Debt Factoring: What is it, and how can it help?

12:37 27 December in Blog, Business Funding

Debt factoring, also known as invoice factoring or accounts receivable factoring, is an alternative source of working capital funding. It is not a loan. Business owners sell their outstanding invoices to a third party known as a factoring company (“factor”) and receive an immediate advance as a percentage of the invoice amount.

Debt factoring is widely used by small and medium-sized companies to accelerate cash flow to pay operating expenses, pursue a growth opportunity, or purchase inventory and supplies to fill customer orders. Some companies decide to factor their accounts receivable because of a pressing financial obligation or when their customers require extended payment terms. It is faster, more flexible, and easier to obtain than a loan.

How Debt Factoring Works

The debt factoring process is straightforward and easy for any size business to use.

You invoice your customer as usual for the goods or services rendered to that business.
You set up an account with the factoring company of your choice.
The outstanding invoices/ progress payments for work completed are submitted to the factoring company for verification with your customer.
The factor reviews the invoices and once verified/ approved, transfers an advance amount to your bank account.
The invoice amount is collected by the factor directly from your customer when due, which is usually 30 to 60 days.
The factor issues a rebate for the remaining invoice balance, less the factoring fee, to your bank account.

Types of Factoring

Factoring can be a program to purchase all of your eligible accounts receivable, so you have continuous and reliable cash flow. The factoring company works with you and your customer to develop a seamless process that dovetails with your business model.

In some situations, single-invoice factoring, more commonly known as “spot factoring,” may be a better solution. This is particularly useful for business owners that have a reliable cash flow stream but occasionally have a large invoice that would disrupt cash flow if they needed to wait 60+ days for payment. In these cases, you can use factoring to convert a single invoice to cash to fill the gap in your cash flow. This is the ideal solutions for businesses simply in need of immediate cash. There is no multi-year contract required.

The most common form of factoring is recourse factoring. Recourse factoring requires business owners to purchase back any non-performing accounts receivable. This means that your business is ultimately responsible for the payment of the customer invoices if they remain unpaid past their due date.

However, with non-recourse factoring, the factoring company assumes the credit risk and liability of non-payment on the factored invoice. Since the credit risk is borne by the factoring company advance rates may be lower and factor fees may be higher when compared to recourse factoring.

Regardless of the type of factoring you choose, there are a number of advantages that make it a better solution for working capital funding for many small and medium-sized businesses.

Advantages of Debt Factoring

There are a number of advantages to debt factoring that make it an excellent solution to fund working capital needs, including but are not limited to:

Accessibility to cash flow: When you utilize debt factoring, you have immediate access to business funding. You don’t have to wait 60+ days to be paid, and there is no need to chase customers for payment. Cash flow is available to pay for things such as operating expenses, a business growth opportunity, or for the purchase of inventory and supplies to fill customer orders.
Flexibility: Debt factoring is more flexible than other business funding solutions. Factoring programs can be custom tailored to fit your company’s business model.

Factoring companies work with you to dovetail transactions with your business processes. You don’t have to do work arounds to fit your business processes into a one-size-fits-all transaction.

Easier to obtain than loans: Loans can take weeks or even months to be approved and closed, and credit approval is based on your company’s financial strength and collateral. With debt factoring, credit approval is primarily based on your customer’s financial strength and credit history, instead of your company’s credit profile. As a result, the approval process is easier and faster than a loan.
Reduces the need to draw on existing credit facilities: Utilizing debt factoring instead of drawing down upon existing bank lines of credit or other credit facilities leaves them available to fund other working capital requirements.

Adding debt factoring to your mix of business funding resources expands available working capital funding, and avoids the need to increase existing credit facilities during a business downturn.

Makes it possible for you to pursue new business opportunities: With debt factoring you can pursue new business opportunities that might not otherwise be possible if a loan is required.

New business opportunities can arise at any time, even during a business downturn. Debt factoring can be used to quickly convert accounts receivable to cash to pay the operating expenses and buy the inventory and materials to fill a new order.

Can be combined with purchase order (PO) financing: Debt factoring can be combined with PO financing to provide seamless business funding of a transaction from the purchase of pre-sold inventory through the conversion of accounts receivable to cash.

You don’t have to wait to buy the inventory needed to fill and order. Instead, you can fund the purchase of inventory and pay for the inventory with proceeds from the customer’s invoice when the order has been delivered.

Reduces credit and collection costs: With debt factoring, you can reduce credit and collection costs. The factoring company follows up with your customer for payment, allowing you to conserve resources to grow your business.

It is important to understand that not all factoring options are alike. Capstone knows that every business is unique with its challenges, and each deserves an individualized approach to solving their cash flow shortfalls. With flexible factoring structures, Capstone will customize a program specific to your business that will help you achieve your business goals. By utilizing debt factoring, you can shift your focus from waiting on cash to working on your next project without the stress of inconsistent cash flow.

Getting Business Funding with Bad Credit

09:33 27 October in Blog, Business Funding

If you own a small business, you know how difficult it can be to obtain the credit you need to supplement your cash flow and working capital. Vendors, suppliers, banks, and other lenders are reluctant to extend credit to small businesses, especially if they have bad credit, forcing them to live hand to mouth to meet payroll, pay suppliers and fill orders. Yet many small businesses survive and grow even when business is tough. They can do this by securing business funding that is flexible and works with them, even if they have bad credit.

Securing Business Funding with Bad Credit

Small businesses that have cash flow problems and find it difficult to obtain funding for their working capital needs usually have a number of the following characteristics:

Bad business credit or no credit rating
Limited operating history
Limited working capital and cash flow
Few business assets that are not already encumbered by liens from lenders
Limited or poor credit rating of the business owner
Limited personal assets to pledge as collateral

Unfortunately, these characteristics are strikes against you when you apply for a loan from a bank or other lenders. Banks have limitations on the number of loans they can make to businesses with bad credit and they have to set aside additional capital in case of credit losses which does not earn a return.

Obtaining a small business loan with bad credit is even more difficult when the economy is weak, and the Federal Reserve is raising interest rates. In this environment, banks and other traditional lenders tighten their credit requirements and focus on larger customers with greater financial strength.

Fortunately, there are alternative funding solutions that small to mid-size businesses, including those with bad credit or no credit, can work with to obtain the working capital they need.

Alternative Funding Solutions

Alternative funding sources, such as invoice factoring companies, do not have the same limitations as traditional lenders. They are more flexible and can work with clients to custom-tailor programs to support their business model.

A key alternative funding solution for small to mid-size businesses, including those with bad credit, is invoice factoring. The cash you have invested in generating accounts receivable can be freed up with invoice factoring to increase cash flow and working capital. Even if your accounts receivable has a lien from another lender, a factoring company can often successfully negotiate an agreement with the lender to carve out accounts receivable for a factoring program.

Invoice factoring accelerates the conversion of accounts receivable into cash, providing immediate cash flow and working capital. Funding is not dependent on the creditworthiness of your business. Instead, the creditworthiness of your customers is used for determining whether you can factor your invoices.

Typically, businesses are forced to wait 60 days or more before they are paid for the products or services they provide. Factoring turns those invoices into nearly immediate cash. This allows business owners to have the necessary cash on hand to sustain operations and meet obligations to their customers while not depending on a traditional lender for a line of credit.

Advantages of Invoice Factoring

Some of the advantages of invoice factoring include:

Faster than business loans – In most cases, rather than waiting weeks or months for bank approvals, you can have cash in your bank account within days of accepting a factoring contract and having your customers approved.
Flexibility and control – Factor all of your invoices or only specific ones. You select which customers you’d like to factor. You may elect to use a process called “spot factoring” which is a funding method where you simply take a valuable invoice and turn it into nearly immediate cash with no long-term agreement. This is common when a company has a single, one-time need for immediate capital to get them over a period of slower cash flow that is not expected to continue.
Strengthen or repair your credit profile – With sufficient cash flow, you can meet vendor and supplier payment commitments. As you build up a positive credit history by paying in full and on time, it will gradually boost your business credit score. Invoice factoring helps to strengthen your credit profile using the strength of your customer’s credit, not the bad credit of your business.
Streamline credit and collections – Invoice factoring eliminates the hassle and expense of chasing customers for payment. It also provides credit and background checks on your customers, and online reporting is available 24/7 to help you manage your invoices and cash flow.

Qualifying for Funding

Even if you have been turned down for a business loan or line of credit, you can convert your open invoices to cash almost immediately with invoice factoring. Qualifying for funding is relatively easy. The key requirement is to have unpaid invoices that are payable by dependable and creditworthy customers. Whether you need immediate capital or regular access to cash, invoice factoring can help you meet your financial obligations even if you have bad credit.

Customized Solutions Work Best

This is one reason more businesses are turning to Capstone. Regardless of what your business credit situation is, your financing needs are not the same as every other small business. We don’t take a one-size-fits-all approach to fund working capital since every business operates differently and has different cash demands. We take the time to understand your business model, your goals, and your overall financial situation. We work with you to develop a customized solution for your business funding needs. We understand the importance of cash flow to the long-term success of your business and we are committed to providing solutions to help you succeed.

Capstone is here to help. Let us work with you today to help you find the best solution to your cash needs without taking on more debt. Whether you are facing an immediate one-time cash need to secure a contract or you need a long-term solution to cash flow, contact our skilled team of representatives today and let us work with you to find the best options for your funding needs.

Infrastructure Investment and Jobs Act Funding Distribution Delays

14:56 22 July in Blog, Business Funding

2021 Infrastructure Investment and Jobs Act Funding Distribution Delays

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

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

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

Contractors Hurt by Slow Funding Distribution

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

What Caused the Delays in Funding?

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

Complex and Archaic Funding Methodology

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

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

Federal Funding Legislation Issues

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

State and Local Delays

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

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

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

What Actions Can Contractors Take?

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

Contact state legislators and governors

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

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

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

Project Funding Through Capstone

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

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

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

Funding Strategies For Businesses To Weather a Recession

16:15 05 May in Blog, Broker Resources, Business Funding

A growing number of business leaders and economists have warned that the U.S. is headed for an economic slowdown or possibly even worse, a recession. Are your clients prepared?

Surging inflation is driven by a tsunami of fiscal stimulus from Federal and state governments, and supply-chain constraints resulting from pandemic restrictions have made it necessary for the Federal Reserve to begin tightening the money supply and increasing interest rates.

The Russian invasion of Ukraine made matters worse by precipitating a leap in prices for energy, agricultural commodities, and metals. The Fed will probably need to tighten faster and harder than initially anticipated. Economic pundits have begun to reduce forecasts for economic growth and start discussing the possibility of the “R” word.

The time to prepare is now. Financial brokers can use the following strategies to help small and mid-sized companies plan ahead to weather a recession.

Accelerate Cash Flow

The key to surviving a recession is cash flow management. In a recession, cash flow is often reduced due to a number of things including customers stretching their accounts payable to conserve cash. As a result, business owners may experience a deceleration in their own cash flow and may have to use available credit facilities. Having high accounts receivable balances outstanding for an inordinate amount of time can be detrimental to the sustainability of a business. A double hit to cash flow and available credit can seriously impair a business owner’s ability to meet its financial obligations. Accelerating cash flow with invoice factoring through a factor company, such as Capstone, can help to reduce this dual impact.

Invoice factoring accelerates cash flow by speeding up the transaction cycle. Instead of waiting 60+ days for customers to pay, business owners can convert their outstanding invoices to immediate cash. They will have more cash available to fund operations and reduce the need to draw down available credit facilities.

Avoid Slashing Key Programs and Personnel

When an economic slowdown occurs, it is common practice for businesses to cut operating costs in order to conserve cash. A mistake many businesses make, however, is cutting key sales, marketing, and product programs. These programs are the link to customers as well as the marketplace, and the source of future growth. Cutting key programs may cost business owners much more in the long run than they will save in the short run.

The pandemic spawned a change in the labor market making hiring and retaining personnel a major challenge for many businesses. Cutting headcount to reduce operating costs and conserve cash should be carefully evaluated to avoid recruiting costs and problems hiring people that may delay ramping up when the economy recovers.

By resisting the urge to implement drastic cuts in these areas, business owners will be able to position themselves to capitalize on the recession and potentially scoop up market share that competition left behind through their cost-cutting.

Increase Working Capital Facilities

Adequate working capital and the right type of facilities are also critical to weathering a recession.

If a business owner needs additional working capital, they should apply now. The Federal Reserve’s monetary tightening and interest rate increases, combined with the possibility of a recession will make it more difficult if the business owner delays. In a tight monetary environment, banks and other traditional financial institutions tighten their credit requirements and favor larger customers while reducing their credit exposure to small and mid-sized companies.

Work with a Factoring Company

During a recessionary period, smaller community banks and other traditional financial institutions may not be able to provide adequate working capital because of lending limits. Also, many businesses may find they will fall outside the acceptable risk threshold to access and retain lines of credit as well as more traditional business funding from these sources. Let the prospective client know that you may be able to help in the event they are unable to qualify for increases to existing credit facilities or new facilities.

While these financial sources prefer to lend to businesses with only positive financial performance, stable cash flows, and predictable revenues, factoring companies, such as Capstone, can often work beyond these issues and provide funding based on the quality and financial strength of a business owner’s accounts receivable. Many businesses also often require faster approvals and access to funds than banks and other typical lenders can offer. Because of these obstacles to obtaining traditional loans, business owners should consider business financing alternatives, such as invoice factoring and P.O. financing.

Invoice factoring and P.O. financing won’t tie up availability and can be used to supplement existing credit facilities. They are easier to obtain than bank loans, and the terms are more flexible. Alternative financing facilities can be custom-tailored to meet a client’s business requirements. More importantly, approval is based on the financial strength of the prospective client’s customers, instead of the business’s credit profile.

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Business owners can survive a recession and be in a position to take advantage of opportunities by implementing the above strategies now. They will also avail themselves to more funding options when they are not operating in crisis mode and when the financial health of their business is at its strongest.

Whether we’re simply seeing an economic slowdown or a full-fledged recession, Capstone is here to help your clients stay focused on what they do best – running their company. We have the experience and resources to custom-tailor invoice factoring and P.O. financing programs for your clients.

Is Invoice Factoring an option when starting a company?

12:24 23 April in Blog, Business Funding

Every new business hopes to join the ranks of those famous unicorns that turn profitable right out of the gate. Sadly, most startups fail to meet this goal. Even worse, the best concepts often struggle or even fail within the first few years.

According to research cited by SCORE, almost all budding companies wrestle with cash flow problems — and problems with cash flow management represent the almost universal plague that leads to new business stumbles and even failures.

These startups may have succeeded at bringing ideas to market and even attracting customers; however, 82 percent of failed new businesses just did not have enough funding to grow or, in many cases, keep operating. And for just these kinds of startups, invoice factoring could provide a solution to improve cash flow in ways that would lead to thriving, growing young companies.

Yes, startups should consider invoice factoring as a new business financing option. Find out how invoice factoring will significantly improve cash flow, how it works, and if it’s the right solution for all startups.

How Invoice Factoring Empowers Startups

The most basic kind of invoice factoring refers to selling accounts receivable to a third party. In other words, startups can convert their unpaid invoices into immediate working capital.

New businesses won’t have to wait days, weeks, or even months for their customers to pay invoices. In turn, they can use this money to service more customers, develop new products and services, pay operating expenses, expand marketing, or in whatever way best suits their goals.

Some highlights of the benefits of invoice factoring for new businesses include:

Credit building capacity: Factoring can help establish a credit record for a business. Generally, a new company has no existing credit record making it more difficult to establish lines of credit, negotiate additional payment time with suppliers, and negotiate new contracts. Since factoring depends on the creditworthiness and financial strength of the startup’s customers, it is a great option that allows the business to meet debt obligations promptly.
Streamline collections: Collecting payments can be stressful, but not with a dependable factoring company. Since the factoring company will be in charge of chasing customer payments, the startup can invest its time in more meaningful activities.
Minimize risk for payment: Many non-recourse factoring companies take the credit risk away from the business. In this structure, they will shoulder all the risk of credit default once they purchase the invoice.
Improve cash flow: The business can offer their customers credit and still invigorate cash flow by getting immediate working capital from invoices.
Factoring is flexible: Businesses have options when factoring their accounts receivable. They have the opportunity to include all eligible customer invoices or select a few customers because they have extended payment terms.

How Does Invoice Factoring Work for New Businesses?

Capstone offers flexible factoring options while eliminating hassles. That means startups can start enjoying the benefits of better cash flow and improved efficiency right away. This list explains all the steps involved in invoice factoring a common, flexible solution for startup businesses:

Invoice customers as usual for goods or services rendered.
Complete an easy application and approval process to get started.
Submit copies of invoices (or any type of progress billings) along with required documentation on the receivables chosen for invoice factoring.
Enjoy an immediate advance that usually amounts to 70 to 80 percent of the total invoice value, depending upon the agreement.
After the customer pays, receive a rebate for the remaining balance, minus modest factoring fees.
Repeat when needed.

What are the Best Businesses for Invoice Factoring?

In general, invoice factoring can provide the best solution for companies doing business with creditworthy customers but have delays in cash flow because of a time gap between invoicing for goods or services rendered and getting paid. Other typical characteristics include:

Working capital strain due to insufficient credit lines from banks and suppliers
Immediate growth opportunity with a product, customer, project, or market share
Sells finished goods or services to creditworthy buyers
Losing sales and missing sales opportunities
Backlog of orders or jobs
Trade cycle of 60 – 150 days, or more

How to Find the Best Financing Solution for a New Business

Capstone provides essential funding requirements to emerging and growth companies. Take a moment to learn more about Capstone’s flexible options for new business invoice factoring.

Invoice factoring helps new and established businesses manage cash flow and work more efficiently. New companies can discuss their needs and concerns with a Capstone representative to choose the best financing option for their unique situation.

Contact Capstone by email or phone to tell them more about your business needs and goals, so they can help you choose the perfect option.

Making the Most of Your Finance Network With Invoice Factoring

07:46 24 March in Blog, Business Funding

Most small and mid-sized business owners know someone who offers financing options. When you are running a business, there are occasional times when keeping up with cash flow needs feels like an impossible hurdle to overcome. Companies understand how long it takes to apply for and gain approval for a traditional bank loan. Since your lines of credit are often needed to ensure you have materials for future orders, what other options do you have to get the cash you need quickly? Factoring is the answer — invoice factoring is one of the easiest and fastest methods of getting a quick infusion of cash into your business.

Tap Your Financing Network

If you are like most business owners, you either know someone who offers short-term financing, or you are working through a broker who handles short-term loans. If you are working with anyone who provides this type of financing, you should ask them about invoice factoring and how you can take advantage of it for your immediate needs.

What Factoring Can Accomplish

When you are facing a cash crunch because orders are fulfilled but unpaid, you may not know how to get the cash you need. Invoice factoring can help you meet your immediate cash needs without entering into debt you will have to repay later.

First, you decide which invoice or invoices you want to factor. Then you or your financial broker have those invoices vetted by a factoring partner and within a few days, you have the cash you need to meet your obligations.

The best thing about finding the right factoring partner is you retain a great deal of control over your accounts receivable. For example, if you decide to work with Capstone, you are not committed to factoring all of your invoices. You determine which invoices you want to use, we vet them, and we send you the agreed-upon amount upon approval. Yes, it is really that easy.

You do not need to continue to attempt to run your business from job to job. Instead, you can take advantage of factoring options and accelerate your cash flow starting today. Please email us at [email protected] or call us at 347-410-9697 and let us help you create a customized plan that enables you to reach your full potential.

Working Capital for Landscapers

07:08 19 March in Blog, Business Funding

Landing a contract with a municipality, condo development, or a commercial property owner to maintain their grounds is exciting. However, imagine you learn that receiving payment on that contract could take 30-90 days. You might now be wondering how you are going to pay your staff, make sure you have the equipment you need for the job, or meet your other financial obligations. Spot factoring may help you solve that problem by increasing working capital for landscapers quickly.

Using Purchase Orders and Invoices

Once you have landed a large contract for landscaping work or you issue your first invoice, waiting up to 90 days for an infusion of cash may seem untenable. After all, you have to pay the people you hire to meet the terms of the contract. And you may need to purchase additional equipment to ensure you can meet the required deadlines. Your purchase order or your invoice will convert to cash within 48 hours of submitting in some cases.

At Capstone, we take pride in offering contractors of all sizes options to meet their cash flow needs. We handle spot factoring of invoices, and we can also fund against a purchase order. Keep in mind that we understand your operation may be small, and you may be just starting out. The good news is we base our funding on the security of the company or municipality with whom you are doing business.

Growing Your Business with the Right Financing Options

One of the best reasons to do business with Capstone is that we offer fantastic turn-around times. We understand a bank loan can seem elusive. Once you have submitted all of the paperwork they require, it could take six to eight weeks or more for approval, and several more weeks before funding. Most banks do not want to deal with small contractors. This can hamper your ability to grow your business and take on new contracts. The funds provided through the programs we offer enable you to bid on more significant contracts. You can proceed feeling confident you will have the necessary capital to complete the job.

For more information on Capstone products, please email us at [email protected] or call us at (212) 755-3636 to speak with a financing representative today. Let us find a customized solution to help you meet your contractual obligations and help grow your business.

How Subcontractors Can Leverage Client Invoices

07:47 17 March in Blog, Business Funding

As a subcontractor, you are typically waiting to be paid until other people finish a specific task on a project. This can cause painful delays in getting invoices paid, making meeting your accounts payable obligations difficult. However, you may be able to leverage client invoices by taking advantage of factoring.

Subcontractors often face challenges taking on large jobs because they lack the needed capital to purchase materials. This can be a significant issue as this challenge can stifle growth. However, if you are working with a contractor who has a bond in place to secure the completion of the project, you could leverage client invoices.

Cash Flow Improvement by Factoring Client Invoices

One of the challenges many subcontractors face when they are bidding on jobs is having the cash available to secure the materials necessary. This can be problematic when you are trying to grow your company by bidding on larger jobs. Because banks and other financial institutions are reluctant to make loans to a subcontractor, you may not know where to turn. Factoring client invoices can be the right solution.

When you secure a job, your contractor likely had to place a deposit and a bond with their client. The result is the contractor is guaranteeing completion of the project, as well as guaranteeing payment for your portion of the work. You can leverage this by using spot factoring — selling your invoice to a factoring company.

Selling Invoices One at a Time

Common concerns about factoring include the possibility of forfeiting your right to pick and choose which invoices you factor. However, when you work with Capstone, we allow you to make the decision whether you factor a single invoice or multiple invoices. We will spend the time needed to understand what your goals are, how much cash you need to bid on the next contract and design a financing package that helps you reach your goals.

The goal at Capstone is to help you accomplish your business goals by making sure you have the cash flow you need. Contact one of our highly trained representatives today at (212) 755-3636 or via email at [email protected] and let us answer your questions about how our products can help your business.

Leverage Client Credit to Maximize Cash Flow

07:59 04 February in Blog, Business Funding

Businesses often face significant financial challenges. Startup costs, hiring employees, use of contractors, and expenses with growth can quickly mount. As a result, companies often have a lower than expected credit rating. They may find it challenging accessing new lines of credit, despite meeting all of their financial obligations. Did you know you can use client credit to improve cash flow?

The lack of ability of a business owner to secure new lines of credit can cripple a company. Not only will it face obstacles to growth. It can often mean they will be unable to bid on more lucrative contracts. They simply lack the financial backing to fulfill the initial terms of the agreement. Additionally, businesses with little savings and staggered cash flow often miss out on opportunities presented by vendors to take advantage of lower costs of credit by paying their outstanding invoices at a discount with early payment.

A business with poor cash flow may not even be able to complete the projects or contracts they have taken on. When this occurs, it destroys the reputation of the business and future business opportunities diminish quickly.

Each of these circumstances can lead to additional cash flow problems and can keep a business from growing. They create situations where a company is only meeting its current financial obligations to employees, vendors, and clients. This is the time when business owners should consider the potential of leveraging their clients’ creditworthiness.

Maximize Cash Flow Without Negative Credit Implications

Leverage matters in business. Whether you are negotiating a contract, working with a contractor, or finding a consultant, the more information you have at your disposal, the better your opportunities for successful negotiations. Leverage also works when you are considering your financing options.

Some company owners fail to realize they can leverage their clients’ credit standing to help improve their own credit. This maximizes their cash flow and avoids incurring additional debt. Specifically, a company has the option to take their client invoices and turn those invoices into immediate cash. However, it is also possible to use the creditworthiness of a client to help improve other forms of financing. This includes obtaining lines of credit.

Lines of Credit and Strength of Leverage

Larger contracts that are not supported by your balance sheet may necessitate a line of credit. Bringing on additional investors can dilute your portion of ownership. Rather, you can apply for a line of credit based on the creditworthiness of the contract which you agree to. This means the stronger your client, the more likely you are to gain approval. For example, some small and disadvantaged businesses may have access to lucrative government contracts. However, because of the size of the business, they may not have a balance sheet that proves they can meet the terms of the agreement. Leveraging the strength of the contract of the U.S. government can provide access to lines of credit or other financing options.

This type of leverage does not just apply to those who are eligible for government financing. Staffing agencies, construction companies, and other firms that have contracts with top companies have an opportunity to use those contracts to increase their cash flow immediately. This is where Capstone comes in.

At Capstone Capital Group, LLC we understand the struggles company owners can face when trying to grow their business. A vicious circle begins nearly immediately. You need capital to meet your day-to-day obligations, but you also need access to capital to help facilitate that growth.

Capstone takes your growth seriously. Our representatives are well-versed in various markets, and we take the time to understand your company goals. Once we have a complete understanding of your goals, we can help put a custom financing package together. One which fully leverages the creditworthiness of your clients and helps put you on a path to continued company growth. To learn more about Capstone and the programs we offer, contact us at (212) 755-3636.

You can also email [email protected]. Let us help you find the right financing program to meet your needs, including improving your cash flow.

Fund Large Orders with PO Financing

07:59 28 January in Blog, Business Funding

Nearly all companies, regardless of size, want to grow their business. Accepting orders can help you grow your business. However, if you lack the capital to fulfill the order, this can be problematic. At a minimum, large orders require an expenditure of capital to purchase supplies. Large orders may require a business to hire new staff members or purchase equipment, often an issue. What many business owners overlook is the potential to access the capital they need through purchase order financing.

What is Purchase Order Financing?

Purchase order financing or funding is a commercial loan option that some businesses turn to for necessary capital while growing. Generally, this type of financing is considered short-term and does not have a negative impact on the balance sheet of a company.

Companies typically use purchase order funding in specific business categories including:

• Distribution Businesses
• Import and Export Businesses
• Manufacturing Businesses
• Wholesale and Reseller Businesses

Other businesses may overlook PO financing, including concrete, landscaping, HVAC, and plumbing contractors that may be eligible. Staffing agencies may also find that the new purchase order they are considering is eligible for PO funding. Anyone who is considering providing any type of deliverable, with a pay period of 60 to 90 days, may have the option of using PO funding.

The basis for this type of innovative financing is that once a business has a qualified purchase order, it can borrow money against the terms of the PO. It can then use those funds to provide upfront payments to suppliers, ramp up production schedules, or meet other financial needs.

Advantages of PO Financing

Business owners who are interested in growth must be able to bid on larger orders and have the means of fulfilling those orders. PO funding means a company can get the working capital it needs to support increased sales efforts. This increases product availability and provides more favorable credit terms to its customers.

Another distinct advantage of having the ability to borrow money against a large purchase order is you can more effectively compete with other businesses in the same field, regardless of size. For small businesses that are seeking ways to “stand out” from the competition, the ability to bid on large orders can make a big difference.

Effectiveness of Purchase Order Financing

Too often, a small but growing business lacks the necessary capital to take on large orders because it does not have the required cash flow to meet the customer’s terms. This can stifle growth. Unfortunately, these same businesses may not have access to lines of credit or have the ability to borrow money through their bank.

Purchase order funding allows a company to take on a larger contract because it does not have to borrow money. Instead, it is getting the financial benefits of the new agreement.

Time from Application to Funding POs

Unlike traditional bank loans, companies can obtain purchase order financing in a relatively short period of time. Capstone’s process for PO funding means your request could be approved in just a few business days. Once approved, the time to wait for financing could be as little as three business days. This is a far different timetable than banks where funding your loan application could take weeks or months.

As a small or mid-sized business, you often do not have the required capital on hand. You don’t always have access to the capital you need to bid on larger contracts or to take on large orders. Because of this lack of funding, you could lose your competitive edge. Rather than bypassing growth opportunities, contact Capstone by email at [email protected] or call us at (212) 755-3636. Let us help you take advantage of larger orders, which can help you accelerate your company growth.

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.