Minority Contracts: How they work and getting funding

09:08 01 July in Blog, Business Funding

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

What is a minority owned business?

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

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

Obtaining minority contracts

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

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

Cash-flow issues plague many businesses

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

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

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

Understanding Invoice Lending and How it Works

01:32 09 May in Blog, Business Funding

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

How Invoice Lending Works

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

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

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

Time to Obtain Funds

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

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

Collections of Balance Due on Invoices

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

What Type of Companies are Eligible?

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

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

Improvement in Cash Flow

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

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

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