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.

Businesses Reluctant to Spend - Capstone

Businesses Reluctant to Spend, Report Says

16:57 29 April in Blog

In a time when consumers are holding their funds close and avoiding spending, a recent report found that businesses are being even more cautious. These findings are likely to weigh heavily on Federal Reserve officials as they consider raising the Federal Fund Rate, despite the fact that they recently decided to delay any increase until at least June.

Business Spending Faltering

Aside from orders for aircraft and defense-related goods, business investment declined by 2.4% in the first quarter of 2016. That means that many companies are reluctant to buy staples like electrical appliances, computers, equipment and heavy machinery. These numbers are reflective of a somewhat bleak economic picture: productivity is low, demand is weak at home and abroad, wage growth is weak, and the global economy is experiencing increased volatility as China’s production slows down.

Earnings Season and Poor GDP Growth

On April 28th, the Wall Street Journal’s prediction of 0.7% first-quarter GDP growth was proven incorrect, and the number rung in at just 0.5%. This bad news came in the wake of earnings disappointments for several major U.S. companies—most notably Apple. Some economists are noting that after years of constant growth, the U.S. economy is bound to plateau. The question remains whether this is a broad market correction or the beginning of a prolonged downturn.

Reasons for Optimism?

One bright spot in the economy is the job market, which has posted steady gains over the last several months. Oil and gold prices have rebounded dramatically in the first quarter, though credit for these recoveries can be attributed to a weakening dollar which inflates their value. Though new orders for durable goods would be expected to rise with a weakening dollar, a recent Commerce Department report found that new orders rose just 0.8% in March—the majority of which were for aircraft and defense-related goods.

Increase Working Capital with Capstone

For qualified clients, we provide the single invoice 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 factoring. To learn more, please visit our homepage.

Sluggish Start Becoming a Pattern for U.S. Economy - Capstone Financing

Sluggish Start Becoming a Pattern for U.S. Economy

18:45 15 April in Blog

Sluggish Start Becoming a Pattern for U.S. Economy - Capstone FinancingThe U.S. economy’s sluggish start to the year is validating the wait-and-see approach the Federal Reserve has taken with raising interest rates.

Business investments, constrained by falling corporate profits and diminishing exports, and held back by the strong dollar, have both played their role in the disappointing start to 2016.

Spending-cautious American households are doing their part to stymie growth. According to figures released by the Commerce Department, retail sales dropped 0.3 percent in March. It was the third straight month without gains in retail spending.

Is This Just a Typical Slow Start?

It’s not uncommon for the American economy to lag behind projections in the first quarter of the year. Gross domestic product (GDP), one of the key measurements of overall economic success, either fell or grew at disappointing rates in both 2014 and 2015. Second, third, and fourth quarters brought much better returns the last two years, and many expect the same to happen in 2016.

Forecasts for the Rest of 2016

GDP forecasters believe the economy will resume recovery throughout the rest of 2016, but growth rates are not expected to be strong. J.P. Morgan Chase has predicted a growth rate of 0.2 percent, while Nomura says 0.7 percent and Macroeconomic Advisers 0.9%.

Following a 1.4 percent growth rate in the closing month of 2015, which itself was viewed as a disappointing figure at the time, Fed officials are likely to remain on the cautious path they’ve already been traveling with interest rates.

In December, the central bank raised the benchmark rate for the first time in nearly 10 years. They have stopped short of further changes due to financial market volatility and global uncertainty. These external forces play a bigger role than domestic economic growth in affecting the central bank’s decisions moving forward.

Some Positive Indicators

The labor market has been one source of good news for the economy. Directly following a lull, more than 1.5 million jobs were added over the past six months.

Boost Working Capital with Capstone

For qualified clients, we provide business funding solutionssingle 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.

Winners and Losers from Fed Rate Increase - Capstone Financing

Winners and Losers from Fed Rate Increase

18:32 22 December in Blog

Winners and Losers from Fed Rate Increase - Capstone FinancingThe last seven years have been painful for consumers, homeowners, small business owners—indeed for all Americans. The financial crisis of 2007-2008 was the worst economic downturn in the United States since the Great Depression in the 1930s. It was caused by a number of factors, including a burst housing bubble, the selling of high-risk financial products, regulatory failures, and the drying up of bank and insurance liquidity. The result was thousands of closed businesses, evictions, and foreclosures, as well as a decline in consumer wealth in the trillions of dollars. Globally, the Great Recession was the worst financial disaster since World War II. Throughout it all, Capstone worked with small businesses to provide financing when they needed it most. Today, we’ll tell you what you need to know about the Fed increase.

Fed Interest Rates

In response to the recession, the government enacted legislation like the Dodd-Frank Act and lowered interest rates. As of December 16th, the Federal Reserve made it official that it is raising key interest rates for the first time since 2006. With the Fed creating a new Federal Funds rate target of 0.50%, all kinds of lending will be affected, from business loans to auto loans, mortgages, and credit card rates. Many are wondering how the long-anticipated rate increase will affect small businesses. Who are the winners and losers? The lending experts here at Capstone would like to give their two cents.

The Winners

When it comes down to it, the winners are the big banks. They will charge more interest for their loans, but not pass on the increase to any of the savers. Savers are unlikely to receive any significant difference in the interest paid to their accounts. The investment firm Charles Schwab Corp., for example, made $1.8 billion in net interest revenue over the last year. Net interest revenue refers to the difference between interest earned on lent assets and interested paid on deposits. With short-term interest rates higher, companies like Charles Schwab are likely to see a huge increase in net interest revenue. When interest rates were low, big money-market fund players like Fidelity, Goldman Sachs, and Morgan Chase & Co. were forced to eliminate many investor fees—resulting in hundreds of millions of dollars in losses. If the rate continues to rise over the next year above .50%, many in the money-market fund industry would be able to remove the damaging fees.

The Losers

The stock market has been falling in recent days. Liquidity in the market was already on the decline prior to the interest rate adjustment, and now it’s likely to decline even more. The losers are those who invest in equities and long-term bonds. Some also predict that the increase will negatively affect homeowners with mortgages, but this is probably overstated. Mortgages are long-term loans, and they are more heavily affected by economic growth and inflation expectations than short-term rates.

Working with Capstone

Capstone works with small businesses, subcontractors, licensees, and distributors with accounts receivable factoring, PO financing, and trade finance solutions. We have a diverse array of underwriting strategies that allow us to lend based on the creditworthiness of our clients’ customers, not our clients. For more information, please visit our homepage.

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.

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