Funding Your Startup

The Pros and Cons of Funding Your Startup through Credit Cards

20:38 06 October in Blog

Is funding your startup through credit cards a viable solution? After all, not every aspiring entrepreneur is lucky enough to qualify for a business loan. We’ll tell you the risks of funding your startup with credit cards and some alternative strategies you can explore.

Tempting Low Cost

In some cases, for $5000 to $10,000 you could launch a startup and it can be a tempting motivation for using credit cards. Several successful startups have gotten their start this way, including the Tropolis group. In the recent economic climate, many starting entrepreneurs find themselves without the collateral to start a business, and credit cards seem to be the only option. However, building a business that relies on funding from clients can be risky when using credit cards, because a late payment from a client can lead to a late credit card payment. Interest payments could accrue.

Organization is Key

Funding your startup through credit cards also requires a high level of organization if you want to keep your debt low. To ensure you do not get in over your head with debt, you’ll have to pay the credit card bills in full every month to avoid accruing interest payments. It may seem like common sense, but organization skills are key to remaining out of debt – it’s easier said than done.

Transitioning to Sustainable Funding

Even if you’re starting your business by relying on credit cards, your long-term strategy needs to change. You should plan to rely on revenue from customers. Using credit cards to fund long-term infrastructure, or even salaries for employees is a good way to end up in debt. Pay off your debt. Potential investors are not keen on seeing it.

Ultimately, the choice is up to you. Just know that there are better options out there, like purchase order financing and trade financing, both of which are available at Capstone.

For more information on lending options that are tailored to your business needs visit our homepage. Check back in on our blog from time to time for more industry news and analysis.

Purchase Order Factoring

Is Purchase Order Financing Good for Business Loans?

21:37 22 September in Blog

Even if you don’t qualify for a traditional business loan, there are options out there. Purchase order financing is just one of them. As you’ll see, certain kinds of businesses might want to make purchase order financing their first choice. We’ll tell you what it is, how it works, and what kinds of businesses should make it their first choice for lending.

What is Purchase Order Financing? 

Let’s say you’ve got an interested client, but you don’t have the funds to fill their order. For growing businesses, that first big order is incredibly exciting. It’s the kind of thing that can propel you from startup territory into a stable business. If you don’t have the money to fill the order when it is placed, purchase order financing is what you need.

Purchase order financing is an advance that allows business owners to make an important transaction, fill a shipment, or deliver a service. And a contract guarantees that the business owner will use part of the returns from the transaction, shipment, or service to repay the advance.

How Does it Work?

Here’s what you’ll need to do to qualify for purchase order financing.

1.    Obtain a verified purchase order or contract from the customer.

2.    Estimate the amount it will cost you to fill the customer’s order.

3.    Present the verified purchase order or contract to Capstone as collateral

4.    If approved, you’ll receive a contract from Capstone and get the funds to fill the order

5.    Once the goods or materials are delivered, and the customer has paid, you repay the premium and any pre-arranged interest.

Below are benefits of purchase order financing and examples of businesses that tend to use it instead of traditional minority business loans.

Benefits of Purchase Order Financing 

●    Technically, purchase order financing isn’t a loan, meaning it will not appear on your company’s balance sheet.

●    Your supplier will be paid, and your customer will receive their goods when they need them.

●    Purchase order financing allows small businesses to fill lucrative orders and establish working relationships with large customers.

●    Purchase order financing does not require A-1 credit.

What Businesses Benefit from Purchase Order Financing?

Some companies will find purchase order financing incredibly convenient and profitable. It is popular with manufacturing and shipping businesses with credit-worthy customers who have large orders to fill. The expected profit margin from the order should be at least 20 percent.

If purchase order financing sounds like the right fit for your business needs, visit the Capstone website. If you’re interested in any other kind of loan, check out our blog.

Regulators Rethink ‘Too Big to Fail’

19:18 03 October in Blog
“Too Big to Fail Banks” (TBTF) has a nice ring to it if you are a banker, but many struggling citizens are demanding tougher regulations on the members of the Federal Reserve System (FED). The United States is considering increasing the surcharge for being part of the FED. Some of this mirrors public anger over the High Street banks of London and the Occupy Movement against Wall Street banks of New York.
 

Bank Profits Up 

In September 2014, FED Governor Daniel Tarullo announced that central banks were contemplating charging higher rates for member banks. This is occurring in an environment with the following characteristics: record bank profits, concerns over taxpayer bailout funds, admitted financial fraud, and economic turmoil. The banks have become a popular target for outrage.
Let us start with the Federal Reserve System. Most people don’t realize that this is a private organization, and it is not a member of the United States government. Yet, it has been given control over issuing the Federal Reserve Note (also known as the United States Dollar).
If that wasn’t enough of a conflict of interest, when the Federal Reserve member banks ran into financial problems, they received a bailout from the US taxpayers. This act increased the level of congressional oversight and scrutiny. After the bailout, these banks enjoyed record profits. Now, the top six (6) American banks control nearly 60 percent of the gross domestic product of the United States, leading to monopoly concerns.

Luxury Tax on Banks 
 
Major League Baseball has a luxury tax on the teams with the largest salaries. The Federal Reserve is considering a similar proposition. Tarullo told the Senate Banking Committee: “We’re all trying to come to grips with what we really need in order to provide more assurance that these firms (top banks) do not threaten the financial system …” Analysts are lamenting that the same problems in 2008 that nearly led to the meltdown of the entire global banking system remain in 2014.
Global regulators have listed 29 banks (including eight in the United States) whose failure could lead to serious macroeconomic distress in the worldwide economy. For example, JP Morgan Chase Manhattan (JPM) may be forced to increase its capital requirements by 2.5 percent of its assets. Many fear that the balance sheets of the top banks remain woefully under-capitalized. The top banks had the biggest surcharge to avoid a repeat of TBTF bailouts.
As regulators continue to target banks, access to small business and working capital loans are sure to suffer as a result. Capstone Capital Group, LLC understands these concerns and offers various business finance options, including Purchase order factoring, “Single-Invoice Factoring,” which functions as a safer alternative to traditional, and oftentimes unpredictable, bank financing. Our underwriting guidelines are simple, straightforward, and not subject to stringent regulatory oversight and control. 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. Give us a call today to find out how we can help you.

Deceptive Headlines: Read the Fine Print

19:30 06 February in Blog
A headline from the Money & Investing section of The Wall Street Journal on January 30, 2014 was “U.S. Banks Start to Ease Limits on Lending”.  What a casual observer would glean from such a headline is that the banks are open for new Business Loans.  The article starts out very hopeful by describing how the new bank lending standards will “underpin” economic growth.  As the data illustrates the positive trend of underwriting standard easement, the reporter waits until the very end to point out that “The trend extended to credit-card, auto and large corporate loans…”
Ironically, large corporate borrowers are the ones fortunate enough with access to the corporate bond market for long-term inexpensive debt capital.  These borrowers have no need for Bank Loans unless they are making an acquisition or have a short-term borrowing need that was not accounted for when budgets were formulated for the upcoming fiscal year. 
Most readers of this blog are small business owners.  Small business owners end up being the ones with very limited options when it comes to Bank Financing.  Typically under pressure for immediate financing, these businesses are more likely to be rejected while going through a bank’s underwriting process for a multitude of reasons related to risk, balance sheet, and other financial issues.  Undoubtedly the first and foremost priority of banks is compliance with banking regulators which is discouraging to these enterprises.  The demographic relies on second tier financing companies like Capstone Capital Group, LLC to help with Working Capital and Contract Funding requirements.
The article goes on to say that small businesses have been hesitant to borrow because of uncertainty related to the Affordable Care Act and rising taxes.  On the contrary, most companies want to grow regardless of the regulation coming out of Washington D.C.  The reason why Small Business Funding have been trending down is that more and more banks are not able to offer them.  As a consequence, Alternative Financing has been the driving force that is providing working capital to small businesses.  This financing comes in the form of Factoring, Purchase Order Funding, and Trade Finance solutions.  Clients who are able to use these funding and financing techniques are growing and thriving regardless of the economic environment.  It is one of the true bright spots in the uneven economic recovery we have all experienced from time to time over the last six years as we run our business operations and try to grow.

Download: Infrastructure Investment & Jobs Act – Contract Opportunities and Funding Analysis

Capstone Capital Group wants your business to take full advantage of the contracts available through the Infrastructure and Jobs act recently signed into law.

Download

    Logo

    Submit your information to be directed to the download page.

    Privacy & Terms