.

Advantages of PO Financing

PO financing allows business owners to increase the necessary working capital required to boost sales, increase product or service offerings, and allows the business to gain the edge over the competition.  

PO financing is more accessible to obtain than a bank loan and may be easier to qualify. The credit underwriting decision is based on the financial strength of the client’s customer, unlike a bank that uses the business’s credit profile regardless of the income and cash flow that will result from fulfilling a firm purchase order or contract.

This is particularly important in light of the Federal Reserve’s change to a tight monetary policy, and the possibility that it might induce a recession. In this environment, bank credit requirements are tightened. Banks favor large customers and have a tendency to reduce credit exposure to small and medium-size customers.

PO financing may sometimes cover up to 100% of the supplies, inventory, or resources needed to get started/ complete a project or an order.  All the while without using credit available under existing lines of credit. It also enables clients to pursue business opportunities, which they might not otherwise be able to do because of insufficient working capital financing, and it can also be a stepping stone to developing a relationship with a supplier that leads to open-account terms.

Advantages of Invoice Factoring

Invoice factoring helps to accelerate cash flow by converting accounts receivable to immediate cash. Clients will not have to wait 60+ days for their customers to pay an invoice. Having access to those funds increases cash flow and reduces the need to draw down on availability under existing lines of credit.

An invoice factoring facility is also easier to obtain than a bank loan, and the credit decision is based on the financial strength of the client’s customer, not the client.  Invoice factoring facilities are more flexible to use than bank loans. In addition, they can be custom-tailored to fit within a business model.


While PO financing and invoice factoring are both designed to provide solutions to a business’s working capital needs, the key points to consider are the timing of when the funds are needed in the transaction cycle and the use of funds.  Understanding the differences will help pair the right financial strategy with the right type of business. 

Tips on Bidding New Projects in an Inflationary Environment

11:10 23 May in Blog

The surge in inflation driven by record fiscal stimulus, pandemic lockdowns and restrictions, supply-chain disruptions, and the war in Ukraine has created a major challenge for business owners in the construction industry in bidding on new projects and maintaining sufficient cash flow.

Many of the commodities used in construction are subject to changes based on third-party events outside of your span of control such as changes in world market prices and geopolitical events. Despite the Fed’s tighter monetary policy, inflation appears to have become embedded in the economy and may continue to persist at elevated levels for some time.

Construction Cost Increases

The following table lists some examples of changes in the Producer Price Index (PPI) reported by the Bureau of Labor Statistics for key materials and other inputs used in construction.

Year-Over-Year Change in December PPI
Construction Inputs 2020 2021
Steel mill products 5.2% 127.2%
Plastic construction products 5.4% 34.0%
Aluminum mill shapes -1.7% 29.8%
Copper and brass mill shapes 24.0% 23.4%
Gypsum products 3.6% 20.7%
Lumber and plywood 37.0% 17.6%
Diesel fuel -2.8% 55.0%
Truck transport of freight 2.2% 18.0%
Construction machinery and equipment 1.1% 10.0%

Along with these costs, labor and wage costs have increased in response to inflation and worker shortages. Average hourly earnings in construction rose 5.8% from February 2021 to January 2022 for hourly tradesmen. The average for similar workers in the overall private sector jumped 6.9%. Unfortunately, these wage increases have not kept pace with inflation and further wage increases may be required to keep your skilled staff employed with your company. 

Overhead costs have also experienced inflationary increases. Personnel costs, rents, and other administrative costs have surged. Unlike construction materials costs, which rise and fall with demand and supply, overhead cost increases tend to become ingrained in a company’s cost structure.

Impact of Inflation on Profit Margins and Cash Flow

Inflation in construction costs has squeezed contractor profit margins significantly. The PPI for input costs rose 1.8% for the 12 months to September 2020, matching the 1.8% increase in PPI for bid prices. But the 19.6% increase in PPI for input costs for the 12 months ended December 2021 far outpaced the 12.5% increase in the PPI for bid prices. 

Contractors must take steps to factor inflation into bid prices, improve the accuracy of their bids, and ensure the project retains profitability.  Inflation erodes a project’s profit margin and if left unchecked can create serious cash flow issues. 

The risk of inflation increases with the size, length, and complexity of a project. Size increases the potential magnitude of impacts from inflation. The length provides the opportunity for inflation to occur and reduces the reliability of estimates. Complexity increases the number of variables subject to potential change. 

Whether you’re a general contractor, subcontractor, or in another segment of the construction industry, the following tips will help you develop your project bids in an inflationary environment. 

Tips to Improve Bid Development Process

Review the way your company develops bids to improve accuracy. 

  • Checklists – Use checklists to ensure all important items are included in the bid.
  • Carefully review plans – Check takeoffs and measurements to improve accuracy.
  • Attend pre-bid meetings and site visits – Review project requirements and get clarification when needed.
  • Technology – Use software to improve estimates and accuracy of bids.
  • Subcontractors – Review past performance, bid details, and pricing. The lowest bid isn’t always the best if the job is late or performed unsatisfactorily.
  • Labor costs and practices – Review local labor costs and practices. If union labor is used, review work rules and how they will impact productivity and costs.
  • Financing costs – Work the cost of financing, or factoring services, into the price to your client.
  • Bid the right projects – Bid on the projects that fit your company’s strengths.
  • Expiration date – The bid should have an expiration date so you have the opportunity to rebid if the bid validity date passes to account for the higher cost of goods.


Implement Project Management Tactics

If your bid is accepted there are many project management tactics that can be used to mitigate the effects of inflation.

  • Time material purchases – Careful timing of purchases can help to contain material costs, especially when seasonality is a factor.
  • Monitor costs – Perform regular variance analysis to determine which costs are trending upward.
  • Hedge commodity prices – Use futures contracts to lock in prices of key commodities.
  • Inventory – Stock up on inventory to protect your business from future price increases if you have the cash to do so.
  • Discounts for early payment – Manage your cash flow to regularly take advantage of early-pay discounts offered by your suppliers and vendors.  These discounts can really add up.  
  • Critical suppliers and vendors – Identify critical suppliers and vendors then negotiate.  Some may be willing to offer better pricing to maintain a valuable customer. 
  • Best practices – Use best practices such as Target Value Delivery to empower your team to manage the project to bid targets.
  • Technology – Incorporate technology to facilitate project management.
  • Performance and quality control – Complete the project on time and maintain a high level of quality control. Your customer may be more open to accepting future bids with more robust profit margins if they know they can count on you and will receive quality results.  


Include Inflation Terms in Contract Language

Construction cost inflation has not exceeded 5% for over three decades so many contractors do not have experience in an inflationary environment. Adding a few percentage points to bids for inflation won’t protect you sufficiently in this type of environment either.

There are many different approaches to mitigate inflation risk in bids.

  • Time and material – Charging for actual time and materials cost shifts the risk of inflation to the customer. Customers may not accept this approach because it doesn’t place limits on costs.
  • Price adjustment mechanism – Language that permits an increase in price under specific circumstances, such as – if the cost of concrete exceeds X then the price of the contract may be increased by Y.
  • Collar – A price adjustment mechanism that works for both price increases and decreases. This can be a good alternative for commodity materials which can be subject to large swings in price.


Take Control of Inflation’s Impact on Your Working Capital with Factoring

Inflation increases the amount of working capital needed to fund a project and also negatively impacts your cash flow if left unchecked. Invoice factoring through funding sources such as Capstone is an excellent cash flow management strategy for construction contractors looking to combat inflation’s negative effects.  Business owners obtain the additional working capital needed to finance projects as well as the cash flow for operations. Factoring can be provided for a single invoice/ payment application, or as a program for all of your accounts receivable.  Credit approval is based on the financial strength of your customer, not the creditworthiness of your business.   

Keep in mind that in an inflationary environment, the value of your accounts receivable lessens the longer they remain outstanding.  Instead of waiting 60+ days for customers to pay, business owners can convert their outstanding invoices to immediate cash.  Having access to those funds provides you with staying power until cash flow catches up with expenses. 


How Capstone Can Help

Capstone Capital Group, LLC is a leading commercial finance company that is focused on providing businesses with sufficient access to working capital. Capstone has the experience and resources to provide customized invoice factoring and PO financing programs that fit your needs in an inflationary environment. 

Download: Infrastructure Investment & Jobs Act – Contract Opportunities and Funding Analysis

Capstone wants your business to take full advantage of the opportunities (or use projects) available through the Infrastructure Investment & Jobs Act recently signed into law.



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