Funding Solutions for Bank Turndowns and Loan Workouts


Funding unlocked for bank turn-downs and commercial loan workouts. Capstone understands the the financial components and transaction structures associated with turndowns and workouts so we are focused on providing capital to our clients when they need it most.

That’s Where Capstone’s Funding Comes In.

  • Easy
  • Immediate
  • Flexible

The recent bank failures, finance regulations, Federal Reserve interest rate increases, and an ever-changing economic climate are impacting lending practices all across the country.

Lending from U.S. banks and other traditional financial institutions has decreased significantly resulting in more bank turn-downs and loan workouts. This has left many small to medium-sized businesses in distress as they seek out alternative business funding solutions.

For financial professionals looking to help their clients manage these issues, one practical strategy is invoice factoring.

Invoice Factoring as a Solution for Commercial Loan Workouts and Bank Turn-Downs

For businesses that have been placed in workout, invoice factoring through Capstone can provide the liquidity to expedite the repayment of the bank or lender while accelerating the growth of the business.

Factoring allows businesses to convert their unpaid accounts receivable invoices to immediate cash rather than wait for them to be paid or have to chase collections. This provides access to instant cash flow to pay off outstanding loans or lines of credit and provide working capital for your customers.

Invoice factoring is also an alternative funding solution for businesses that have had their loan applications turned down, such as when someone is a new business or has a poor credit history. Since factoring is based on their customer’s credit — not theirs — even companies with risky credit profiles may still be eligible for invoice factoring.

Opportunities for Financial Institutions and Their Clients

As reported by the financial news cable networks and the Wall Street Journal, banks and other financial institutions are very likely constrained in their ability to underwrite and originate new loans.  They have less flexibility in situations where a loan is classified as in workout and are less willing than ever before to add collateral reserves to their balance sheets to keep classified loans in their portfolios.

As such, they are being forced to turn down loan applications, call loans early and reclassify riskier loans as workout loans in order to meet stress test requirements under the Dodd Frank too big to fail legislation.  Because of the mismatch in long term interest rates with current interest rates, banks are not willing to sell off poorly performing loans at a loss as that could jeopardize their solvency.

For many businesses, this means they will need to find alternative funding sources for working capital until banks loosen their credit requirements again. Finding a replacement lender may be difficult because most traditional banks are tightening their credit criteria, and taking on a borrower in a workout at another bank will only make it more difficult to pass stress tests. These business owners need support and professional financial advice from someone skilled in these situations. 

In these cases, placing a borrower with an alternative funding source, such as Capstone, which is not subject to the same restrictions as banks is a more viable solution. Capstone can fill that gap and help make sure your clients get paid. Invoice factoring can be a mutually beneficial solution for both banks and loan-workout clients. Valuable banking relationships can continue with reduced risk, while the client benefits from the cash flow generated from factoring their accounts receivable.

Discover new ways to
fund your business

Through the utilization of a factoring facility, bank loans or lines of cred can be paid off and the client will have the cash flow to stabilize their business or sustain operations. Invoice factoring also provides businesses with immediate access to the cash flow they need, without a lengthy application and approval process.

Capstone Make Invoice Factoring Easy

With Capstone, the process of applying for factoring is easy. We’ll need to review a few key pieces of documentation from your clients, such as:

  • the credit worthiness of your client’s customers
  • A current accounts receivable aging report
  • A copy of any loan documents or credit agreements with current bank or lender
  • Any amendments for forbearance agreements (if applicable)

This information lets us quickly determine whether we can help your client.

Clients can pay off their loan or line of credit and continue to use factoring in the future if they wish to fund working capital. Once set up, the process is simple:

  • The client submits an invoice or progress payment as work is completed.
  • We verify the invoice.
  • We immediately advance the amount of the invoice minus a small reserve.
  • When the customers pay us, we rebate the reserve, less the factoring fee.

This process ensures the business will always have the cash on hand to continue operations and help them through rough patches with defaulting on loans. As the client grows their business and resolves their situation, many businesses can emerge financially stronger and may be candidates for traditional lending services.

Factoring with Capstone can alleviate risky loans and workout situations, ensures the banks or lenders get paid back, and provides future opportunities for all.

Contact Capstone Today

Contact the invoice factoring experts at Capstone to review your portfolio, understand the options, and see how we can help your bank workout group.

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