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.

A Case Study From Capstone

A Case Study From Capstone

22:07 18 February in Blog

A Case Study From Capstone

Through the use of Capstone’s unique funding programs, our clients take advantage of opportunities that would otherwise be lost as a result of being undercapitalized. One of our most recent success stories is an interior design firm that was the successful bidder for a Fortune 100 pharmaceutical firm. They required a renovation of the electronic skylight shades for the employee cafeteria.

See Our Current Case Studies Here

The challenge our client faced was a lack of credit, which made the matter a COD transaction. Because the transaction size was in the six-figure range, the client would have had to forgo the opportunity entirely, were it not for access to capital.  Prior to receiving the order, the client applied for a funding facility with Capstone Capital Group, LLC.  When the order was received, the client was entered in our system and we began assisting them immediately.

Long lead-time was another client concern. The order was placed in early November with a late January installation date.  The COD terms required a significant sum of money to be tied up for about 90 days if the terms were kept at COD.  Capstone entered negotiations with the custom shade manufacturer with the client’s participation and arranged for credit and payment terms that were acceptable to all parties. In the middle of January, the shades shipped to an authorized installer’s warehouse as part of the transaction negotiated by Capstone.  Following a few pre-installation meeting with managers of the physical plant, the shades were delivered to the site. The old shades were demolished and remove and the new shades were installed.

As a result, the work was completed and accepted by the Fortune 100 Company, fulfilling the contract between our client and their customer. The client billed the account, Capstone factored the invoice and in March, Capstone will make final settlement with the interior design firm.

The key points to take away from this case study are as follows:
-Capstone client receives six-figure interior design contract and needs capital.
-Capstone client on COD terms for entirety of project with vendors.
-Capstone works with client to create liquidity and structure a PO Finance transaction to create credit with all vendors.
-Custom goods are ordered.
-Custom goods are received, demo is completed, and new shades are installed.
-Work is accepted and completed by Fortune 100 customer.
-Customer is billed.
-Invoice is factored, retiring the PO advances.
-Client receives working capital.
-Accounts receivable is collected.
-Client receives profit.
-100% leverage, 100% of the time.

Capstone Capital Group, LLC provides clients with the capital they need to fund projects. For years, we have helped organizations get the immediate cash they needed without the typical red tape that most banks require. For more information about Capstone and our Single Invoice Factoring, give us a call today at (212) 755-3636 and speak to a representative.

Here Comes the Surcharge: Big Banks Dealt another Regulatory Blow by the Feds

21:09 20 November in Blog
Here Comes the Surcharge: Big Banks Dealt another Regulatory Blow by the Feds
In another effort to reduce the risk of “too big to fail” banks and financial institutions, the Federal Reserve plans to hit the largest of U.S. banks with an expensive new regulation.  Accordingly, Federal regulators intend to impose a surcharge on the largest U.S. banks requiring them to maintain a fatter cushion in order to protect them from potential losses. The version of the surcharge proposed by the Feds will be tougher than the one international regulators agreed to. 
Additionally, when determining the size of the new capital surcharge, the Fed will penalize those banks that heavily rely on volatile forms of short term fund, such as overnight loans.  By implementing these measures, some of the larger U.S. banks may need to increase their capital cushions beyond those of their international rivals.  The move has led some to wonder if Washington is putting U.S. banks at a competitive disadvantage.  The exact amount of capital needed by big banks has yet to be determined.
Banks have added substantial capital since the financial crisis and, at present, are currently subject to many new regulations. The exact range for their capital surcharge hasn’t been settled on by the Fed.  However, they are considering a range that extends a few percentage points higher than the top range of 2.5% of risk-weighted assets imposed by international regulators.  It’s quite possible U.S. banks could face surcharges as high as 4.5%.
According to regulators, by raising the capital requirement amounts for firms that pose the greatest risk to the U.S. financial stability, the Fed intends to improve these firm’s resiliency.  What is at issue is the requirement that the world’s largest financial institutions hold an additional layer of padding in case of another financial crisis.  While the details of the Fed’s proposal on specific banks are not yet clear, firms with large broker-dealer operations, like Goldman Sachs Group, could potentially face increased capital charges under the Fed’s plan.  This is because such firms rely on large short-term loans to finance client activities.
Firms like Goldman Sachs and Morgan Stanley count such short-term liabilities as more than one-third of their liabilities. Both firms have indicated in regulatory filings that they are maintaining enough capital to meet international surcharge requirements.  The U.S.’ plan to enact a higher surcharge shows the latest move by Washington to boost the banking system by requiring Wall Street to protect themselves against losses. As a bonus, regulators adopted additional rules requiring banks to hold safe assets that they can sell for cash if they need to. 
It is not clear how many U.S. firms will be required to raise additional capital to comply with the United States’ tougher surcharge requirements, and some of the larger banks declined to comment. However, it is clear that larger U.S. banks will argue the surcharge is putting them at a competitive disadvantage. 
As the Feds continue to further regulate the banking industry, loans to small and midsized businesses become increasingly more difficult to obtain.   Capstone Capital Group, LLC can assist you.  We have been assisting small to mid-sized businesses in obtaining the required working capital they need to grow and thrive, and have been doing it for many years.
Capstone specializes in Single Invoice Factoring (“Spot Factoring”) for businesses in need of immediate cash. For more information about our Spot Factoring product and how we can help your business grow, contact us today at (212) 755-3636, or visit our website at www.capstonetrade.com.
 

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