4 Ways to Grow Your Network as a Commercial Loan Broker

10:16 31 August in Blog, Broker Resources

Different from your social network, your business network as a commercial loan broker is all about making and building connections to help you succeed within your industry. It is no secret that building your network is key to building a successful loan brokerage. And, not only is networking imperative in growing your client base, but it also plays a huge part in developing your reputation as someone who can get transactions funded.

There are plenty of reasons you should be networking as a commercial loan broker. So, when you are working to make connections in the commercial lending industry, follow the four tips below.

Partner with the right lender.

One of the most important networking tips for commercial loan brokers is to partner with a group of lenders that will help you maximize your efforts and meet your goals. By working with the best lenders, you not only will be able to offer your clients great choices for funding, but ideal lenders will provide what your clients need so you can focus on growing your business while also making your clients happy.

When looking for a lender to work with, keep an eye out for a lender that offers a referral program, such as Capstone Capital Group’s Referral and Broker Program. Not only does Capstone Capital Group’s referral program pay you commission for each client you bring in for the life of the contract, but they also provide other benefits such as broker support and training, and full accounting.

Satisfying your client’s needs not only leads to your success as a commercial loan broker, but it will also help you continue building your network. Since you need to have the ability to offer your clients options for loans to fit their individual needs as a broker, also partner with lenders that provide back and front office services to their clients, like Capstone.

After all, your goal in networking is to gain more clients. So, you need to partner with the best lenders to be able to offer your clients the best options to keep them happy.

Keep your priorities straight.

Once you’ve found suitable lenders and investors to partner with, like Capstone Capital Group, you’ll get to work pairing them with the right businesses in need. During this time, it’s imperative that you keep in mind the promises you have made to your clients and the lenders in your network, and follow through with those promises.

As a commercial loan broker, your top priority should always be to match clients and lenders with opportunities that will help each party succeed. By keeping your priorities straight, you will ensure that you are building trusting relationships with lenders and clients. And, as word of mouth advertising is incredibly powerful and happy clients tell others about their successes, in order to grow your network, you need to follow through with every client and each promise you make.

Take advantage of social media.

In order to make new business connections and grow your network as a commercial loan broker, you can go through traditional means, such as cold calling or sending out emails. However, it is also equally as important to utilize social media sites as well.

Take advantage of today’s social media by setting up different accounts on different sites including Facebook, Twitter, LinkedIn, and Google+. These popular sites make it easy to share information while interacting with a range of associates and borrowers. To expand your network, set up both a personal page and a company page. Then, join forums, participate in discussions, and share interesting industry news on your pages to continue growing your network.

Participate in industry events.

Attending industry events or networking events is another way to make connections within your industry as a commercial loan broker. All it takes is a quick search online to check on upcoming events for the commercial lending industry and in your area. Industry events could include lunches, trade shows, and seminars, all of which present an excellent opportunity to network and expand your business circle.

As with most things in life, practice and preparation are necessary for successful networking in any industry. If you find you are not constantly networking, you could be missing out on big opportunities for your business. So, start your networking process by setting goals, creating social media accounts, finding industry events to attend, and signing up for Capstone’s Referral and Broker Program.

Business Optimism Index Increases Demand for Financing

05:49 07 August in Blog, Business Funding

Small businesses fuel the job market across the United States. Thanks in part to small business growth, unemployment is currently showing very low rates. According to the National Federation of Independent Business (NFIB), more businesses are considering increasing their hiring and increasing inventory. One of the challenges these businesses will face however is making sure their cash flow allows them to keep up with the need to invest in higher employment and inventory.

Increased Business Means Need for Increased Capital

One challenge faced by most business owners is the need to have capital on hand to increase their business. Businesses will find it impossible to increase inventories if they do not have the raw material available to do so, and hiring good labor requires an investment which may not produce immediate returns. This means more businesses than ever before need access to reliable sources of capital.

Despite the higher optimism index, and the fact banks are seeing more applications for loans than they have since the 2008 recession, the statistics on loan approval are dismal. Here’s a look at what is happening in the banking sector as far as loan approvals:

Big banks – defined as a bank with $10 billion or more in assets, big banks are currently only approving 25.9 percent, slightly more than one-quarter, of the loan applications they receive.
Small banks – community banks and regional banks are approving slightly less than one-half of all applications they receive, approximately 49.4 percent. It is worth noting this is a significant improvement over 2015.
Institutional lenders – overall, institutional lenders are making greater strides than their counterparts, approving slightly more than two-thirds, 67.4 percent, of loan applications. This is good news but in general, these are lenders who are seeking high rates of return and have minimum loan amounts generally higher than what most small businesses can qualify for.
Alternative lenders – interestingly enough, the one area where loan approvals to small businesses continue to fall is with alternative lending sources. Keep in mind, in most cases, these lenders focus primarily on businesses where there are credit issues. Chances are, any business owner who must work with these lenders are paying higher rates than normal.
Credit unions – while credit unions are currently approving slightly more than 40 percent of all small business loan applications, this number is at record lows for credit unions.

These numbers are not good for small businesses because they reflect one very important fact: Small businesses still face hurdles when it comes to securing much-needed financing for their activities, and particularly when it comes to continuing to take the lead in job creation.

Contracts, Agreements to Purchase, and Invoices

There is an irony to a business owner not being able to secure financing when they have contracts to deliver the product, agreements for future product purchases, and have issued invoices which are currently unpaid when they need capital. Most banks, credit unions, and other financial institutions do not see any value in these commitments and therefore they tend to discount them. This is not the case at Capstone Capital Group — we understand the needs of business owners to secure capital and we can help them make the most of their accounts receivables, import and export agreements and contracts by providing financing, and helping with letters of credit and logistics.

Thanks to a unique approach to financing, we have been able to help small and medium-sized businesses take advantage of new opportunities to grow their business by developing a funding plan that meets their needs. Whether you are a small or mid-sized business owner, or you are a broker who has financing clients who do not fit into the mold traditional lenders are willing to work with, contact us today and let us help. You can reach one of our professional representatives by contacting us by phone at 347-410-9894 or by Email at [email protected].

Funding Sources for Construction in New York

09:45 31 July in Blog

Finding sources of financing for construction projects can be challenging. Even developers with a proven track record of success, those who have multiple properties, and those with perfect credit can struggle to find the right source of financing for their projects. Here are some options you can consider when searching for financing for a construction project.

Explore Commercial Bank Options

Fortunately, New York is home to some of the largest banks in the country. Keep in mind before you get started, you should have a detailed plan in place for the property. Commercial banks tend to prefer to work with established developers who have a ready-to-implement development plan in place so make sure you are prepared to discuss the details of the project with a loan officer.

Pursue Private Financing

One of the options for construction financing that many developers pursue is with private lenders. These are typically wealthy individuals, or pools of wealthy individuals who make loans. One should expect to pay a significant premium for funds borrowed privately since these individuals tend to make fewer loans than banks therefore their profit margins are different.

Using Equity from Existing Property

For developers who have existing property which have equity, it may be possible to borrow money against those properties. In some cases, your lenders will allow you to take an equity line of credit against the property, while in other cases, they may prefer a second mortgage. Keep in mind, if the lender prefers a second mortgage, the existing property is at risk until the second loan is fully paid.

Overcoming Financing Challenges

While we have been discussing the options a developer may have for financing projects, there are significant barriers for those who are not project developers. Contractors and subcontractors often need financing to fulfill their obligations during a construction project. This applies regardless of the project type including office buildings, retail projects, and medical offices. Most contractors and subcontractors will require money to get the materials needed, pay the workers needed for the project, and have funding available for bonds and other surety the project may require.

Specialized Business Interests and Financing

Fortunately thanks to a great deal of outreach in the communities, there are many contractors and subcontractors who have the ability to bid and win projects based on their status. These businesses include veteran-owned, minority-owned, and disadvantaged business enterprises. Oftentimes, these contractors and subcontractors also face significant hurdles to obtaining financing.

When you are facing challenges finding financing for construction projects in New York, you should contact Capstone Capital Group. Capstone offers a variety of financial products that are suited for contractors and subcontractors. Some of the services we can provide include:

Surety Bonding Assistance — We have used ClearPay™ to help qualified general contractors who need bonds to issue to a project owner.
General Contractor Financing — We understand the need for working capital for projects you plan to bid on, or for projects you take on for your current client base. We can help you with both by offering unique financing solutions.
Subcontractor Financing — When working on a project, you need capital available to meet your payroll obligations, purchase supplies, and pay normal operating costs. We understand there are often delays in completion of a task and payment for that task so we can help with single invoice financing.

One of the primary reasons why your first stop for funding construction projects in New York should be Capstone is we will customize a financing package that is designed to meet your unique needs. Since we have industry experience and knowledge, you can feel confident we can design a financing package that meets your needs. Contact Capstone today and talk with one of our professional representatives. We can be reached by telephone at (347) 414-9673.

Secrets to growing your minority owned business in 2018

08:17 27 July in Blog

Regardless of the type of minority owned business you are running, increasing your customer base should always be the goal. Increasing sales of your products or services is a necessary part of keeping your business growing, thriving, and turning a profit. There are some basic steps to growing your business during 2018 which can make the difference between success and failure.

Review Your Business Goals

One of the first steps you should take is to review your business goals. It is important because you want to see how you have done meeting those goals. If you have milestones that were missed, determine the reasons why and decide what steps you can take to correct them. Then set new goals so you will be ready to move forward.

Review Internal Processes

Regardless of how we try to make sure we are doing things in the most efficient manner, chances are we are overlooking some streamlining possibilities. Whenever you are considering growing your business, you should review your internal processes and make sure they are not holding you back. Payroll, marketing, sales, and customer service functions should all be reviewed before you begin developing new business to prevent problems. This type of review should also help you determine how many, if any, new staff members you may need as you grow your business.

Hiring Decisions Matter

Optimism about the future of your business lies in your ability to build a quality team around you. One of the most important decisions you will make for your business growth is your employee base. Making last-minute hiring decisions because of an influx in business can prove costly. When you set your business goals for 2018, have an idea about additional staffing needs and act accordingly. Remember, there are various tax credits available to many employers who hire certain persons for their business including veterans.

Interact with Customer Base

Anytime you are considering growing your business is a good time to reach out to your customer base. Whether it has been weeks or months since you last heard from them, getting feedback about their experience with you can be invaluable as you work towards growing your customer base. This is also a good time to inquire as to how their business is going and ask for referrals to potential new clients. Remember to thank them for their past business and do not forget about these people — over time, they could provide you with significant leads to other business.

Examine Your Business’s Financial Health

Every business has financial challenges, regardless of the size of their business, the length of time they have been in business, or the industry where they do business. While dated, an article in Forbes Magazine highlighted the unique challenges faced by minority-owed businesses. While this piece was originally written in 2012, today, you can still find studies that show this trend has not changed much in nearly a decade. The Minority Business Development Agency (MBDA) tracks these trends and they show that minority-owned businesses continue to create jobs faster than their counterparts but still lack the access to their needed capital. This is where you should consider turning to Capstone Capital Group for help.

Capstone understands every business has unique financing needs. We also understand to continue to grow your business you need access to capital. This is one of the many reasons we offer diverse products — to meet the diverse needs of our customers. We understand in some cases, factoring invoices may be an option that can help you keep regular cash flow, but we also know that occasionally, a business will require working capital to launch a new product line, bid on a contract, or expand their facilities. We encourage small and medium-sized businesses to contact one of our professional representatives today and let us review your current business goals and see if we can help you with the financing necessary to meet those goals.

Minority Contracts: How they work and getting funding

09:08 01 July in Blog, Business Funding

The federal government awards more contracts than nearly any other business in the United States. As part of a commitment to providing help to small businesses, the government commits to offering slightly more than 20 percent of all contracts to small business owners, including women-owned and minority owned businesses. Before obtaining a contract however, a business must apply for minority-owned business status.

What is a minority owned business?

These are business entities which have received certification as a minority-owned business. According to Minority and Women Business Enterprises (MWBE) a business may be certified if they are:

A minority-owned business is a for-profit enterprise, regardless of size, physically located in the United States or its trust territories, which is owned, operated and controlled by minority group members. “Minority group members” are United States citizens who are Women, Asian, Black, Hispanic and Native American.

Obtaining minority contracts

During 2017, 9.8 percent of all government contracts were awarded to minority-owned businesses. This means if a business meets the minority requirements of a contract, they have the right to bid on that contract. The bid process is done through a government process. Depending on various factors, the department in need of services may file an Invitation for Bid (IFB), Request for Proposals (RFP), or Request for Quotes (RFQ). Typically, the business would respond to these requests online.

The other steps include bid submission, oral presentations, and finally a contract may be awarded. The challenges are just beginning of course because finding the necessary capital could be a challenge if a small business has cash flow issues. Having the capital to fulfill the terms of the contract is important because not only do you have to abide by the contract terms, but failure to do so could mean you are unable to secure future contracts from the government, or from other companies who have committed to working with the minority company owner’s community.

Cash-flow issues plague many businesses

One of the most important things you should remember is that your business is not unique if you are experiencing cash-flow issues. Businesses of all sizes, particularly small and mid-sized businesses, face these challenges on a regular basis. While being awarded a contract is very exciting, the fact is that your local bank or a venture capital company may be hesitant to provide capital for you to get started working on fulfilling the contract, this can be problematic for numerous reasons. Facts are facts, we often need money to make money.

This is when Capstone Capital Group can step in and help you get the capital you need to get started on the contract today. We have helped minority business owners who manage small or medium sized businesses secure the capital they need using innovative techniques designed specifically to meet their needs. We will assess your current contract, and help you determine what type of funding will best meet your needs. Whether you need to secure a working capital loan, or determine that factoring is your best option, you can feel confident that we will work with you to get you the necessary capital.

Whether your contract is with another company who elects to work with you because of your minority status, or you have been awarded and are now working on a government contract, talk to one of our professional representatives today about our diverse funding programs. Let us work with you and design a program that meets your needs and helps your business continue to thrive in this competitive marketplace. You can reach us by telephone at (212) 755-3636 or email [email protected].

Capstone Capital Group Promotion Announcements

12:46 14 June in Blog, Press Release

NEW YORK, NY, June 13, 2018 /24-7PressRelease/ — Capstone Capital Group, LLC announced the promotion of three employees this week. Those employees are Thomas J. Ingrassia who was promoted from Corporate Finance Manager to Vice President of Due Diligence and Underwriting, David B. Culotta earning a promotion from Senior Associate to Corporate Finance Manager and Jessica Grille who was promoted from Due Diligence Analyst to Senior Analyst.

Mr. Ingrassia joined Capstone in 2008 and is currently the Vice President of Underwriting and Due Diligence. His primary responsibilities include the management and review of due diligence materials submitted by prospective clients, the underwriting of new accounts into Capstone, purchase order and factoring account management and internal risk management. In addition, Mr. Ingrassia works with investors to provide information about financing opportunities with Capstone, develops advanced financial models for both internal and external applications on an ad-hoc basis as well as manages the internal information technology infrastructure and databases. Prior to joining Capstone Mr. Ingrassia managed the Prime Brokerage Operations team for Goldman Sachs Group Inc which had employees in New York City, Salt Lake City and Bangalore, India. During his tenure he executed trades and managed collateral positions for all of the hedge fund client’s accounts with the firm throughout the financial crisis. Mr. Ingrassia received a Bachelor of Science degree in Mathematics from Syracuse University and a Master of Business Administration degree in Finance and International Management from Fordham University.

Mr. Culotta has been with Capstone since 2010, most recently serving as a Sr. Associate. Mr. Culotta’s current responsibilities include operations management, business development, policy and procedure oversight, due diligence and risk management, client relationship management, marketing, and employee recruitment. Mr. Culotta serves on Capstone’s Credit Committee and specialize in financial modeling, financial statement analysis and preparation, credit & collections, operations analysis, and digital marketing. Mr. Culotta has held various managerial roles and has more than 14 years’ experience in the accounting industry including public and private sector as well as in the finance and banking industries. He graduated from Canisius College with his Bachelor of Science Degree in Accounting and is currently pursuing his Certified Managerial Accountant (CMA) certification.

In her current role, Ms. Grille is responsible for credit analysis, credit approval, due diligence analysis for clients, client relationship management, and social media marketing. Prior to joining Capstone last year, Ms. Grille was busy with her studies at Pace University. Ms. Grille earned the Cum Laude designation upon graduation after earning her Bachelor of Business Administration in Finance with a Minor in Economics. While at Pace, Ms. Grille also participated in the Pforzheimer Honors College after submitting thesis on Bitcoin, Blockchain, and the Future of Cryptocurrencies. Ms. Grille intends to continue her education by pursuing her Master of Business Administration.

Capstone is a private finance company committed to assisting clients with cash flow issues. We understand every business has unique financial needs and we do our best to provide specific solutions to fit those needs. Some of our products include Purchase Order (PO) Financing, Factoring Services, and International Trade Financing. We work with businesses offering services and products with an emphasis on those who bill their customer through “process billing” type contracts, typical for those in the construction trade, publishing, service businesses, suppliers to government agencies, staffing companies., as well as wholesalers. Each of our divisions handles a different aspect of business with one goal in mind: to help our clients remain competitive and growing by ensuring they have access to the capital they need.

Understanding Borrowing Against Accounts Receivables

09:00 16 May in Blog, Business Funding

Small and medium-sized businesses often face temporary cash flow problems, especially if they don’t understand borrowing against accounts receivables. The difference in time between issuing an invoice and getting paid for that invoice is often between 30 and 90 days. This delay in receiving payment can result in a business facing challenges purchasing new material for products, meeting payroll obligations, or meeting monthly expenses such as utilities or rent.

In these cases, meeting cash flow requirements is a necessity and businesses often turn to accounts receivable financing as an option. Some business owners avoid this type of financing because they do not understand what it means or how it works.

Accounts Receivable Factoring

There are two separate options a business owner can use to borrow money against their accounts receivable.

One is to work with a factoring company who takes control of your receivables. Using this method, a company delivers products, sends clients their invoices and the factoring company advances the company a portion of their invoices. The client in turn pays the invoice to the factoring company and once payment is received, the factoring company pays the business the balance of the invoice less their fees.

In most cases, this type of factoring involves a long-term contract between the factoring company and the business.

Spot Accounts Receivable Financing

Another common way to get cash against accounts receivable is known as spot factoring. This method of borrowing against accounts receivables is used when a business needs an immediate infusion of cash for any purpose.

For example, a business may have taken on a new contract and needs cash to purchase materials to fulfill that contract. Instead of borrowing money from the bank, the business owner decides to factor one or more of their client’s invoices.

The advantage of this type of financing is the company does not have to have a long-term contract, they get to decide which accounts receivables to factor, and they get the cash they need, typically within a few business days.

Impact on Balance Sheet

One of the reasons a business owner may opt to borrow against their accounts receivable rather than taking out a loan is the impact on their balance sheet.

When a company factors their invoices, they get an infusion of cash which shows as a positive on their balance sheet, and they do not take on any new debt.

The other advantage of accounts receivable financing is a company typically does not have to sacrifice partial ownership of their company to get much-needed capital as they may have to with other types of financing.

Borrowing Against Accounts Receivables Advantages Over Traditional Borrowing

One advantage a company will find when they opt to borrow against accounts receivables is the time it takes to access funds. A traditional factoring situation means a company often has access to cash within a few days of submitting their invoices to the factoring company. With a traditional loan, borrowers can wait weeks, and in some cases, months before getting approval for a loan.

For most company owners, the other advantage of factoring over typical bank loans is restrictions on how funds are used. When a company applies for a bank loan, the bank may place limits on how the funds may be used which can tie the hands of a business owner. You know best what you need funds for and when you borrow money against your accounts receivable, the factoring company typically does not place restrictions on how the funds you receive are used.

Capstone Capital Groups offers a range of accounts receivable financing options for small and medium-size business owners. Contact us today by email at [email protected] or call us at (212) 755-3636 and let us see how we can help you better manage your cash flow by helping you borrow against your accounts receivable.

Understanding Invoice Lending and How it Works

01:32 09 May in Blog, Business Funding

When you have a need for cash, and you prefer to not borrow money, one option is to get a cash advance on your invoices. Invoice lending, more commonly referred to as factoring, is used by small and medium-sized businesses to help meet their cash flow needs.

How Invoice Lending Works

Invoice lending allows you to provide product to your customers on credit. Once the product has been delivered and the customer has been billed, you can submit the invoice to a factoring company and get cash based on the face value of the invoice.

This method of financing allows you to offer credit terms to your customers, get the cash you need before the 30, 60, or 90-day terms you have offered your customers and turn over the collection of the invoice to the factoring company.

Another advantage of invoice lending is that you typically can determine which invoices you want to factor. Whether you wish to consider factoring a single client, or a specific group of clients, most invoice factoring companies offer that flexibility.

Time to Obtain Funds

One of the most common reasons why a company would use invoice lending is the time between submitting invoices and obtaining funds. In most cases, you can submit an invoice and receive cash within a few business days. This can be helpful to a small or medium-sized business owner who needs immediate cash to make payroll or pay monthly bills.

Unlike a bank loan, or lines of credit which can take weeks to get approved, business owners can get a nearly immediate advance on their accounts receivable. Once your invoice has been approved by the factoring company, you will get a percentage of the face value of your invoice.

Collections of Balance Due on Invoices

When you borrow money against an invoice, you are no longer responsible for collecting the payment for the invoice. The factoring company who made the cash advance will follow up on collections. Once your customer has paid the invoice in full, the balance of the invoice, less the factoring fee will be released to you. Typically, payments will be redirected to a lockbox controlled by the factoring company.

What Type of Companies are Eligible?

One of the many challenges businesses face is having sufficient funding for their day-to-day operations. While banks, and other traditional lenders tend to focus on businesses who have been around for a while, with regular cash flow, a factoring company is often willing to accept more risk. This is because they are loaning you money based on a specific asset, namely your invoices.

Because of how factoring companies work, more businesses are typically eligible for this type of lending. Subcontractors including electricians, staffing agencies, architects and more can benefit from invoice lending. Other types of businesses that often use invoice lending to maintain a steady cash flow include manufacturers, contractors, and suppliers.

Improvement in Cash Flow

Some business owners are faced with seasonal swings in business revenue. This can often result in them being unable to take on new contracts because they do not have the cash flow needed to fund materials for a new customer. Invoice lending can help business owners who are facing a temporary cash flow problem meet their obligations and take on new contracts.

If you are concerned about the cash flow outlook for your business, contact Capstone Capital Group by email at [email protected] or by phone at 347-410-9697. We are a private finance company offering numerous solutions to help small and medium-sized businesses meet their cash flow needs.

Understanding the Typical Types of Factoring

09:13 04 May in Blog, Business Funding

Factoring is a financing arrangement that is typically used by small and medium-sized businesses to help them maintain a steady cash flow. As every business owner understands, cash flow is important to ensure the successful, continuous operation of their business. This is why it’s important to know the different types of factoring.

In general, factoring means a company is turning over their invoices to a third party in return for receiving a portion of those invoices in cash within a few business days. Primarily, there are two types of factoring, recourse factoring and non-recourse factoring.

What is Recourse Factoring?

As a business owner, you are assuming a certain risk when you extend credit to a customer. Typically, the more reliable a client, the more favorable the terms you are offering. Some businesses even offer a discount if a client pays more rapidly. This type of factoring is called recourse factoring.

In fact, it is common for a company to issue an invoice with two separate terms such as offering a 5 percent discount if paid in 15 days and a 90-day net pricing. This means the client has 90 days to pay the invoice in full. Should the client not pay their bill in full at this time, the company would then begin collection activities which may involve refusing to ship additional product, having their accounts receivable department call the company about payment and in some cases, adding on a fee for late payment.

When customers refuse to pay, the business may turn over the collection activity to a collection agent or attorney.

However, if the business has opted to finance the invoice with a factoring company, they no longer must be concerned about collecting payment for the invoice.

The factoring company takes over the risk associated with the invoice, and the client is indebted to them. Om return, your business receives a portion of the face value of the invoice and the balance is held by the factoring company until the company pays the invoice. If the company fails to pay the invoice, the factoring company may ask you to substitute another invoice of similar value in its place.

This is known as recourse factoring.

What is Non-Recourse Factoring?

In some instances when a company borrows money, they are putting up assets such as equipment, real estate, or equity in the business. This allows the lender to seize, and in some instances, liquidate the asset to make themselves whole.

If the agreement between the borrower and lender calls for “no recourse” it means the lender has no option to turn to the business owner for any shortfall between what the company owed the lender, and what the liquidated assets provided.

In the case of non-recourse factoring, however, there is a slightly different meaning. When you deliver product to a customer, you do so under the belief the company will still be in business when the invoice comes due in 30, 60 or 90 days.

However, if you have factored that invoice, the factoring company is assuming that risk since they have given you a portion of the face value of the invoice up front. Should the company go out of business, and you have a non-recourse contract with the factoring company, the company will absorb that loss without any financial repercussions falling on your company. Non-recourse factoring typically only protects you and your business in the event your customer closes their doors before they pay their invoice.

If you are considering entering into any type of factoring contract, it is important to determine what your liability is should other problems occur with your customer. If the contract is non-recourse, talk to the factor to determine how they define non-recourse factoring.

At Capstone Capital Group, we work with small and medium-sized businesses to help them solve their cash flow problems. Contact us today and let’s discuss your needs and discuss your options for recourse, or non-recourse factoring.

An Overview of Factoring Agreements

09:00 01 May in Blog, Business Funding

Factoring agreements are designed to ensure a company who is using their accounts receivable as collateral, and the company who is accepting them as collateral, have a mutual understanding of their obligations. Like any other contract, factoring agreements are legal documents and are binding on all parties. Depending on the depth of your agreement with a factoring company, you will find the following information:

Sales of Receivables

This section of the agreement will include information on what agreement you have with the factoring company pertaining to what receivables will be included in the agreement. You should pay attention to this section, so you understand what you are agreeing to. For example, if you have agreed to only certain invoices, you do not want this section to be a “blanket” sales of accounts.

Credit Approvals and Withdrawals

This part of the contract will state what the company expects from you in terms of documentation to support an invoice. The factoring company may also have specific requirements you must meet if you want to change the terms offered to a company you are factoring invoices for.

Invoicing Assignments

This section of your contract will specify how you are to deal with payment for invoices you have assigned to the factor. Language must be included on the invoice issued to the client indicating they are to make payment to a lockbox controlled by the factor.

Fees and Commissions

There may be one or more sections of the contract that explain what fees and commissions are due to the factor. Before signing any factoring agreement, make sure you understand all the fees and commissions involved.

Advance Information

Your contract should specify how much the factor will advance against invoices. There may be different amounts for specific customers’ credit levels, and there may also be a maximum you may be allowed to have outstanding at any given time. This portion of your agreement should be reviewed carefully to ensure you understand the limits of the advance the factor is granting.

Warranties and Representations

You will be required to acknowledge that your company is duly authorized to do business, that you are solvent enough to enter into an agreement, and the invoices you are factoring are legitimately owed debts to your company. The factoring company will make similar warranties about their solvency and authorization to enter into a contract with you.

Defaults and Termination of Agreement

This section of the contract deals with when a contract may be terminated, what events could result in your being in default of your contract, and what notices are required to inform the factor of your intent to terminate the contract. This is typically done only when a long-term contract is necessary and may not be included in spot factoring contracts.

Security Interest in Receivables

The contract will spell out the factoring companies interest in your receivables. This section of the contract will prohibit you from factoring the same receivables with another company or using the same receivables as a security interest in any other type of loan arrangement.

Conclusion of Factoring Agreements

Whenever a company has decided to borrow against invoices, there will be a contract involved. Your contract will be unique to the agreement you reach with the factor including what the term of the contract is, what fees are paid, and what will occur should your client default on an invoice. Be sure you understand the terms and conditions you are agreeing to.

If you are considering working with a factoring company to help improve your cash flow, contact Capstone Capital Group today. You can reach us by filling out our online contact form, by calling us at (212) 755-3636, or by email at [email protected]

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.

Partner with the right lender.

Keep your priorities straight.

Take advantage of social media.

Participate in industry events.