Number One Threat to Long-Term Economic Growth - Explained by Capstone

This is the Number One Threat to Long-Term Economic Growth

12:10 07 August in Blog

Amid positive job reports and a surging stock market, one factor still presents a major obstacle to long-term economic growth in the US: a persistent slackening of productivity. We are currently in the midsts of the longest downward slide in worker productivity since the 1970’s, an unfortunate asterisk that should accompany the latest round of job reports. It’s also likely to keep the Fed from raising interest rates any time in the near future.

Productivity by the Numbers

Productivity — the measure of what goods and services a worker produces each hour on the job — fell 0.5% at a seasonally adjusted rate during the second quarter, according to the Labor Department. That marks the third consecutive quarterly drop in productivity, the longest streak since 1979. What’s worse, the trend shows few signs of abating; productivity growth rang in at just 1.7% from 2007 to 2015, half that of 2000 through 2007.

Why Worker Productivity Matters

For business owners, the importance of worker productivity can’t be understated. The equation is simple: less productivity means more expenses and less profit. On a macro level, productivity is a key gauge in measuring wage growth, prices, and overall economic output — which have all been falling as well.

What’s Killing Productivity?

According to numerous studies, lagging productivity has several culprits. Among the most important are businesses unwillingness to invest in new equipment, machinery, and equipment — the raw materials that translate directly into job growth, wage growth, and gains in worker efficiency and productivity. While the exact cause of lagging productivity is difficult to nail down, it’s worth noting that fixed nonresidential investment, the meat and potatoes of business spending, has also dropped the last three quarters along with productivity.

That lack of investment has lead to a decline in new orders for nondefense capital goods on a year-over-year basis for much of the last year and a half.

What’s the Solution?

As we mentioned in our most recent blog, the majority of US manufacturers are small businesses — and many find themselves sorely lacking the working capital needed to invest in their businesses, jump-start productivity, create backlogs, and grow. As a low-risk remedy, manufacturers and other small businesses with strong demand for their products use invoice factoring to boost their cash flow. That’s where Capstone can help!

Grow Your Business with Capstone

For qualified clients, Capstone provides purchase order factoring, 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. Please visit our homepage or contact us directly for more information.

About US Manufacturing - Capstone Financing

4 Things You Didn’t Know about US Manufacturing

09:37 15 July in Blog

As we discussed in a recent blog, US manufacturing is alive and well—despite what many people may think. Following up on that piece, we are happy to give yet another positive update from the manufacturing sector.

The stars have aligned for US manufacturing in July, with domestic demand strengthening and offsetting the relative strength of the US dollar. US manufacturing activity hit a 9-month high in July, dispelling fears that the UK’s decision to leave the EU would hurt the already poorly performing sector. Factors that are boosting US manufacturing activity include a strong housing market, strong automobile demand, and solid consumer spending: all of which help to increase spending on manufactured goods.

US Manufacturing: Down and Out or Just Different?

It’s true that today’s manufacturing landscape is quite different from that of 1950. It’s even changed significantly since the year 2000, having shed 5 million jobs since the turn of the century. But what many people don’t realize is that it’s not only US manufacturing that’s being transformed. Technological advancements have made it possible to increase production with fewer workers. The end result is a strong (albeit much quieter) manufacturing sector that increasingly relies on tools like invoice factoring to increase working capital and expand business.

Surprising Facts about US Manufacturing

Here are four things you probably didn’t know about US manufacturing.

Most US manufacturing firms are small; 75% have less than 20 employees, and 99% have less than 500.
The US boasts 12 million manufacturing workers —9% of the entire workforce
The average manufacturing worker earned over $4 more an hour than the US average — $25.58 compared to $21.32.
Many manufacturing companies use invoice factoring to boost cash flow and expand their business

Boosting Working Capital with Capstone

For qualified clients, Capstone provides single invoice and contractor 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.

Novel Way for Subcontractors to Find Financing from Capstone

A Novel Way for Subcontractors to Find Financing

20:13 11 May in Blog

2015 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.

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.

A Case Study From Capstone

22:07 18 February in Blog

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.

Spring Brings ‘Spec’ Homes

21:54 03 February in Blog

Though winter is still upon us, builders are betting on a strong spring with speculative, or ‘spec’ homes. The construction of such homes is already underway with home builders getting a head start. Speculative homes are homes built without a buyer in place. The advantage of ‘spec’ homes to home builders is the assumption that the wind carrying recent sales will blow into the home purchasing season of spring.

Going into 2015, over 200,000 homes under construction or recently completed were listed for sale by home builders, according to the data released by the Commerce Department. This number is a 17.2% increase from 2014, signifying optimism amongst builders for spring home sales. Since June 2008, the sales of new homes this past December were the highest they’ve been.

With the Super Bowl marking an end to football season and a start to the spring home selling season, builders are prepping ‘spec’ homes for sale. As traction around selling speculation homes grows around March and April, more communities will be opened by builders for a promising spring home selling seasons.

Capstone Capital Group, LLC. Understands the importance of the spring home selling season and the growth it means for the home building industry. 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, purchase order factoring give us a call today at (212) 755-3636 and speak to a representative.

Bye-Bye, Branches-Branch Closures Signal Big Changes in Banking Services

15:23 26 November in Blog

As banking continues to go through changes and services become more electronic-based, bank branches are slowly falling off the map. Just under 2,600 bank branches have closed in 2014, while a mere 1,137 have opened. SNL Financial reported that 2013 saw a net loss of 1,487 branches while 2014 has seen a loss of 1,462 so far. In total, there are 94,752 branches in the US, leveling out to an overall 1.5% decline.

Acquisitions, mergers, e-banking services, regulation and many other factors have contributed to the slow decline of brick and mortar branches.

The following top five banks that have seen closures this past year:

· Bank of America (148 closures)

· SunTrust (60)

· BNP Paribas (47)

· KeyCorp (45)

· JP Morgan Chase (40)

It’s clearly noticeable that Bank of America has seen the highest number of brick and mortar branch closings. In the 3rd quarter alone, the company saw 41 closings. Bank of America is currently the second largest bank determined by deposits. It ranks third for branch numbers in the US. As of June 30, 2014, this number was 5,099.

As closures continue to sprout up across the board in virtually all areas of the US, many fear that the impact on neighborhoods and communities will be a significant one. The National Community Reinvestment Coalition stated in a report the “vibrancy of communities” relies heavily on the “critical services” that bank branches provide. The group noted that predatory lenders are just one of the many problems that arise in areas where bank branches close their doors.

Others believe that bank branch closings will only see a temporary decline. Banking analysts are confident that things will smooth over once the yield curve begins to expand, and the Federal Reserve regulates interest rate policy.

In terms of regional closings, SNL Financial reported that Chicago has seen the largest hit with 125 losses. Washington, D.C., saw the second most amount of closings, ranking in at 39.

Illinois, in terms of state closings, saw the largest loss. Ranked behind Illinois were Pennsylvania with 92 losses, Ohio (84), Michigan (75), and New York (70). In fact, only six states reported positive gains in the past year. Nebraska saw the most openings which totaled to nine.

While most banking services can be conducted online, there are still some things that community bank branches do which serve a purpose. Regardless of technology and mergers rendering a select few branches useless, the rest will continue to thrive and serve communities.

The banking industry has gone through many changes these past few years and continues to do so. Services that banks used to offer have changed significantly and have even been eliminated altogether. With regulators imposing ever stricter rules on credit, businesses are finding it more and more difficult to obtain loans they truly need. Capstone Capital Group, LLC has the answer. Capstone has eliminated the bank red tape by offering small to mid-sized business 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 (212) 755-3636.

The Fed’s Answer to U.S. Economic Growth: Let Them Have Loans-With Little to No Risk

15:27 17 November in Blog

In a recent move by Washington to stunt economic growth, Washington agreed to a two-step strategy. The first step involves Fannie Mae bringing back low and no money down mortgages. The second step would be to discourage business loans.

A few weeks ago, Mel Watts, the Director of the Federal Housing Finance Agency, discussed plans to bring back low down payment options for government backed mortgage loans. In some cases, allowing down payments as low as 3%. Mr. Watts also suggested other initiatives to expand credit that critics fear may lead to another real estate boom and bust scenario.

Additionally, the banking regulators and the Federal Reserve just approved new rules for “private” mortgage-backed securities. The proposal wouldn’t require underlying loans to have any down payment at all. In an ironic twist, the 2010 Dodd-Frank law was enacted to ensure that everyone has “skin in the game”. However, with the new rules enacted by regulators, it would seem no one is required to have any skin in the game. The new rules will allow borrowers to put no money down and will also allow them to have high debt-to-income ratios – as high as 43%.

The new rules will allow creators of mortgage-backed securities to bundle pools of the above-mentioned loans and sell them on the secondary market without having any risk of credit. Without any reform, investors would be duped into believing the risk isretained by the mortgage bond sellers and that these mortgages are safe.

In yet another part of the new rules, regulators forced risk retention for so-called leveraged loans. These loans are made by banks to heavily indebted companies. They do carry the risk which does not disappear when loans are bundled together. These bundled loans are what is termed collateralized loan obligations (CLO). What is even more surprising is that with these loans regulators mandated a 5% credit risk retention on the buyers of these loan pools.

While leveraged loans didn’t have anything to do with the financial crisis, the Fed’s reasoning for discouraging risky business loans is twofold. Along with the Fed’s campaign justifying “risk retention”, the new regulations may offset distortions in the credit market from experiments in monetary policy engaged in by the Feds.

Nevertheless, some experts believe the solution to all this would be to start raising rates for everyone, and not just certain classes of assets. Another thing would be for judges to make certain provisions of Dodd-Frank are not applied o CLO managers in ways not intended by Congress.

The above should give the new congress something to think about, and the incentive to re-write certain provisions of Dodd-Frank, beginning with the repeal of the provisions regarding “risk retention”.

As regulators continue to enact rules making business loans more difficult to obtain, Capstone Capital Group, LLC has the solution. Capstone has been assisting small to mid-sized businesses for years. They can help your business obtain the necessary working capital you need to help sustain and grow during uncertain economic times. This is accomplished without all the red tape you would normally get from most banks. Capstone specializes in Purchase order factoring, Single Invoice Factoring (“Spot Factoring”) and is geared towards firms in need of immediate cash. Spot Factoring is an alternative to business financing in that it provides no contract invoice selling, with flexible terms, in exchange for working capital from Capstone Capital Group. Give Capstone Capital Group a call today at (212) 755-3636 to find out how we can help your business grow and succeed.

Small Business Exporters Fearing Credit Crunch

19:25 06 November in Blog

Congress made a decision to temporarily extend the Export-Import Bank. However, the decision is affecting business owners who depend on the credit agency. The agency decreases their risks when they export items.

The charter was extended by Congress until the middle of 2015. The extended time frame was a compromise between people who trusted the agency and individuals who wanted to get rid of it. Typically, the export-agency is reauthorized by lawmakers every few years.

Jennifer Dettman of Shark’s Veterinary Equipment stated that she depended on the bank because it provides open credit for two months. Dettman’s company only has seven employees where everyone builds surgery tables for various animals. Once built, the tables are sold to zoos, universities, and clinics in different countries. The company started using the bank’s insurance program back in 2011.

When a client orders a table from the company, the employees manufacture it for nearly two months. The table is insured by the Export-Import Bank for a fee of 0.5 percent of the overall shipping cost. Usually, the company makes each customer pay for this fee. When a client defaults, the company can process a claim after 90 days at the bank. 95 percent of the company’s losses will be covered with the bank.

According to Ms. Dettman, the bank provides very good coverage. Dettman also stated that the bank reduces her risks. Dettman knows that there are similar insurance coverage plans in the marketplace, but she does not know the price plans.

Trading partners in the United States seek help to support their exporters. According to supporters, the agency lowers the federal government’s deficit. Earlier this month, the agency reported that 675 million dollars were sent to the Treasury Department this year. Congress passed an extension that lasted until June 30.

Supporters now want a reauthorization that has a longer term. Last week, a bipartisan legislation was unveiled in the House Financial Services Committee by two key members. The bank’s charter will be extended for five years if the legislation passes. The new measure will require the bank to allocate half of their net earnings every year. A portion of the monies will be used to cover potential losses.

As the banking industry continues to get hammered by governmental regulation, gaining access to small business and working capital loans will become more and more difficult to obtain. Capstone Capital Group, LLC appreciates these concerns and has the solution-Single Invoice Factoring. Single Invoice Factoring functions as a safer alternative to traditional and unpredictable bank financing. Our requirements are straightforward and easy to understand. We are not subject to strict regulatory oversight and control. Capstone Capital Group, LLC is here to help small to mid-sized firms who are in need of immediate cash. Our Factoring programs provide flexible, no contract invoice selling in exchange for working capital. Give us a call today to find out how we can help you.

Lawmakers Continue to Turn Up The Heat On Big Banks

20:49 16 October in Blog

In a recent hearing before the Senate Banking Committee, lawmakers continue to call for increased regulatory reform from regulators in an effort to reduce the risk big banks pose to the U.S. financial system.

A distinction was made between large banks and other financial institutions. Several senators encouraged regulators to lessen the burden, or possibly exempt, certain insurance companies and small to midsized banks from aspects of Dodd-Frank.

Sen. Bob Corker (R., Tenn.), for instance, called on regulators to take whatever steps necessary to make certain these banking institutions are not too complex so as not to be resolved through bankruptcy.

Other senators praised the Federal Government for promising to raise the capital requirements on the largest U.S. banks. According to Sen. Sherrod Brown (D., Ohio), there is a great deal of support in both the house and senate to implement stronger capital standards. Such standards could require big banks to retain additional earnings in order to build capital they would use to fund lending rather than allocating such earnings to their shareholders.

Banking executives believe that capital rules for the largest U.S. banks are already too high.

The senators’ frustration regarding Wall Street banks were further expressed in the hearing by Sen. Elizabeth Warren (D., Mass.). She inquired as to why individual bankers were not being held accountable for their nefarious actions which lead to the financial crisis. Ms. Warren’s concern is that lack of criminal prosecution may send the message that you can break the law, get away with it, and receive a bigger paycheck.

With lawmakers continuing their efforts to put pressure on regulators to come down hard on banks, the ones that ultimately suffer are those looking to banks for capital. Individuals and small business owners who rely on bank financing may find it more difficult to obtain the loan they so desperately need in order to make payroll or expand their business.

As lawmakers continue to apply pressure on regulators to impose more stringent requirements on the banking industry, it is clear small business and working capital loans will become ever more difficult to acquire. Capstone Capital Group, LLC understands the concerns of commercial borrowers who are considering bank financing. Accordingly, we offer various business finance options, including “Single Invoice Factoring” which functions as a safer alternative to traditional, and often times unpredictable, bank financing.

Our underwriting guidelines are simple, straightforward and not subject to stringent regulatory oversight and control.Capstone Capital Group, LLC specializes in Purchase Order factoring, 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. Give us a call today to find out how we can help you.

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

Capstone wants your business to take full advantage of the opportunities (or use projects) available through the Infrastructure Investment & Jobs Act recently signed into law.