Banks Threatened as Lending Leaders - Capstone Financing

Banks Threatened as Lending Leaders?

16:21 07 December in Blog

Since time immemorial banks have been the default institution for lending, but online lending sites, together called FinTech companies, are now posing a threat to bank’s hegemony.

FinTech Companies a Legitimate Threat to Banking?

Though there are many FinTech enthusiasts, some believe this is simply a phase that will fizzle out, much like the peer-to-peer lending craze did several years ago. The difference between FinTech companies and peer-to-peer lenders is that FinTech companies get their funding from institutions rather than individuals. This makes them legitimate marketplace lenders.

Others think fintech companies are here to stay. Marketplace lending has expanded rapidly in recent years. According to the Harvard Business School, the portfolio balances of online alternative lenders have doubled every year since 2005. In 2014 alone, they lent $7 billion to individuals and $5 billion to small businesses.

Where is it Headed?

All signs point to the trend of alternative loans continuing. LendingClub, a leader among FinTech companies, plans to lend $7.6 billion in the coming year—about as much as the previous eight years combined. With demand high and alternative lenders taking just 1.1% of consumer-based loans and 2.1% of small-business loans, there’s lots of room for growth. Despite these promising numbers, FinTech companies face rising sales-and-marketing expenses as they try and take on the big lenders like Morgan Stanley and Goldman Sachs Group.

Banks to Compete with Alternative Lenders

Traditional lenders aren’t simply going to let FinTech companies creep in on their share of the marketplace. Big lenders have shown willingness to compete for credit-card loans. They’ve also invested significantly in marketing to tech-savvy consumers who would be drawn to FinTech lenders. FinTech detractors predict that the unprecedented growth of marketplace lenders will slow by 2017. Many FinTech companies have lowered their rates despite increasing demand, which is a sign that traditional lenders are gaining back some of the market share.

Choosing Capstone for Alternative Sources of Funding

Demand for alternative loans is high because they fulfill a consumer need. Capstone provides small businesses, subcontractors, licensees and distributors with construction accounts receivable factoring, PO financing, and trade finance. Despite the pressure from big lenders, we’re confident there’s plenty of room in the marketplace for FinTech companies and alternative lenders like Capstone. We provide the flexibility that big lenders simply can’t offer. If you’re running a business and you need an advance of funds before an invoice is paid, Capstone should be your number one choice. For more information on our services, please visit our homepage.

Bank Loan or Invoice Finance

Bank Loan or Invoice Finance: What’s Best for You?

01:53 12 October in Blog

Bank Loan or Invoice FinanceHere is the situation: unexpectedly, you receive a huge product or service order. Besides the huge profit you’ll net by filling the order, you’ll also be establishing a business relationship with a desirable client. There’s just one problem: you don’t have the funds to buy the materials or pay your workers to complete the order!

Do You Really Need a Loan?

It’s in situations like this that business owners don’t hesitate. Nobody likes the notion of going into debt, but small business owners know that it’s part of the formula for success. The order is more important to the business’s future than going into debt. Taking calculated risk is what sets them apart from less enterprising individuals. The question is, should you get a bank loan or a get funding from personal invoice financing?

Bank loans are probably more common, but that doesn’t make them better. Until recently, taxis were the only way to get from point A to point B if you didn’t have a car, and hotels and motels were the only place to stay if you were in from out of town. There was a need in the market for alternatives, and Uber and Airbnb filled the niches. The same is true with single invoice finance.

Though bank loans are more common, single invoice finance offers some distinct advantages that you should know before making your decision.

Advantages of Single Invoice Finance

• Receive funding immediately
• Bank loans can take several weeks for approval, whereas single invoice finance can get you funds within 24 hours.
• Repayment is made by your customer
• Less paperwork
• Use only the invoice you are factoring for collateral
• Fewer fees
• Your credit is not important, your customer’s credit is important
• Once your customer pays the invoice, the contract is terminated.
• Won’t show on your balance sheet

Selling an invoice is selling money that technically belongs to you. It’s your asset, and therefore it doesn’t have to be noted on your balance sheet.

Get in touch with Capstone Capital Group and get in the game with factoring, funding, and financing. For more industry insights, read our previous blogs.

Invoice Factoring

Understanding Invoice Factoring

18:42 20 May in Blog

Invoice factoring is a common practice that enables businesses to receive immediate payment in exchange for selling accounts receivables at a discount to their face value. Once an invoice is“ “Factored” and it is time for the customer pays for a product or service, the payment is forwarded to the factoring company. One of the most significant advantages of factoring is that businesses can receive immediate cash flow with no additional debt that appears on balance sheets.  Therefore Factoring is an off balance sheet transaction. Factoring can also be advantageous for businesses looking to obtain initial working capital without having to demand immediate payment from their customers.

The Invoice Factoring Process

Factoring is a rapid process that usually takes less than 24 hours to complete. The factoring process starts after a business delivers a product or service and sends an invoice to their customer. A copy of the invoice is then sent to the factoring company, which will purchase the invoice in exchange for an immediate cash payment. Most factoring companies offer up to 80 percent of the invoice value with the balance going into a reserve account. Once the purchase of the invoice has been completed, businesses can have the money, minus nominal fees, sent directly to their bank account.

Advantages of Factoring

Many businesses choose to use factoring because it can provide a predictable, immediate revenue stream than can be used to fulfill an order. While many businesses request prompt payment, they can rarely expect it in the real world. Even when discount incentives are offered, many customers will still choose to pay later. These problems can be especially challenging for newly established businesses that struggle to convince customers that they can deliver. Businesses that use factoring can receive immediate revenue without having to demand upfront payment or incur excessive risks.

Additional advantages of factoring with Capstone include:

  • Insurance against customers that fail to pay.
  • No penalties for failing to meet a minimum invoice sales volumes.
  • No contractual restrictions on how funds can be used.
  • Practically unlimited financing that scales with business growth.
  • Additional working capital with no additional debt.
  • Take advantage of supplier discounts by paying early.
  • Add more value to customers though attractive payment terms.

How Factoring Affects the Bottom Line

Factoring fees are an average of about two percent, which many business owners argue can add up to a lot of money in the long run. In reality, most businesses that use factoring can earn several times more than the factoring fees that they pay. Studies indicate that a majority of businesses can scale their production capacity by more than 25 percent without increasing fixed costs. Since limited capital is the primary constraint for most businesses, immediate payment can enable businesses to operate at full capacity and earn several times more than the factoring fees.

Business Requirements for Factoring

As with any other credit service, businesses will need to be pre-qualified. Factoring services are only available to legal business entities that sell business-to-business services to governments or other companies. Businesses will need to have customers with good credit to qualify for a factoring service.   It is also important to have no outstanding invoice leans. Most businesses that meet these basic requirements can be approved to take advantage of invoice factoring services.

CFPB be Reformed by Neugebauer's Bill

Could the CFPB be Reformed by Neugebauer’s Bill?

14:50 25 March in Blog

CFPB be Reformed by Neugebauer's BillOver the past few years, there have been attempts to change the composition of the Consumer Financial Protection Bureau (CFPB), even its name. Now, a new bill might truly pass Congress.

Introduced by Republican Representative Randy Neugebauer for the state of Texas, H.R. 1266 would create a five-member commission structure to lead the CFPB, which is currently headed by Director Richard Cordray.

Neugebauer’s proposed bill lays out the framework for creating a bipartisan commission leadership structure. Included in the bill is a provision that no more than three commissioners can be members of one political party. This is so that there are not coinciding vacancies when terms end.

Additionally, Neugebauer’s bill readjusts CFPB executives’ pay to the federal scale as well as creates an official seal for the agency. There is also a proposal to change the name of the CFPB to the Financial Products Safety Commission.

Much support has already been garnered for Neugebauer’s bill. The legislation was introduced with 20 initial co-sponsors, all Republicans and all members of the House Financial Services Committee, on which Neugebauer serves.

A coalition of banking and business groups including the American Bankers Association and the U.S. Chamber of Commerce expressed their support in a letter that read, “We believe that a five-member commission, as Congress originally intended, will better balance consumer access to financial products with the need to ensure a fair marketplace.”

Because Republicans control the Senate, a bill passed by the House is expected to pass even without Democratic backing. However, a coalition of more than 300 interest groups is in strong opposition to the bill, defending the CFPB.

Capstone Capital Group, LLC has eliminated the bank red tape by offering small to mid-sized businesses Single Invoice Factoring (“Spot Factoring”). Businesses can now get the immediate cash they need in exchange for working capital from Capstone Capital Group. For more information on Capstone’s Single Invoice Factoring call us today at (347) 821-3400.

Promising Numbers Mask True Problems for Big Banks

19:38 30 October in Blog
A recently released report on the economic conditions and earnings of big banks seem to paint a picture of stability. However, a more plausible interpretation would attribute it to stagnation and the difficulties that lie ahead. Overall, investors see a rather unimpressive rate of return in terms of equity. Meanwhile, among the big banks, Citigroup came out slightly above expectations and J.P. Morgan Chase and Wells Fargo slumped a little in the third quarter.


Wells Fargo’s returns fared somewhat better, which is mostly due to the nature of banking versus more volatile capital markets. Even with this advantage, returns still didn’t live up to those from the year before, which were almost a whole point higher. J.P. Morgan, on the other hand, has hit a plateau at a 10% return rate, casting a more negative shadow on the recent numbers. Conversely, Citigroup looked strong in many areas. They even registered profits through legacy holdings and downsizing, but still only managed a 6.5% return.


Analysts have pinpointed several reasons for this lackluster performance.  J.P. Morgan and Citigroup both still face legal challenges in the midst of the global slowdown. Also, interest rates have remained extremely low while demand for loans has remained steady.  All this as regulations and the required amounts of capital have gone up. 


Some experts cite these facts as proof that this reflects a permanent shift in returns that investors can expect in the future. Of course, banks also have to conform to stress tests performed by the Federal Reserve, which makes them less flexible than firms in other industries. Other macroeconomic factors don’t seem to bode well either, as new mortgages issued at J.P. Morgan, Citigroup and Wells Fargo fell by 14%, 51%, and 40%, respectively.


Trading in certain commodities and currencies has generated some growth. But these mostly signify slightly less anemic banks as opposed to strong ones. Some hold out hope for increased rates in the near future, although many investors have become restless due to the impact of current low rates on net interest margins.


Banks are still finding growth opportunities hard to come by without higher returns. Price-to-book multiples for J.P. Morgan and Citigroup have averaged 1.07 and .076 times, respectively. So, for the time being, the only solution for banks is to rely on cutting costs and looking for gains elsewhere. Despite the initial appearance of the numbers, they really just show that sometimes silver clouds have dark linings.

As the major money center banks continue to adjust their operations to Dodd-Frank’s lower earnings environment, cost cuts translate into less personal service.  For small business owners, less personal service means a higher likelihood that their loan applications will be processed automatically through computer software. Thus, removing any discretion from the loan approval process.  Capstone Capital Group, LLC., on the other hand, provides the personal service of an old time banker and does not rely on the credit of its clients to make their credit decisions.  Capstone relies on the credit of its client’s customers to determine whether or not they will get the working capital they need.
As the Feds continue to scrutinize and further regulate the activity of Big Banks, and with interest rate increases looming in the future, small to midsized business loans are becoming increasingly more difficult to obtain.  What is a business owner to do if he or she needs working capital to make payroll or expand operations?  Capstone Capital Group, LLC has the solution.  We have been helping small to mid-sized businesses for years obtain the necessary working capital they need to sustain and grow during uncertain economic times without all the red tape you normally get from most banks.
 
Capstone Capital Group, LLC specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group.  For more information about our business funding solutions and how we can help your business grow and succeed, give us a call today at (212) 755-3636, or visit our website at www.capstonetrade.com.

 

Capstone Wishes You a Safe and Happy 4th of July!

18:51 03 July in Blog
The 4th of July is dedicated to honoring our great nation and taking the time to appreciate and celebrate our independence and freedom.

 

Thanks to all of our loyal customers and partners, we continually work together to help this country thrive. Together we build, fund and grow better businesses that benefit our economy and our country as a whole.

 

Look to Capstone Capital Group, LLC, to help your business start, grow and thrive. Capstone prides itself as a factor whose objective is to help its clients succeed. Our partnership, along with optimism and dedication in our free market society, is the catalyst which spurs economic growth and a more prosperous U.S.A!

 

Thank you for your continued loyalty and support. We wish you all a safe and happy 4th of July!
For more information on how to partner with Capstone, please email [email protected] or call (212) 755-3636 to speak with a representative today.

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.

Let the Borrower Beware

20:38 29 May in Blog
Capstone Capital Group, LLC prides itself on providing funding for its clients that run viable businesses but are in need of working capital and will grow as a result of funding.  Unfortunately, there are new lenders who pop up every day to take advantage of the latest trends in high yield lending that do not always have their client’s best interests at heart.

 

The most recent trend is called “Merchant Cash Advance”.  This segment of the lending industry dates back to the early 1990’s, but did not hit widespread acceptance until about five years ago.

 

When the Merchant Cash Advance business began, it was a method of providing liquidity to retail businesses that did not have significant assets that could be pledged to a bank in exchange for a line of credit.  The idea was to make an advance to a business in exchange for an assignment of the credit card receipts that were typical for the business.  For example, if a restaurant had monthly sales of $500,000 and needed $300,000, the Merchant Advance lender would structure a payment of $15,000 to $17,000 twice a week for 12 to 16 weeks.  These payments did not starve the company of its cash flow and as long as business was consistent and stable, the business owner who could not get a loan anywhere else had access to a willing lender.  If all went well, the lender would be paid back and the restaurateur could return to the lender at a later date and borrow again.  If the lender was not paid back, the company would be pursued by the lender to the extent the lender thought it prudent. With this method, more than the entire portfolio losses on one account could be covered by gains on many other accounts.

 

18 years later the business has now morphed into a high risk high return lending process with full recourse.  In the Sunday Bergen Record, the newspaper highlights the trials and tribulations of borrowers who fall prey to unscrupulous lenders in this market.  Like all businesses, there are those who operate ethically and those who are only in it for the money.  The Bergen Record article highlights what the pitfalls are of getting in bed with the bad apples of the industry. The article also explains why so many companies are entering the space and what their backgrounds might be.

 

Capstone Capital Group, LLC prides itself as a factor whose objective is to help its clients grow.  Unlike the merchant cash advance companies, we are able to factor sums from millions to hundreds of thousands with no personal guaranties or the pledging of real property, automobiles, etc.

 

Capstone specializes in Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Single Invoice Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group, LLC.

 

The next time you are looking for business funding solutions, be careful.  Our process may take five business days while theirs only takes one hour, but we will help you grow your business through our funding process.  Depending on whom you contract with in that business could mean the end of yours.

 

 
For more information on how Capstone can help, please email [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.

Let the Games Begin!

19:00 01 May in Blog
The Federal Reserve (“Fed”) has now entered into its fourth month of reducing the impact of quantitative easing on the economy. 
The original theory behind quantitative easing was that if the Fed purchased bonds, it could sustain lower interest rates for borrowers. Therefore, more companies would borrow, which in turn, would help the economy with import finance.  Once small businesses started borrowing, they would expand their plant and equipment, hire new employees and have more profit.  However, the theory of quantitative easing did not work that way in a practical sense. 
What actually happened was the banks lent the money they could borrow from the Fed back to the Fed by depositing funds with them in return for an interest rate with no risk to their capital, unlike a small business loan. These business funding solutions were done at such high levels (i.e. tens of trillions of dollars) that the banks have been able to restore their capital base without having to pay any interest to their depositors (we don’t consider a quarter or one percent per year interest to a saver “interest”.) 
Without banks having to pay significant interest rates to their depositors, there was no driving force to encourage the underwriting of small business loans and take the risk.  The Fortune 1000 and companies of the sort that were cash rich over the last six years could borrow all they wanted from banks. However, those companies decided to go to the bond market where they could negotiate better terms. Because of this, the banks made loans to this group of companies and very few of the companies actually needed the loans and thus did not down on their credit facilities.
Because of the reduction in quantitative easing, the pundit and economists are projecting a mere 3.5% growth for the economy.  The Fed is lowering its quantitative easing by $10 billion per month (no typo here.)  The theory is that the banks will now begin to make small business loans because the Fed is no longer their biggest customer.  Interest rates will start to tick upward so the banks can price the new small business loans commensurate with the change in credit from the Fed to the mom and pop operator around the corner from your house.
But just in the nick of time, Dodd-Frank banking regulations have become effective which require the banks to do the exact opposite of what the reduction of quantitative easing should bring to the economy – growth.
Dodd-Frank is also known as the “Too Big to Fail” legislation.  This legislation was designed to reduce the impact on taxpayers when banks take risks with their depositor’s money.   Just when the Fed took a step to help the economy, Dodd-Frank will be applying the brakes again to small businesses.  For this reason, we have been trying to reach out and explain why factoring your accounts receivable with Capstone Capital Group, LLC to generate working capital is a step forward to accomplishing your business goals for 2014 and beyond

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