Get By With A Little Help From Your Friends
Big Firms Fill Funding Gap was the headline on April 22, 2014’s CFO Journal section of The Wall Street Journal. The article confirms our predictions that the unintended consequence of Dodd-Frank is the reduction of capital available for small companies. The article describes how large companies who rely on smaller companies are financing their expansion of plant and equipment to supply their larger counterpart with goods under a long term supply agreement. Typically, the supply agreement provides the capital to payback the loan made by the larger company to the smaller company.
The article goes on to describe how accounts receivable factoring has become a mainstream method of financing the working capital needs of small business. At one time, factoring was a financing methodology only used by desperate companies. Dodd-Frank has changed all of that. At Capstone Capital Group, LLC we have seen our factoring business grow exponentially over the last 18 months.
One of our factoring clients has made a great case study that proves the benefits of both factoring and a large company financing a small company. The company is located in the Midwest and is a co-packer for fresh and frozen bakery products for major name brand food products companies. Last year, the company entered into a new contract with a multi-billion dollar company. Our client did such a great job as a co-packer their client came to them and offered to purchase equipment that would enhance their production facility. Our client’s management agreed and the food company made an interest free loan for the new equipment which will be paid back over 18 months. The payment plan requires no money, just a discount off of the case price of a product they will sell to their customer. The incremental increase in business each year will be a minimum of $2,000,000 per month. That is a home run.
There are no strings attached. Our client can produce a similar product with a different recipe for other clients. This, combined with the invoice factoring program we have put in place, has enabled the company to increase its employees, operate more efficiently and increase their gross margin.
In business, there are times when out of the box solutions are necessary to accomplish your goals. Factoring with Capstone Capital Group, LLC may be the out of the box solution you need to get you to the next level. Once your customers see the direction you’ve set for your business, they too will offer out of the box solutions to increase your business and create benefits for both of you. Start Spot factoring your receivables today and continue to pursue your business goals. Once you have committed them to paper one way or another you will find out how to attain them even if it is with a little help from your friends.