Stake for Small Business Owners this Election Season

What’s at Stake for Small Business Owners this Election Season

19:40 29 June in Blog

Stake for Small Business Owners this Election SeasonU.S. presidential elections are a marathon, not a sprint, and this race has been exceptionally grueling—both for the candidates and the public at large. But more concerned than the average U.S. citizen are small business owners, who have responded to the uncertainty by delaying new hires, forgoing new equipment orders, and avoiding all but the most essential investments. We’ll tell you why confidence is slipping and what small businesses can do to buck the trend.

An Unprecedented Election Season?

Every presidential election captures the nation’s attention, but this year’s race seems to have no precedent. Whereas most Americans tune into the race after the primaries are over and the Republicans and Democrats have chosen their respective nominees, both parties saw unconventional candidates challenge the status quo during the primaries and capture the attention—and votes—of millions. Now that the primaries are over and Donald Trump and Hillary Clinton are set to face off in the general election, the future and the direction we’re heading remains as unclear as ever.

Small Business Owners Uncertain

According to a survey conducted by the Wall Street Journal and Vistage Worldwide Inc, one-third of business owners report that uncertainty over the coming election is negatively impacting their business.

Though small business owners are responding in different ways, the overarching theme is this: they have opportunities to grow their businesses, but they’re hesitant to spend the money. It’s not just the election causing concerns—there’s also global concerns, like the recent exit of the U.K. from the European Union, which threw global markets into a brief tailspin and the tenuous state of the Chinese economy. Closer to home, there’s also uncertainty over the timing and impact of future interest rate hikes.

Small-Business Confidence, by the Numbers

Given the picture we’ve just painted, it’s no surprise that small-business confidence fell to its lowest level since November of 2012 this month. Even industries that consider themselves ‘immune’ to political drama, like real estate, construction and development, are seeing activity dwindle. In the end, small businesses off all types face higher cost of capital than their larger counterparts, and that’s why they bear the lion’s share of the burden when uncertainty prevails and consumers reduce spending.

Luckily, there are several tools that small businesses can use to seize opportunities for growth—regardless of the prevailing political and economic climate.

Capstone Helps Small Businesses Boost Working Capital and Grow

For qualified clients, Capstone provides purchase order factoring, single invoice factoring, and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

How to Grow Business in an Unnatural Economy - Capstone

How to Grow Business in an Unnatural Economy

21:58 15 June in Blog

How to Grow Business in an Unnatural EconomyStalled growth, disappearing jobs and a sense of foreboding are the defining characteristics of today’s economy. So, what or who is to blame? According to one theorist, the process of “creative destructions,” whereby the death of one business or industry gives rise to another, is failing. We’ll tell you why it’s happening and show you how Capstone’s single invoice and full-contract factoring allow businesses to grow along with demand, avoid taking on additional debt, and improve their balance sheets organically—even in an economy stuck in limbo.

The Numbers

A sobering job report released earlier this month showed the creation of only 38,000 new jobs —124,000 fewer than had been predicted — which is the lowest monthly total since September 2010. Furthermore, the Bureau of Labor Statistics reported that 94,708 Americans were not participating in the labor force during the month of May, bringing the participation rate to 62.6%.

A Limited Recovery

There’s no doubt that we’ve recovered from the Great Recession. The stock market has been on a 7-year bull run—although it has been tested recently. If you’ve tuned into the rhetoric coming out of the presidential race, you’ve heard the conviction that the recovery has been rather one-sided—that the gains of the last 7 years have benefitted a select few while the majority of the population has been left on the sidelines. No matter where you stand politically, the notion of a limited recovery seems to be supported by an analysis of Census Bureau data.

A Tale of Two Counties

According to the Census Bureau, the net increase of new business establishments is just 2.3% since 2010. Compare that with a 6.7% net increase during the 1990 recovery and a 5.6% net increase during the 2000 recovery. What’s worse—over half of the 166,000 new businesses formed in the United States since 2010 are located in just 20 counties. In short, a select few geographic areas are prospering, and the rest of the country is losing businesses and losing jobs at an alarming rate.

Aggressive Oversight and Misplaced Regulation

Touted as the culprits of the financial crash, banks and financial institutions, the drivers of growth since time immemorial, have been forced to tighten their lending requirements. The unintended consequence, of course, is that businesses’ traditional sources of credit have dried up. An enduring irony of the Dodd-Frank Act, which among other things was designed to limit the size of financial institutions, is that its burdensome requirements have actually forced many small community banks out of business—making the Big Banks BIGGER, not smaller.

If a lack of funding weren’t bad enough, businesses are now contending with rising federal regulatory compliance costs and state licensing requirements. And here the bitter irony continues. The new wave of regulations have disproportionally harmed small businesses—the symbol of the American Dream and American industriousness—not the large corporations the regulations were meant to control. A report ordered by the U.S. Small Business Administration found that the per-employee cost of federal regulatory compliance was $10,585 for companies with 19 or fewer employees. Companies with 500 or more employees, by contrast, paid an average of $7,755 per employee to stay compliant. Added to compliance costs are a rapidly multiplying number of state and local licensing requirements. 5% of employees required certificates or licenses in 1950. Today, the number stands at 30%.

A Metaphor for our Economic Ecosystem

There are many apt metaphors that describe what’s happening to the U.S. economy, but one of our favorites has to do with Smoky the Bear and forest fire prevention. Forest fires aren’t pretty, but they’re a natural and necessary phenomenon. They clear away the old, dead wood and give new generations of plants the space they need to grow. If the old, dead wood remains propped up for too long, the ecosystem ends up with less growth, less diversity, and a few individuals soaking up all the sunlight. And when a fire does finally come along, it’s much bigger and more destructive than it ever needed to be.

Boost Working Capital with Capstone

Capstone gives small and midsize businesses that are negatively impacted by Dodd-Frank and other constrictive legislation the working capital needed to seize opportunities for growth. For qualified clients, we provide single invoice factoring, construction factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage for more information.

Interest Rates Predicted to Rise - Capstone Explained

U.S. Economy Picking Up Momentum in Q2; Interest Rates Predicted to Rise

19:56 27 May in Blog

Interest Rates Predicted to Rise - Capstone ExplainedAfter another harsh winter, the American economy is stabilizing and beginning to shrug off concerns of a prolonged slowdown or recession.

According to the latest economic gauges, industrial production is increasing, inflation is firming, and the housing sector is continuing to pick up momentum. All of these factors, combined with data reflecting retail sales rebounds, job gains, and rising consumer confidence, point to improved — though still less than spectacular — growth potential for the second quarter of 2016.

Interest Rates

Fed officials afraid of financial market volatility and poorly performing overseas economies have kept a steady hand on short-term interest rates throughout 2016. A domestic growth rebound in Q2 could be just the inspiration they’ve been looking for to raise rates this summer. Their next opportunities come at the policy meetings scheduled for June, July, and September.

John Williams, President of the San Francisco Fed, recently told the Wall Street Journal that the data is starting to make a strong case for rate increases not just in June, but potentially more than once in the next few policy meetings.

Despite Positives, Some Forecasters Remain Cautious

First quarter 2016 gross domestic product (GDP) increased only 0.5 percent over Q1 2015, but growth might be poised to accelerate.

Since the end of the recession, Q1 GDP growth has consistently been weak, followed by a rebound in Q2. The latest reports of modest but definite growth in highly important sectors would suggest that the same pattern is about to repeat itself in 2016.

Macroeconomic Advisers, a forecasting firm, estimates that GDP will expand at a rate of 2.3 percent this quarter. The Federal Reserve Bank of Atlanta estimated an even higher growth rate of 2.5 percent.

However, it’s not all sunshine and roses. Despite all the positive data starting to roll in, many forecasters are still leery about the economy’s current health as well as its general outlook for the future. Earlier in May, a Wall Street Journal survey of economists revealed an estimated 20 percent chance of a recession taking place in the U.S. sometime in the next 12 months.

Boost Working Capital with Capstone

For qualified clients, we provide purchase order factoring, single invoice factoring and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. To learn more, please visit our homepage.

Novel Way for Subcontractors to Find Financing from Capstone

A Novel Way for Subcontractors to Find Financing

20:13 11 May in Blog

Novel Way for Subcontractors to Find Financing from Capstone2015 was a picture-perfect year for construction, a banner year for the post-recession. Yet in 2016, many contractors in the United States are struggling to find financing for construction projects.

The lack of financing has been a reality even over the past several years with the economy recovering by leaps and bounds. It was a reality throughout the housing crisis and even prior to the recession when construction and development were booming. Contractor business financing has been a struggle, but it’s clearly nothing new.

Banks’ Aversion to Construction Financing

Banks are perennially gun-shy when it comes to lending to construction firms. They cite the industry’s volatile revenue fluctuations, the unpredictable nature of construction, contractors’ sensitivity to economic cycles, and excess competition as reason to stay away. The recent failure of several prominent construction firms has only strengthened banks’ resolve to avoid offering lines of credit to construction firms, contractors and subcontractors.

Contractors & Underwriting Issues

Steady bank relationships are often out of reach for construction firms with a poor ratio of accounts receivable to accounts payable and limited liquidity in working capital. But when construction firms and contractors struggle to find financing, subcontractors tend to suffer even more. Banks are hesitant to allow subcontractors’ bonded accounts receivable to serve as collateral for lines of credit, and those who primarily engage in bonded work often find it difficult or impossible to provide additional collateral.

Is there any hope for subcontractors in today’s construction industry?

Factoring: A Solution for Subcontractors

Factoring is a finance technique that allows a company to leverage its accounts receivable and accelerate its working capital through the sale of its accounts receivable to a third party. Specifically, a factor gives a business an advance on a customer invoice — generally between 70 to 90% of the invoice amount – so they can create a backlog of work without equity or debt financing. As the company improves their balance sheet, they increase the likelihood of receiving a traditional line of credit from a bank.

Seize Opportunities for Growth with Capstone

For qualified subcontractors, Capstone offers contractor financing and provides a single invoice and full-contract factoring for work performed under contract with a creditworthy general contractor. Capstone has highly experienced construction professionals on staff to facilitate the purchase of construction-related accounts receivable. To learn more about our contractor business financing and other services, please visit our homepage.

Small Businesses, beware the “Advance-Fee Loan Scheme”!

21:04 05 June in Blog
The “Advance-fee loan scheme”, as the scam is more commonly known, has been around for years.  However scammers have recently intensified their efforts in part due to the current financial crisis in addition to tighter underwriting requirements in regards to small business loan financing created by Dodd-Frank (Too Big To Fail ) Legislation.
 
The scam is fairly straightforward.  By way of telephone, email or internet communication , these so called  “loan broker” con artists target small business owners and entrepreneurs by promising them they can secure a sizable business loan for them and all they have to do is pay the loan broker a fee “in advance”.  According to Alabama Securities Director Joseph Borg, businesses with $1 million to $50 million in revenue are the most common targets because under the new legislation banks have the most difficult time lending to these microcap companies. 
 
What happens next is that the small business owner will pay a substantial upfront fee up to the loan broker with a loan never actually materializing.  The small businessman is ultimately met with dozens of unanswered phone calls and unresponsive emails, with the con man eventually leaving town.  According to Federal Trade Commission (“FTC”), this type of scam has been happening with more and more frequency. In 2013, the FTC booked a record 53,833 complaints about advance-fee loans filed by entrepreneurs and consumers.  This number is up from 43,070 in 2012 and 44,504 in 2011. 
 
As mentioned above, these scams typically target desperate business owners who feel like they have no other options.  Paying a broker a fee in advance without any guarantees of success is not the wisest of business moves.  If you are a small business owner looking for additional capital and have been denied a loan by your bank, it is not the end of the world.  Alternatives, such as invoice factoring offered by Capstone Capital Group, LLC, exist which can provide you with the capital you need to get your business back on track and do not require the advancing of upfront fees with the hope your loan will be approved and funded, if at all. 
 
For more information on Capstone’s services, please email at [email protected] or call (212) 755-3636 to speak with a representative today.

Celebrating the 100th Anniversary of the Bronx

20:40 15 May in Blog
Claritza Wilshire, Business Development Officer at Capstone Capital Group, LLC attended the Sixteenth Annual Bronx Banker’s Breakfast.  The meeting was hosted by the Business Initiative Corporation of New York (BICNY) and BronxBorough President Ruben Diaz, Jr.
The meeting focused on revitalization of the Bronx’s economic activity and financial projections. The event was part of the several ceremonies commemorating the 100thAnniversary of the Bronx.
Capstone Capital Group, LLC attended with the following institutions: Citibank, Popular Community Bank, Rite Check, Capital One Bank, Hudson Valley Community Bank, Bethex Federal Credit Union, JP Morgan Chase, Ponce De Leon FSB, Spring Bank, Webster Bank, Wells Fargo, Apple Bank, Flushing Savings Bank, M&T Bank, Signature Bank, IDS Corporation, Monroe College, US Small Business Administration, SBDC at Lehman College and SCORE.
Capstone Capital Group, LLC is committed to supporting the development and redevelopment of Bronx infrastructure projects thru its funding programs.
Subcontractors who are winning bidders can rely on Capstone Capital Group, LLC factor programs to assist them in meeting their contractual obligations, working capital needs and supplier credit facilities.
Is it time for your company to partner with Capstone and arrange a factoring facility for your working capital needs? Call us today at (212) 755-3636 or visit our website at www.capstonetrade.com.
View our photos from the Sixteenth Annual Bronx Banker’s Breakfast:
Marlene Cintron, President of BICNY and Claritza Wilshire, Capstone Business Development Office
Bronx Borough President Ruben Diaz, Jr. and Claritza Wilshire, Capstone Business Development Office
Madeline V. Marque, VP of BICNY, Claritza Wilshire, Capstone Business Development Office and Ruben Diaz, Sr.

1st Quarter Self Assessment – Business Goals and Objectives

16:47 27 March in Blog
The end of the first quarter of 2014 is upon us. It’s time to evaluate your business goals and objectives against actual performance.If you wrote your goals down as was suggested in Are You Better Off Today Than You Were A Year Ago?, you have the means to objectively analyze where your business stands and what you achieved over the first three months of 2014.
If you exceeded your goals, analyze why:
  • Were you too conservative when you established them?
  • Did you line up your resources properly and did everything else fall in place?
  • Did you get lucky?
Fun fact: do you know what the definition of Luck is?
Laboring Under Correct Knowledge – people make their own luck by being prepared!
We advised on hiring retired executives to assist with growth plans, using temporary employees to fill gaps upon receiving that larger contract and lining up financing or funding through a company like Capstone Capital Group, LLC.With these three tools at your command, you should have met or exceeded your goals.

Reasons Why You Didn’t Reach Your Business Goals

For those of you who have not met your goals for the first quarter of 2014, let’s analyze why:
  • Were you overly optimistic about the establishment of your goals?
  • Did you line-up the proper resources to succeed and to accomplish the goals?
  • How close or far away were you from achieving your goals?
  • Did you line up the staffing and funding to support your growth for cash flow?
The key here is NOT to get discouraged but to be honest with yourself and fix the obstacles that are holding you back immediately.
Today Capstone received a call from a subcontractor, and we would like to share the story here:
Back in October 2013 when Capstone first met this subcontractor, we discussed the establishment of a funding facility through accounts receivable factoring to support his growth. He was anticipating the award of a few government contracts.This subcontractor was successful in obtaining the contracts and started the jobs however he has unfortunately run out of cash.
Part of this subcontractor’s strategy is the exact formula for success – he probably worked for several years to convince the general contractors to develop confidence in his ability to deliver. The contract awards were received and there was appropriate staffing for the project however he failed to line-up a funding facility.
Now, guess what his next move was? He called the office in a panic and asked how quickly Capstone could put a funding facility in place using his accounts receivable to factor. Capstone will move as quickly as possible to support him, but it’s more important to take a look at the added stress this subcontractor has taken on because he did not plan properly.
Construction and Professional Services jobs are leading the economic recovery. Many of Capstone’s clients are taking advantage of this growth. Where do you stand?

JOBs, JOBs, JOBs

17:12 13 March in Blog
Last Friday the US Jobs report for January 2014 was published.  The economy created 175,000 new jobs in the month of January.  Economists expected this figure to be lower because of severe weather throughout the United States.  If the figure was smaller, the typical cycle of the economy losing steam in the Spring would have been predicted.  This cycle of the economy losing steam each Spring has been going on for at least five years.
Economists are now predicting that the growth they projected for 2014 is sustainable and will continue throughout the year.  Let us hope that by the end of March they do not revise the January jobs number downward.  Typically, what happens is the job numbers are often adjusted negatively or downward 45 to 60 days after they are published.  This gives the economists the opportunity to revise their forecasts.  But more importantly, at this point who cares? 
How is your economy doing?  Our clients at Capstone Capital Group, LLC seem to be doing very well.  Each month we are setting records in terms of business funding solutions and new client origination.  Regardless of what the US Jobs report says (or their revised versions), our clients will grow substantially in 2014.
We are fortunate to operate in a micro economy where the macro economy has significant influence but it doesn’t stop those entrepreneurs who are constantly seeking out opportunities to attain their goals.  We continue to advocate that you should ignore the economic forecast lest they color your view of the opportunities that are within reach.  Last week we discussed “getting into the game” by finding a small business funding source to support your company’s growth and bid opportunities in Get in the Game!.  This week, the economic data supports that view and if you are too slow at jumping in you may get left behind.
Sarah E. Needleman writes a column called the Accidental Entrepreneur for The Wall Street Journal.  Last week she published an article entitled “When Banks Won’t Back Your Startup.”  In the article, she interviewed a company who availed themselves of a Factor because no other financial institution would provide funding.  Through the use of the factor, the company was able to cover operating expenses while waiting for customers to pay.  The company grew significantly and eventually raised $250,000 in investor funding. 
To quote the owner of the company “Factoring is an amazing strategy when you can’t go to a bank and you are trying to get a product out there.” 
To sum it all up, the economy is coming back, Get in the Game!, get some new contracts, and get a Factor to fund them  If you are a construction subcontractor we are waiting for you!

It’s the Economy, Stupid?

19:47 23 January in Blog

Everyday, depending on what consumers or employers are doing, the economy is either growing or contracting.  There are a few Economic Indicators or news announcements that you might be interested in following to come to your own conclusions: 
  1. The decision by the Federal Reserve (“Fed”) to either increase or decrease the Quantitative Easing (“QE”).
  2. Whether or not Congress or the President plans on not enforcing certain aspects of Dodd Frank,
  3. How your local Business Climate is reacting to the changing economic conditions in your region or area of operations.
The decision by the Fed to ease further or decrease their QE program is important because the program has had unintended consequences.  The original strategy behind QE was to increase the money supply to stimulate the economy.  Put simply, if banks had more money they would lend it to you, the small business owner. In turn these business funding solutions you to hire new employees and increase sales through which the economy would grow.  grow.  The reason why small business funding may have worked in the past (i.e. the early 1990’s) is because banks did not receive interest on funds deposited at the Fed.  Under the QE banks will receive interest on their deposits.  This has translated to no lending to the Small Business Community because lending to the Federal Governmentcomes without the chance of a default.  Small Businesses who take risks often default and are not as good credit risks as the Federal Government.
The “To Big to Fail Banks” are now lending to their guarantor and not to you.  These banks have been able to recover from the financial crisis without taking any risks.  During the same period of time in the early 1990’s the Prime Rate was 8% (per annum) and the Fed Funds Rate was approximately 3%.  Parking money at the Fed yielded negative 3% and lending to a good credit yielded 5%.  The banks made loans and the economy recovered all they way until 2001.  As a result of the stimulus the private sectorrecovery led to robust economic growth with limited (if any) budget deficits by the time President Bill Clinton left office.
Because the banks are lending to the Federal Government there is no inflation risk since all the excess liquidityis in the bank being borrowed by the Fed.  That’s good for a business owner and homeowner but not good for people planning to retire because more likely than not, they’ll have to go back to work to increase their nest egg or just cover living expenses.  This is why temp agencies have so many qualified candidates to hire to support the growth of your business.
When reviewing Dodd Frank headlines what you should focus on is the reserve requirements of the banks.  If it appears that the law will be amended to reduce the reserve requirements for small business loans then you could consider going back to the bank for financing.  However, you will still need audited financial statements and three years of profitable operations, personal guarantees and the rest.  You have to weigh the cost to you personally versus going to a finance company or Factor where the cost of capital may seem more expensive but the cost to you personally as the business owner is far less and there is less risk to your personal assets than at the bank.
Finally, how is the local economy doing?  Connecticut is considering developing a Port Authority,  Florida is creating a for-profit railway system, New York is building at least three new bridges,  the City of New York is in fear of being washed into New York Harbor and has initiated a $20 billion flood control plan.  I am sure if you read your local paper everyday you will find that there are significant opportunities available to you or your business.  Take a minute to cut out the article and call the reporter to ask them questions.  Who doesn’t like to talk about their work?  Contact whoever is in charge of the project; find out how you can help. 
The worst case scenario is that you prepare a presentation and you don’t get to participate in the original project it was intended for however the presentation can be utilized for a variety of other opportunities so another opportunity can be gained from poking around.  This could actually lead to multiple jobs.  Although the opportunities identified above all seem like construction projects, they need Supplies, Office Supplies, office space, etc. and they last several years.  You might not be able to change the direction of the economy, but you are able to change the direction of your company.  Set yourself up for success by working towards completing your business goals and use spot factoring to make progress by any means necessary.

Why “Big Banks” Are Turning Down Working Capital Lines of Credit at a Record Pace

17:42 19 November in Blog
Has your request for a Working Capital loan ever been declined or converted to a term loan restricting your ability to grow?  Many construction subcontractors who have expanded bidding opportunities are running into problems finding working capital due to significant restrictions put in place by the Dodd-Frank law.
Below is a  response Capstone Capital Group, LLC received from a global financial institution on behalf of a client for whom Capstone Capital Group, LLC was seeking a Limited Subordination Agreement (LSA) so that we could Factor their Construction Accounts Receivable and accelerate their working capital to pay essential expenses like rent and payroll in a timely manner.  All references to names or places have been deleted  to protect the privacy of the client and the “big bank”.

 

“The request has been declined based on the reasons provided below:
The subordination of the receivables mentioned in the attachment will diminish the overall value of our UCC filing as it requires us to take junior position to the Factoring company.  This relationship is already considered high risk as the line is currently in process of being termed out due to EW concerns (High Utilization, Insufficient Liquidity, and # of recent inquiries).  In addition further concern was noted due to recent review of financials indicating a decline in revenues between 2011 and 2012 with negative taxable income for 2012.”

 

This “big bank” response is typical in today’s banking climate.  Dodd-Frank, which created the “too big to fail” banking syndicate, has resulted in small businesses being frozen out of the working capital loan markets because they are deemed to risky.  Cyclical businesses are no longer welcome at America’s “big banks”.  Dodd-Frank requires banks who continue with these loans to put as much as 30% of the loan value up as cash collateral due to the loan’s risk rating.  Revolving credit facilities are being termed out, locking up the flexibility that many business owners need to grow their business and hire more employees.  Business owners in need of working capital seem to have limited options for obtaining working capital.
To help small businesses (or business owners) secure working capital in a manner that is compliant with federal law, Capstone Capital Group, LLC provides a LSA which only requires the “big bank” to subordinate only on an individual invoice-by-invoice basis.  Unlike the quote and typical subordination agreements, Capstone Capital Group, LLC does not seek subordination on all of the small business’ assets, only on a single invoice factoring, thereby maintaining the senior lien position for the “big bank” on all of assets of the small business.
Capstone Capital Group, LLC has observed that through the use of the LSA, our clients grow rapidly and are able to reduce the term debt owed to their bank ahead of schedule and in many cases in half the time. For more on this topic – check out our article from The Secured Lender Magazine – Debt Hangover Relief
Visit our website or connect with us on LinkedIn or respond below should you wish to discuss this further.

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