How To Become A More Valued Supplier Through Capstone’s Purchase Order (PO) And Trade Finance Programs

12:54 20 September in Blog

Become a Valued Supplier Through Capstone’s Purchase Order And Trade Finance Programs

Being a valued supplier or contract manufacturer for customers today requires a lot more than just the best price, quality, and on-time delivery. Customers want suppliers and manufacturers that can be a seamless part of their supply chain, and partner with them to grow their business. This means that if you want to win new business and grow volume with your existing customers, you will need to be able to:

  • Diversify product offerings and increase availability.
  • Create flexible credit terms for customers.
  • Accept larger orders and make more frequent bids.
  • Reduce procurement times and accelerate shipping.
  • Offer logistics and warehousing operations to support customer requirements.
  • Participate in product and packaging design to achieve customer cost and quality goals.
  • Support customer growth plans and meet unanticipated spikes in demand.
  • Maintain a reputation as a business worth continuing to work with.

Having the financial resources to win new business and support existing customer requirements is a significant challenge for many companies. The pandemic sapped the financial strength of many suppliers and contract manufacturers. It reduced the working capital needed to maintain adequate levels of inventory for normal business volume, and finance new business opportunities and spikes in demand. 

Finding Working Capital

Finding the working capital financing to take advantage of business opportunities as the economy recovers has been a problem for many companies because of their weakened financial position and the ‘risk-averse’ mode of banks. Lending to many small and medium-sized businesses is restricted even when they have firm POs for future business.

Fortunately, there are alternative financial solutions to help you become a more valued supplier. Purchase order and trade finance programs can provide the working capital you need to grow with your customers and win new business.

Purchase Order (PO) Financing

PO financing gives you the ability to obtain the inventory needed to support current customer requirements, spikes in demand, and capture new business. Unlike bank financing where the focus is on your collateral, financial statements, and credit rating, PO financing relies on the future business a customer order represents and the financial strength of your customer. 

The way PO financing usually works is your financing source reviews your customer’s credit, accepts your PO, approves your purchase order loan, and makes payment directly to your supplier. Once your supplier receives payment, they will begin working on fulfilling the order.  After the goods are shipped and your customer receives the order, you’ll send an invoice to your customer.  Payment for the account receivable is made by the customer directly to your financing source, not you. Your profit is paid to you after payment is received, closing the transaction.

PO financing is easy, immediate, and flexible. It has a number of advantages for your company including:

  • Faster and easier to obtain than bank financing.
  • No need to tie up your assets as collateral for a loan.
  • The credit decision is based on your customer’s financial strength, not your company’s credit rating.
  • Combining with a factoring program reduces trade cycle funding gaps so you receive cash quicker.
  • Expands your working capital financing so you can support current customers and gain new business.
  • Allows you to accept large orders without using up the cash needed for operations, or avoid borrowing against the bank line of credit you need to backstop operating cash flow.
  • Increases ability to be more competitive in the marketplace.
  • Leverage additional volume to negotiate better pricing and terms from your vendors/ suppliers.

Trade Financing

Trade financing utilizes PO financing for international transactions. It can help you obtain financing to support existing customers, gain new business, and finance surges in order volume.

Sometimes, the best deal on supplies or the particular product simply cannot be found domestically.  Many small and medium-sized companies can be deterred from looking for suppliers abroad due to the paperwork and jargon used in international transactions. Ultimately they end up foregoing business opportunities. Trade finance simplifies the process, especially if the financing source, such as Capstone, has extensive experience in international transactions. 

Trade financing typically includes the importer (you) obtaining a Letter of Credit (LC) from your financing source.  An LC is a payment instrument with the main purpose of mitigating risk associated with international trade for both importers and exporters. The LC also protects you against non-performance by the foreign supplier, because payment is not made until all terms of the LC have been met, the product meets desired specs, and the product is shipped.  In short, a LC assures payment and contract obligations. 

A factoring agreement between you and your financing source closes out the loop on the transaction. When you ship to your customer and send them the invoice, the customer pays your financing source directly. Your profit is paid to you after payment is received. An easy, fast, and flexible solution.

Trade financing has all the benefits of PO financing structured to facilitate international transactions. It gives your company the ability to do business around the world without tying up your working capital or using your bank line of credit. Trade financing reduces trade cycle funding gaps and improves cash flow.

Capstone’s PO and Trade Finance Programs

Capstone recognizes that every business operates under different circumstances and can tailor a program to fit your needs.  Capstone’s PO financing and trade financing programs provide businesses with access to flexible financing and logistics solutions through Capstone’s network of buyers, wholesalers, and distributors. Capstone can partner with you to provide the working capital you need to grow your business internationally and domestically and be a more valued supplier.

If you would like to discuss PO and trade finance programs with a Capstone representative, please call (212) 755-3636.

8 Tips on Selecting the Right Factoring Company

11:04 10 September in Blog

Choosing a factoring company is an important decision that should be considered carefully. You want a factor that understands your industry and that will work with you to provide the working capital needed to grow your business.  A relationship that is transparent as well as flexible.  The process you use to vet a factoring company should be as rigorous, in its own way, as the one you would use to select a key supplier.

The questions to ask when vetting a factor should be comprehensive and tailored to fit your business. There is no one-size-fits-all solution. 

  1. Industry knowledge and experience – Does the factor have hands-on experience working with companies in your industry and if so, how long?  Request the level of experience from any factoring company you plan to work with.  Having keen insight and experience relative to your industry as well as other industries is invaluable.  Experienced factoring companies are best positioned to serve your needs and ensure you are working with the best resource possible.  This is also important for things such as structuring/ custom tailoring transactions, coming up with innovative business ideas, and helping you avoid pitfalls.     
  2. Financial resources – Does the factor have the financial resources to fund the necessary transaction size and support your growth plans? What is the amount of credit facility the factor can provide?  You will want to work with a factoring company that has the capacity to fund your transaction size.  Small or new factoring companies may lack the resources to factor in your invoices or finance your POs.  If you have a need to factor a $1MM invoice, you want to make sure they have the ability to do that. 
  3. Customer service and immediacy – Does the factor have a presence in the same area that you are operating? If you need to get in touch with your Account Manager, how quick are they to respond?  It can be very important for business owners to want to stop into an office if they have questions or are not sure about something.  If there is no physical presence, you will want to see if they perform office visits or use virtual conference software such as Zoom, Skype, or Microsoft Teams.  Factoring is a service industry and business owners need to have answers to their questions now; not in a few days or a week.  
  4. Factoring programs – Do factoring programs include single invoice (“spot”) factoring and ongoing factoring programs?  Some factoring companies will require a business to factor all their accounts receivable.  However, businesses may only have a single-one time need for immediate capital to get them over a period of slower cash flow.  It is important that the factor is flexible and are able to tailor a program to fit your needs.  Working with a factor that offers both programs gives business owners the freedom and opportunity to factor all eligible customer invoices or select only specific ones.
  5. Recourse and non-recourse – Are recourse and non-recourse factoring programs available?  Consider working with a factor that provides both types of factoring.  Some of your clients may make better candidates for recourse factoring than others.  Factors with a competent credit team can help your business deal with customers with poor payment histories. A good factoring company can help you make significant reductions in your losses due to non-payment by assisting you in analyzing the credit of your customers before you start the work or deliver goods.
  6. Other products – Does the factor offer other financing products such as purchase order financing, and trade and import financing? Find out what other services the factoring company offers.  A single source for alternative financial funding can be more efficient and facilitate seamless business transactions.
  7. Funding turnaround time – How long does it take to receive the advance for factored invoices?  You want to make sure the factor has the ability to provide you with prompt on-time funding.  This can be especially important when you are in a pinch and have last-minute unexpected expenses pop up.
  8. Fees and discount terms – What are the fees charged and discount terms?  How are they calculated?  In certain factoring arrangements, the number of days the invoice remains outstanding increases the factoring fees.  The factoring fee is typically calculated as a percentage of the total invoice value.  Your factor fees rates may also be based upon the level of risk of your industry as well as the contract length.  Be wary of factoring companies that offer very low discount rates as there typically will be other hidden fees.  Additional fees may include monthly (or contract) minimums, applicable transfer fees, servicing fees, legal fees, termination fees, and the initial startup fee.  Make sure the factor is upfront with you regarding its rates, service charges, and fees.   

Once you’ve chosen a suitable factoring company to work with, like Capstone, you’ll want to start right away by providing the necessary due diligence for the underwriting process.  Working with the right factoring company is important as it will ensure you have adequate access to cash flow to fuel the growth and long-term success of your business. 

If you would like to discuss invoice factoring programs with a Capstone representative, please call (212) 755-3636.


Frozen Foods Manufacturer and Supplier: Purchase Order Financing and Factoring Facility Case Study

09:57 26 August in Blog, Case Studies

This Client is a family-owned and operated frozen foods manufacturer headquartered in New York.  They offer a full line of convenience products, which includes an extensive line of appetizers/ hors d’oeuvres, pre-plated meals, gluten-free certified, vegetarian, bulk entrees, breakfast products, crepes, and blintzes.


  • Formed in the 1970s, the company is a nationally recognized leader in the production of high-quality, kosher endorsed (OU Kosher Certified), frozen foods products.
  • The Client manufactures under its own brand as well as private label which are distributed to all major renowned discount warehouses based in the United States.

Company Challenges:

  • This company is well established and has a well-deserved reputation however they were struggling to make timely payments to vendors due to working capital constraints imposed by their existing bank facility.
  • The Client’s growth significantly outpaced its ability to leverage its balance sheet and cash flow.
  • They were unable to meet the growing demands of their major customers using their bank sponsored ABL Facility.

Capstone’s Solution:

  • Provided a seven-figure Master Factoring Facility and a Purchase Order Facility.
  • Opened ad-hoc Letters of Credit for the purchase of new equipment.

Progress and Future Outlook:

  • Since the commencement of the relationship back in 2019, Capstone has purchased $72 million in total sales.
  • Cash flows and business operations were stabilized through the uncertainty of the COVID-19 pandemic.
  • Cash flow constraints were eased resulting in the Client meeting/surpassing order demand from all major customers.
  • The Client has found Capstone to be flexible, practical and knowledgeable about their industry; Capstone took the time to understand their business needs and provided a customized funding solution.

Strategies for Businesses That Want to Mitigate Credit Risk

11:08 10 August in Blog

Although the economy is recovering, many companies are suffering additional losses which have further weakened their financial position.  Losses derived from insufficient credit risk management policies and practices have many businesses without sufficient working capital to meet their daily cash flow needs. Payments for open invoices are being “stretched” out longer and businesses are experiencing increased late payments and write-offs.

You can mitigate your credit risk and protect your financial condition by reviewing your credit policies, procedures, and processes to be sure they make sense for an economy in transition, and consider implementing the following strategies:

Credit Criteria

In a growing, stable economy companies tend to accept lower credit quality on the assumption that a rising economy will mitigate the risk.  The economy is recovering but shortages, price inflation, and the COVID-19 Delta variant have created significant challenges for many businesses.

Tightening credit criteria to include the following can mitigate credit risk:

  • Years in business
  • High trade credit amount
  • Credit rating score
  • Litigation, lien, and bankruptcy history
  • Key financial indicators such as current ratio and acid test ratio

Generally, this information will be available in a business credit report.  Reports can be ordered from credit bureaus such as Dun & Bradstreet, Experian, Ansonia, etc.   Try to find the right balance that will mitigate credit risk, but not weaken competitiveness.  Further credit information can be obtained by requesting trade references, bank references, and financial statements from customers, or even by internet searches.  Information for companies that are public may be more accessible on the internet by using YAHOO Finance or EDGAR on the website as these businesses are required to regularly submit public filings and financials.

Credit Limits

How much can your company afford to lose to bad debts? Analyze credit loss exposure to your top customers under varying scenarios. If the potential exposure is too great, carefully adjust credit limits to avoid jeopardizing customer relationships.

Payment Terms

Payment terms are often dictated by competition and industry practices. However, overly generous payment terms increase credit exposure, and your company may not be able to finance the level of accounts receivable.

Credit risk can be mitigated by reducing payment terms to accounts with higher credit risk, e.g. changing from Net 30 to Net 15. Reducing excessive payment terms for other accounts will further mitigate risk and reduce investment in accounts receivable.

Discounts for Early Payment

Offering a discount for early payment, e.g. 2% 10 Net 30 can be an effective way to mitigate credit risk. In a low-interest-rate environment, cash discounts can be a powerful incentive to pay early. The cost of offering a cash discount can be high. Make sure you have the profit margin to absorb the cost. 


Requiring a deposit with an order helps to mitigate credit risk. Deposits are not unusual for special orders, large orders, higher credit risk, and orders with long lead times.

Letters of Credit

Letters of credit to guarantee orders are a common way to mitigate credit risk in international trade and on special and large orders. Letters of credit can be expensive for a customer, and the amount of the credit is counted against the availability of borrowing facilities the customer may have at the issuing bank.

Collection Procedures

Increased customer contact reduces late payments and mitigates credit risk. On large orders contact customers shortly after the invoice has been issued to make sure it has been received, and there are no problems that will delay payment. Add a payment reminder just before the due date, and shorten the time between past-due payment reminders. In collections, the squeaky wheel gets the grease.


Automation of credit and collections processes can reduce DSO up to 10 days. Lower DSO increases cash flow and reduces credit risk. Automated credit scoring and monitoring, electronic invoicing, email automation, and online customer portals reduce late payments and mitigate credit risk.

Third-party options to mitigate credit risk should also be considered. Even companies with the best credit policies, procedures, and processes can benefit from the additional risk mitigation available from commercial finance companies.

Credit Insurance

Insuring against credit losses is a common method used to mitigate credit risk. While credit insurance may be helpful in certain circumstances, there are a number of drawbacks that need to be considered, including:

  • Cost: There may be a minimum premium and the cost may be high for low volumes.
  • Deductible: You may have to incur credit losses up to a deductible amount before the policy pays.
  • Coverage: The policy may exclude disputed amounts and high-risk accounts, or limit coverage for an account.

Credit insurance is generally best suited for companies with a small number of large accounts.

Invoice Factoring

Invoice factoring is a widely used form of financing which can mitigate credit risk and provide immediate funding. Factoring can be provided for a single invoice, or as a program for all of your accounts receivable.

With a non-recourse factoring structure, the factoring company willingly assumes the risk of credit default once the invoice is purchased, mitigating your credit exposure.  Invoice factoring credit approval is based on your customer’s financial strength, not the creditworthiness of your business. Credit analysis and collections services for factoring with recourse (the most common form of invoice factoring), can be provided to clients that need help managing their credit risk.

Invoice factoring is an excellent solution for companies that need to mitigate their credit risk and receive immediate funding for their accounts receivable.

How Capstone Can Help

Capstone Capital Group, LLC is a leading commercial finance company that is focused on providing capital to growing companies. Capstone can tailor a program using existing accounts receivable to generate working capital and provide credit risk mitigation services that fit your business needs.

If you would like to discuss invoice factoring and credit mitigation with a Capstone representative, please call (212) 755-3636.

Green Energy Initiatives Are On the Rise and So Is the Demand for Funding

11:55 02 August in Blog

Growing concerns over the potential negative impacts caused by fossil fuels on the environment, health, weather, and the economy have increased the consensus among stakeholders – consumers, business, and government – that action needs to be taken to reduce the use of fossil fuels in transportation, industry, construction, agriculture, and other sectors.

Environmentally sustainable growth fueled by renewable energy from naturally occurring resources, including sunlight, wind, geothermal heat, tides, as well as other sources, and increased energy efficiency can help accomplish this goal.  Environmentally sustainable growth has the ability to foster economic growth and development while ensuring that nature continues to provide the resources and environmental services our society requires.

The green energy initiatives needed to attain environmentally sustainable growth will require huge investments and the demand for funding is increasing rapidly. The issuance of green bonds increased from $18 billion to $120 billion from 2015-2019, with the U.S. representing approximately 15% of the total. Due to the scope and nature of the investments that will be required, funding from private and public sources will be necessary.

Macro Forces Driving Green Energy Initiatives

More money is flowing into green energy projects than ever before and is rapidly increasing due to the falling costs (and increased efficiency) of green energy, the COVID-19 pandemic, federal tax credits, and an unprecedented political movement to decrease carbon emissions. The proposed 2022 U.S. Federal budget alone includes $36 billion earmarked for green initiatives.

The COVID-19 pandemic has accelerated the shift of investment away from fossil fuels with investors flocking to environmentally sustainable growth projects as the must-have investments of the future.  At the onset of pandemic lockdowns in early 2020, demand for oil and gas fell sharply as air travel plummeted and people stopped driving.  Crude oil prices traded below $0 while the value of the oil and gas industry saw major declines worldwide.   Stakeholders are now seeing green energy sources as more resilient to these types of disasters as impacts of the pandemic were not as profound on that sector.

Additionally, major companies such as Microsoft, McDonald’s, Wal-Mart, Apple, and HP are pledging to reduce or eliminate their carbon footprint all the while consumers are exhibiting a growing preference for sustainable products and services with more people willing to pay a premium for them.

Green Energy Initiatives

Green energy initiatives are being undertaken by the private and public sectors, and through the collaboration of both sectors.  Some of the notable initiatives in the U.S. include:

  • The Office of Energy Efficiency and Renewable Energy (EERE) is working to support energy efficiency and renewable energy research in collaboration with private organizations, researchers, and other nations, on projects including Grid Modernization Initiative, EERE Small Business Innovation Research, and Better Buildings Initiative.
  • The Department of Energy (DOE) announced over $65 million in public and private funding to commercialize promising energy technologies.  The DOE also unveiled two funding opportunities totaling over $162 million to improve efficiency and reduce carbon emissions in cars, trucks, and off-road vehicles.
  • The maritime industry is exploring the use of alternative fuels to power cargo vessels.
  • United Airlines, Boeing, Honeywell, and the Clean Energy Trust announced an initiative to advance aviation biofuel development.
  • Unilever unveiled a new sustainability initiative dubbed the Regenerative Agriculture Principles, promoting the use of renewable sources and other initiatives in agriculture.
  • NES Fircroft, an engineering staffing provider, listed 10 major renewable energy projects to watch in 2021. The projects including hydroelectric, solar and wind have an estimated cost of approximately $80 billion.
  • The proposed $50 billion U.S. Federal Small Business Green Recovery Fund is promoting green innovations and investments among small businesses that advance climate change mitigation, adaption, and other sustainability solutions. The fund will offer small businesses financial support in the form of green grants, green loans, and green bonds. Green loans and green bonds will be channeled on a commercial basis through intermediary financial institutions by building on the experiences of the Paycheck Protection and Main Street Lending Programs.

Need for Green Energy Funding

The cost to convert the entire U.S. power grid to 100% renewable energy has been estimated at $4.5 trillion.  This enormous investment means funding for green initiatives will need to come from both private third-party sources and public sources.  Private third-party sources will include commercial finance intermediaries, joint ventures of public and private companies, and equity investment funds.

Businesses that need funding for green energy initiatives are also able to apply for grants from a number of publicly funded sources however most times that may not be enough on its own.  In fact, most green energy initiatives would never be possible without the involvement of private third-party funding sources.

How Capstone Can Help

Green energy initiatives demand time, money, and a certain level of risk tolerance.  Capstone understands the financial components along with the risks associated with project financing and is focused on providing capital to support our clients’ green energy goals.  Invoice factoring can be a more convenient alternative to other types of third-party funding sources that typically structure green energy project finance through debt financing or by raising equity.  Capstone has provided its clients, from many diverse industries, with funding for green energy initiatives and can tailor a program for your sustainability project.If you would like to discuss your green energy project with a Capstone representative, please email us at [email protected] or call (212) 755-3636.

Pandemic Recovery Impacts on Business Growth

14:19 06 July in Blog

Starting off with positive news, the U.S. economy shows strong signs of recovery as the pandemic abates and confidence in the vaccines grows. On the downside, expect many parts of the economy to experience some growing pains.

For example, businesses still struggle with supply-side and labor issues. Businesses and individuals will have to choose between spending more and buying less.

Find out how these pandemic-related issues will impact businesses and the companies that fund their growth.

Potential Inflation Risks

Several pandemic-related forces may combine to drive increased inflation. For instance:

  • Supply and labor problems: Some industries still struggle with supply-side issues, such as the rising cost of key inputs like lumber and semiconductors, as well as overseas shipping delays. Other companies have had a hard time attracting new workers to meet demand. Employers need to compete with government unemployment stipends and employees who have employed their time off to seek better opportunities.  A tight labor market combined with higher minimum wages are also contributing factors.
  • Pent-up demand for products and services: Pent-up demand for various products and services can boost revenues but also aggravate supply and labor problems in struggling markets. Until suppliers expand production and distribution, prices for scarce human and material resources will rise.
  • Government stimulus programs for individuals and businesses: The government also offered multiple stimulus programs to both businesses and consumers. People with extra cash to spend generate more revenue for businesses, but the extra customers may burden unprepared businesses and even entire industries as they struggle to scale.  Given so much cash (government stimulus) being pumped into the economy, consumers now have $2.1 trillion in disposable personal income (savings).  This disposable income, if deployed by consumers in pre-pandemic activities, should result in increased consumer spending, as estimated by the U.S. Bureau of Economic Analysis
  • End of deflation from China:  With China being the hub of the world’s manufacturing for the past 30 years, China was contributing -1% to global inflation as estimated by the Fed.  More recently, China’s economy has caught up to the rest of the world and is not exporting deflation like it once did.


Comparison of the Pandemic Recovery to Historical Periods

The Inflation of the 1960s

According to speculation by economists involved in the business financing industry, ongoing government stimulus may keep contributing to higher inflation rates over the next few years. As an analogy, consider the “guns and butter” period of the 1960s when social spending heavily competed with defense spending for a share of the government’s budget.

During that time in history, modest inflation of one to two percent ballooned into five or six percent within only a couple of years. Some economists suggest that the pandemic recovery period of the 2020s could mirror that time because of increased government stimulus spending.

The Roaring Stock Market of the 1920s

A contrast of the potential of the 2020s to the growth period of the 1920s, exactly a century ago, might even appear more striking. Like today, the country had emerged from a pandemic. Similar to today’s digital revolution, innovations like electricity, refrigeration, radio and even indoor plumbing accelerated growth and productivity.  Both periods created permanent changes to the country’s population and economy resulting in an unparalleled movement of people and significant social disruption. 

Also, like the 2020s, in the 1920s, economic growth fueled a soaring stock market mostly benefiting the wealthiest people, and some financial analysts expressed concerns about it being overvalued. Sadly, the 1920s ended in the Great Depression. Besides concerns about the economy, political divisions loomed over this generally prosperous time. Again, the economy’s definitely demonstrating signs of a strong economy. On the other hand, all stakeholders in that economy have an opportunity to study history in order to avoid repeating it.

What are Some Sectors to Watch?

Some sectors of the economy will take longer to recover. In fact, some may never experience the kind of growth they did prior to the disruption caused by the pandemic. For instance:

  • Hotels: Compared to three percent before the pandemic, over 15 percent of hotel loans are delinquent now. People have slowly begun to resume traveling. Many businesses relied on video conferences to avoid in-person meetings during the pandemic, and they may continue to rely upon technology because of cost savings and convenience.
  • Retail store space: Even before the pandemic, e-commerce started to take an increasingly large share of retail revenues. Once people grow accustomed to shopping online, many said they plan to continue to rely on their favorite digital outlines for convenience and the ease of comparing prices. Thus, many brick-and-mortar stores have closed. Over 10 percent of retail loans were delinquent, and some experts predict that up to half of the large anchor stores in malls will close by the end of 2021. Note that while demand for physical stores declined, overall retail sales have trended up.
  • Office space: The pandemic drove many employees from their business offices to their home offices. As employees and businesses have adapted to this change, many companies have turned remote work into the new normal in many industries. While the share of long-term leases as a percentage of all leases dropped, the average length of leases has declined by 15 percent.

The Good News for Secured Lenders During the Recovery

While many end-use sectors for secured lending are in recovery mode, plenty of sectors, such as manufacturing are struggling right now to keep pace with demand. The chart for the ISM manufacturing index spiked and so have both wholesale and retail sales. Accordingly, commodity prices have rapidly increased, notably for lumber, semiconductor, base metals used in manufacturing, and other products.

As cash flows recover, current demand growth for both secured and traditional funding remains somewhat flat. However, full recovery is within reach and should pick up soon as manufacturers take advantage of financing to expand production and inventories.  The saying goes ‘All change is preceded by crisis’ and today there is a huge push for lenders to adapt to innovation and technology like never before.  Capstone is ready with a fresh website redesign, enhancements to informational content, a quick and convenient funding app, as well as integration of new software and social technologies.  These updates will improve functionality and usability for current clients and make it easier than ever to help all business owners access the capital they need throughout their recovery.

Payment Terms Trending Longer Post Pandemic – Tips to Manage Cash Flow Woes

15:27 28 June in Blog

Scoring a new contract or purchase order from a reliable customer can provide any contractor or supplier with a windfall growth opportunity. Still, the nature of the opportunity can also present many growing businesses with a dilemma.

Credit-worthy companies know that plenty of suppliers and other contract firms covet doing business with them.  Accordingly, they possess enough leverage to require generous payment terms that may leave their partners waiting for 60 to 90 days, or even longer, for payment.

Without an immediate payment, small businesses may lack the cash flow they need to pay vendors and employees to deliver on the contract.  In today’s world, where there are very few customers, and everything is consolidated, businesses do not have the luxury of turning a customer down.  If a company is not properly managing its cash flow, it might have to pass on the opportunity and risk never being offered it again. 

Learn more about current payment term trends and some tips to help manage cash flow in this environment.

Payment Terms Are Trending Longer

More businesses have turned to longer payment terms as a way to manage their own cash flow. As one example, The Star Tribune reported that 3M notified some suppliers that they needed to extend their payment terms from net 60 to net 90 to help manage their working capital.

Supply-chain professionals and economists have observed that 3M provides just one example of a growing trend towards extending contract payment schedules. For other examples, Best Buy and Honeywell also asked suppliers to extend payment terms within the last year.

Besides longer payment times, other causes have contributed to later payments. As an example, pandemic-related manufacturing slowdowns and supply issues have also generated long lead times. In turn, longer turnaround times will mean waiting even longer for payments.

Tips to Manage Cash Flow Challenges

Waiting months for payment poses a challenge for many businesses, including manufacturers, suppliers, staffing companies, transportation businesses, construction trades, and even professional service firms. While changing terms might help some businesses manage their own working capital better, it obviously hampers their partner company’s ability to do the same.

Cash Flow Management Strategies

Dealing with cash flow ensures businesses have the money they need to pay their suppliers and employees. Some important tactics for managing cash flow include:

  • Understanding the impact of payment terms: For various reasons, businesses should understand and accept the consequences of varying payment terms. With other things equal, shorter payment terms offer more value than longer ones because delayed payments might generate more costs in the form of interest, fees, or lost opportunities.
  • Offering incentives for early payers: With the understanding that shorter payment terms hold value, some businesses offer incentives for early or cash payments. Offering a discount or other incentive for early payments may save money in the long run. Adding electronic payment can make paying more convenient and help speed things up.

Invoice Factoring

New, small, or struggling businesses may lack the credit or the time to apply for traditional business loans.  Rather than turn away opportunities for growth because of a simple lack of cash or credit, small businesses should consider alternative funding options that bridge the gap between agreements and payment dates.  As a simple, fast, and reliable alternative, consider the benefits of invoice factoring as a funding solution.  

Unlike most kinds of traditional business financing, invoice factoring does not involve a loan. When an invoice is factored, the business will transfer ownership of their invoices for accepted and completed work in exchange for an agreed-upon advance, as a percentage of the invoice. 

This kind of funding gives companies the cash flow they need to focus on their current operations and relieves concerns over slow-paying customers.

Businesses with these kinds of characteristics may benefit from invoice factoring:

  • Qualified unpaid invoices for completed delivery of goods and services
  • Creditworthy B2B or B2G customers
  • Long delays between completed work and payment; trade cycle 60-150 days or more
  • Losing sales or missing growth opportunities 
  • Immediate growth opportunity with a product, customer, project, or market share


Don’t Let Long Payment Terms Derail Business Growth

In the worst cases, extended payment terms can force companies to turn down work. In some cases, demonstrating that cash flow management has caused problems might even damage their business reputations and ability to conduct business in the future. In all cases, it wastes time and money that the company used to generate a sale.

Access to rapid, flexible funding not only helps companies grow but can even help them save money. Many of the business’ own suppliers and vendors will offer discounts for prompt, cash payments that the business owner will be able to take advantage of. Moreover, companies don’t need to have established credit scores or wait for months for approval.

To discuss the best funding solution for your business, contact Capstone at (212) 755-3636 or complete a short, online application.

Capstone Announces Website Upgrades to Improve the Customer Experience – Press Release

13:01 25 June in Blog, Press Release

Capstone, a private finance company with a focus on accelerating its client’s cash flow, recently announced several redesigns to their website that will improve the user experience of clients, referral partners, and other website visitors. offers funding solutions through factoring, purchase order financing, and both domestic and international trade financing. They focus these financing solutions in an effort to meet the unique needs of service, wholesale, manufacturing, distribution, supply, and construction companies. Capstone works directly with a growing base of clients and with referral partners including brokers, banks, and other financial professionals.

The new website features give clients convenient options to apply for new funding as well as providing industry-specific financial resources. In a continued effort to educate current and prospective customers, Capstone has also enhanced its informational content to include case studies and White Papers on current economic trends that affect business funding. In addition, design updates to service pages improve the user experience, enhance website navigation, and provide all of the information about various funding options in one place. According to Capstone, the website updates will improve functionality and usability for current clients and help all business owners find the best funding options for their needs.

Located in New York City, Capstone’s management has over a century’s worth of combined expertise in business and investments. In particular, Capstone’s management team possesses unique expertise in financial services and construction-related transactions. They specialize in factoring, trade, and purchase order financing. Other Capstone services include funding for music royalties, staffing companies, and a diverse lending program for minority-owned businesses. In addition to funding a broad range of clients in various industries, Capstone takes an innovative approach that serves their client’s diverse and evolving needs under all sorts of economic conditions.

For more information, visit Capstone at or call (212) 755-3636.

business funding after ppp

MWDBE Funding Options Compared After the PPP Runs Out of Money

13:08 28 May in Blog

Disadvantaged businesses often lack sufficient access to business financing options. Some reasons for this might include a lack of collateral, lower net worth, too little credit and banking history, or other tangible and intangible barriers. To pursue certain opportunities, businesses also often need faster approvals and access to funds than banks and other typical lenders can offer. Because of these obstacles to obtaining traditional loans, disadvantaged business owners may need to consider business financing alternatives, such as invoice factoring.

Over the past several years, Capstone has served as a primary or secondary financing source for a variety of minority, women, and disadvantaged business entities, or in short “MWDBEs.”  We’re experts in making sure that companies can obtain the funding they need to pursue growth opportunities. Business owners can always contact Capstone with questions about business financing.

Has PPP Run Out of Funds to Lend?

Early in May 2021, the SBA announced that it could not accept more PPP loan applications. Out of $800 billion in forgivable loans meant to support small businesses through the pandemic, the fund only had $8 billion left, according to CBS News. Because of rapidly depleted funds and current borrower targeting, most small businesses cannot apply or get approved for PPP loans any longer, though the SBA said it would still process applications that had already been submitted.

The government earmarked the small pool of remaining funds for community banks that mostly serve MWDBEs. Even for disadvantaged businesses, the $8 billion is not expected to last long after considering it only took 13 days to use up the initial $350 billion in funding.

Alternatives to PPP for Small Businesses After PPP Ends

With the chance of obtaining one of these forgivable PPP loans largely gone, small businesses must compare other funding options. To get started, take a brief look at various financing alternatives, including invoice factoring, current SBA programs, bank lines of credit, business credit cards, and merchant cash advances.

Source of Funding Invoice Factoring SBA Loans Bank Lines of Credit Business Credit Cards Merchant Cash Advances
Approval/ Processing Time 2 to 7 business days At least 90 days and up to 6 -12 months 1 to several business days Instant to several business days 2 to several business days
Qualifications Creditworthy customers, quality account receivables Multiple and varies by loan but typically includes collateral, prolonged history of financials, a certain length of time in business, and credit Size of Corporate Balance Sheet, corporate liquidity, and value of personal assets; may require a prior relationship with the bank, above-average personal credit, and a personal guarantee Excellent credit Prior sales history, projected future sales, and a personal guarantee
Fees / Interest In general, range from one to four percent fees for 30 days Modest, interest rates vary by lender Typically 15  percent APR or more Typically, 15 percent APR or more Expect 30 percent APR or more
Maximum Amount No maximum; percentage of invoice or contract $5,000,000 maximum Varies $15,000 – $30,000 maximum Percentage of future revenues

Invoice Factoring

Instead of having to wait 30 to 90 days for customers to pay invoices, qualified businesses can sell all or some portion of their accounts receivable to an invoice factoring company. This makes invoice factoring a great option for companies that are new, have faced some credit challenges, would rather not take on debt, or simply need funding fast.

Factoring fees usually range between one and four percent, making invoice factoring a low-cost alternative when compared to the interest rates on most small business funding options. Generally, a business is able to obtain an advance for their accounts receivable within a day or two once initial underwriting has been completed. 

How to Apply and Qualify for Invoice Factoring

Qualified businesses usually generate invoices for other businesses or government contracts. Since the factoring company will assume responsibility for collecting accounts receivable, they’re mostly concerned about the creditworthiness of their client’s customers and quality of the accounts receivable. Processing time typically ranges from 48 hours to seven business days.

SBA Loans

The SBA has multiple programs, include some for traditionally disadvantaged business owners. Benefits of SBA funding may include competitive rates and flexible terms. Some even come with extra resources, like business mentoring, counseling, and education. Depending on the loan program and qualification, loans can range from as little as $500 to as much as $5 million. Some SBA loans impose restrictions on how the borrower can use the money.

Qualifying and Applying for SBA loans

Qualification depends upon the loan program. SBA might qualify businesses that have been declined by banks and other traditional lenders. Still, businesses typically need to demonstrate their ability to repay, and have a prolonged history of financials, certain length of time in business, and demonstrate that the company engages in sound business practices. Processing times and required documentation varies; however, typically expect to supply plenty of documentation and to wait at least 90 days and even up to 6 – 12 months for a loan decision.

Bank Lines of Credit

A line of credit from a bank can offer businesses a flexible way to draw upon funding when they need it. Lenders will offer each borrower their own maximum credit limit, which generally won’t exceed $250,000. Similar to credit cards, businesses can usually keep drawing on and repaying their balance, so long as they adhere to the terms. Interest rates for business lines of credit can vary wildly, but typically are around 15 percent or more.

Qualifying and Applying for a Bank Line of Credit

Banks generally want prospective borrowers to demonstrate creditworthiness and steady revenue over at least the past couple of years. Some online lenders also offer business lines of credit and may focus mostly on revenue and not even require business credit scores. Other lenders generally want to see credit scores of at least 600 to 650. Generally, the bank may have certain requirements for the size of the corporate Balance Sheet, corporate liquidity and value of personal assets. The borrower may also need at least six months of revenue, collateral or personal guarantees to secure financing.

Business Credit Cards

Business credit cards work somewhat similarly to lines of credit, though they typically have much smaller maximum balances. For instance:

  • Credit card issuers generally limit maximum balances to around $15,000 – $30,000.
  • Also, except for cash advances, businesses mostly use credit cards for purchases. Cash advances on credit cards usually come with higher interest rates than purchases too. A line of credit actually deposits cash into the business account.

Qualifying and Applying for a Business Credit Card

Qualifying for the best business credit cards generally requires good to excellent credit, with scores over 720. Even so, interest rates often range from 15 percent or more.  Some credit cards also charge an annual fee.

Credit card companies offer online applications and can even provide instant approval decisions. Otherwise, expect to wait from 10 days to two weeks to get approval and a credit card in the mail.

Merchant Cash Advances (MCAs)

Targeted to businesses with steady receipts of credit and debit card sales, a merchant cash advance is a form of non-bank lending that gives businesses the chance to obtain an advance against future sales. The business repays the advance through an agreed-upon percentage of sales which the MCA company automatically withdraws on a daily or weekly basis from the business’s bank account. Fees vary considerably, but compared to most other financing sources, they’re extremely high, from a 30 percent APR up to triple digits.  Generally, merchant cash advances can land small business owners in a never-ending cycle of debt and should be avoided at all costs. 

Qualifying for a Merchant Cash Advance

Lenders will consider historical sales volume to estimate future revenues and will require a personal guarantee to secure funding.  Very often, lenders can execute this process and offer approval decisions within a day or so.

Don’t Wait Until Your PPP Funds Run Out – Call Capstone for Business Funding Today

Capstone offers flexible factoring options for businesses in many industries. In particular, we understand the unique challenges faced by MWDBEs and we have been able to structure a funding platform specifically to support the working capital needs of these types of businesses. Capstone can serve as a primary funding source or can work within an existing bank relationship for opportunities that banks and other lenders have declined or take too long to approve.

Contact us today to tell us more about your business needs, and we will work hard to provide you with the best solution.

ar factoring vs bankline of credit

AR Factoring Vs. Bank Lines of Credit – Pros & Cons Reviewed

09:27 18 May in Blog

Jeff Bezos received the initial capital for Amazon when his parents offered to invest almost their entire life savings in his idea. Most startup and small business owners don’t have this luxury or might prefer to pass on such an offer anyway. Still, companies typically need to seek a source of outside financing in order to manage cash flow and grow.

On the positive side, some financial institutions offer flexible financing for various kinds of businesses. Explore the pros and cons of invoice factoring vs. a bank line of credit, two popular alternatives for new and small business funding. The best solution really depends upon the kind of customers a business has and how they invoice clients.

Pros and Cons of Invoice Factoring Vs. a Bank Line of Credit

Even though invoice factoring (also known as “A/R” or “accounts receivable” factoring) and bank lines of credit can both provide flexible business financing, they don’t work the same way. Most of all:

  • A bank line of credit equals debt: Getting a line of credit from a bank increases the company’s debt on their Balance Sheet. Interest on this debt may indicate that the business ends up having to pay back considerably more than they borrowed. Outstanding debt might make it difficult to qualify for other kinds of financing. High interest on some lines of credit can even generate future financial difficulties.
  • Invoice factoring equals a sale: In contrast to a line of credit, invoice factoring does not increase business debt. In fact, it’s a sale of an asset that generates cash flow. It’s true that factoring companies charge a fee; however, they also relieve the business of the effort of collecting payments and make it easier for businesses to grant and extend credit to their own customers.

Is Qualifying for Invoice Factoring Harder Than Qualifying for a Bank Line of Credit?

In general, qualifying for invoice factoring depends upon:

  • Customers: Factoring companies rely upon the creditworthiness of invoiced customers and not the business selling the invoices. Thus, they favor businesses with B2B or B2G invoices. Most factoring companies also prefer to deal with domestic customers as well.
  • Invoice timing: For non-recourse transactions, the factoring company will assume the risk of collecting receivables and won’t want to take on any additional risk that a business is unable to deliver on the goods or services they’ve billed their customer for. Therefore, the business must submit invoices for delivered goods or services that have been completed/ accepted and not in-process or planned work.

In contrast, businesses need to demonstrate creditworthiness and financial strength to qualify for a bank line of credit. Approval can take time. After approval, banks and similar lenders generally make it relatively easy and fast to draw upon the funds.

How Much Does AR Factoring Cost?

As with any kind of financing, costs may vary depending upon the unique business and the factoring company you use. In general, expect fees to range from two to four percent for the first 30 days a balance is outstanding with the factor company, usually depending upon many factors such as the general creditworthiness of customers and how long it takes them to pay. Typically, businesses can, expect upfront advances of 70 to 80 percent of the total invoice. The factoring company will also issue a rebate for the rest (minus fees) after successful invoice collections.

How Much Does a Bank Line of Credit Cost?

Interest rates typically depend upon the company’s creditworthiness and the size of the draw. For some customers, banks might charge as little as five percent; however, they can charge as much as 20 percent.

With a bank line of credit, the borrowers only need to pay interest on money they actually take and not the entire maximum line of credit. On the other hand, some banks also charge periodic fees to manage the account, even if the business doesn’t use any credit facility.

Is Invoice Factoring or a Bank Line of Credit Better?

For a business with the right kind of receivables, invoice factoring can offer several advantages over a bank line of credit. For example:

  • Lower financing costs: When a factor company pays for invoices, they generally only subtract a small fraction of the total for fees.
  • No additional debt: Businesses sell invoices to a factoring company and don’t need to assume extra debt or pay to service that debt.
  • Reduced collection effort: The factoring company will issue an advance to the seller and handle the collection of the receivable from there.
  • Easier approval for businesses with creditworthy customers: Businesses with domestic B2B or B2G invoices for delivered products and services should enjoy quick approval.

Partner With Capstone for Fast Business Funding

Businesses in all types of industries need to deliver products or services, issue invoices, and then wait to get paid. Capstone’s invoice factoring services can provide upfront funding, so their clients don’t have to wait to get the working capital that they need to pay operating expenses and invest in growth.

Besides invoice factoring, Capstone also offers a variety of funding options for all sorts of companies. Contact Capstone today to find the best funding option for almost any business.

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.



    Submit your information to be directed to the download page.

    Privacy & Terms