Available for Immediate Download: Payment Protection Program Loan Forgiveness Guide

Every business in the United States faced some form of setback during the COVID-19 forcing shutdowns and slowdowns. In response, millions of business owners were forced to seek out additional sources of capital. Fortunately, the Paycheck Protection Program (PPP) was available to millions of small businesses.

The Paycheck Protection Program launched with some confusion about how to apply, what the criteria was, and how the loans would eventually be forgiven. For this reason, many business owners are still uncertain about the process necessary to turn these loans into grants.

For those who took out loans under the PPP including those in construction, manufacturing, wholesale and retail trade, and transportation and warehousing now have to be ready for their next big challenge — applying for loan forgiveness.

Some who were able to successfully borrow money under this program, there were also several changes meant to make it easier for businesses to use the program. This also meant that those businesses who obtained funds during the initial funding windows may not be aware of what steps they have to take to ensure their loans are “turned” into grants instead.

The 24-week period for applying for the forgiveness of the loans is quickly approaching for most businesses.

To help business owners — including tribal businesses, those who were self-employed, independent contractors, nonprofits which met specific criteria and more — navigate the unprecedented challenges you are facing, download our white paper, Payment Protection Program: Loans Forgiveness which will help guide you through the process to make sure you are fully prepared for the future.

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Available For Immediate Download: Restarting Your Business After COVID-19 Mandatory Shutdown

The last thing you need is to have your business collapse after working tirelessly during these lockdowns to stay prepared. Now that you are ready to reopen, you want to make sure you are prepared for any challenges that may come your way.

Capstone Capital Group, LLC wants to help you make sure your planning is flawless, which is why we are offering this free guide to help you get back to business on a sound financial footing.

This guide provides you with the tools to:

• Assess the state of your business and customers
• Plan a strategy that will keep your business on course for success
• Implement your strategy through a series of steps 

All of this is meant to guide your business and your customers through the challenges of restarting your business in this post-COVID world.

Download this free guide now and get access to our limited monthly newsletter to which thousands of professionals rely on for an in-depth monthly analysis of the state of the North American Business Finance Industry.

Download Now

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Prepare to Put Minority Contract Opportunities to Work for Your Business

Minority-owned businesses may have the ability to bid on contracts which other businesses may not have. In large part, this is because of the Minority Business Development Agency which encourages states, and municipalities to hire minority businesses to complete projects on their behalf. However, as a minority-owned business, you still need the financial capacity to allow you to make these bids.

Minority Businesses and Banking Challenges

When you know you will be bidding on a contract, the first thing you do is ensure you have the staffing and materials you will need to complete the terms of the contract. Should a review show you will need additional staffing and supplies, you may then be forced to seek out capital to ensure you can successfully complete the contract should you win the bid.

This is the time when small and mid-sized business owners often turn to their banking relationships. However, a recent article in the New York Times shows that minority business owners often face many hurdles when dealing with banks. In fact, minority businesses often find it impossible to develop long-term banking relationships. This leaves many facing unusual challenges when bidding on contracts, even when those contracts mean a stronger business.

When a minority business is bidding on contracts, especially a government contract, there are numerous hurdles to overcome including showing how you are going to fulfill the terms of the contract. Many businesses are asked to provide guarantees, which often are not available for minority businesses. Therefore, working with a company like Capstone has many advantages whether you are bidding on a contract, or you have recently been awarded a contract.

Discover the Capstone Difference

At Capstone, we have a process that allows us to work with both internal processes and outside private partners to help you gain access to much-needed capital. When you have landed a minority contract, we understand it could be 90 to 120 days or more before you see payment for an invoice you have issued. This is why we will help you customize a plan which works best for your company. These plans may include:

• Offering Capacity for Competitive Bidding – depending on the products or services you will be providing under a contract, you may need to seek letters of credit, as well as logistics expertise your company may not have. We can help you with these needs through our Import and Export Financing options.
• Distributor and Supplier Factoring – whether your needs include lines of credit, logistics expertise, or immediate access to cash, we can help you craft a program that will help you meet the terms of your contract without taking on additional debt.
• Contract and Invoice Factoring – we can help you with a range of factoring needs including spot factoring of a single invoice if that is what fills your immediate needs. We understand how important avoiding new debt can be and we can help you access the capital you need without taking on any additional debt burden which can hamper your company’s growth.

Finding the Right Balance for Your Business

Capstone believes in relationship building. We know each business has different needs for cash flow. We also understand some business owners require capital to maintain their obligations, while others have sufficient cash to meet those obligations but wish to have access to additional sources of capital in order to invest in the growth of their business. This is why we take the time to understand several things before we develop a plan that suits your business. Some of our discussions will include:

• Your goals for your business
• Your current business growth and outlook
• Whether your business is seasonal
• The size of your current staff and anticipated need for growth
• Your current inventory and future needs
• Your accounts payable and receivables aging

Once we have discussed these matters with you, we will develop a comprehensive financing plan that is designed to help you meet your goals and grow your business. Not only can we help you meet your cash flow finances, in many cases, we can include long and short term financing options which will help you make long-term plans to ensure you are able to meet the goals you set for yourself and your business.

Whether you are considering bidding on a new contract, or you have been awarded a minority contract and now need the capital to fulfill the terms of your contact, contact Capstone today at (212) 755-3636 and see what a difference having a strong relationship with a financing partner can make in your business.

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2020 Global Factoring Report

During 2014, more than $3,000 billion dollars changed hands between businesses and companies who provide factoring. A 2019 study recently published by Reports Monitor (RM) determined that by 2026, more than $4,600 billion will be handled in this manner.

The data in this study shows other information which is fascinating when you consider the past and future potential for factoring including the geographical areas where businesses use factoring. In fact, there are very few businesses that take advantage of this unique type of financing. Geographically, the following percentage of businesses use factoring:

• North America 2.1 percent
• Europe 5.3 percent
• Asia Pacific 5.4 percent
• Latin America 4.5 percent
• Middle East and Africa: 3.3 percent

Overall, this is a relatively small percentage of the businesses who could benefit from this type of financing.

Use of and Reasoning For Factoring

This study also shows that nearly 79 percent of all factoring is done by small and medium-sized businesses. Despite the small percentages of businesses who rely on factoring, over the years, the largest growth rate use of factoring is within small and medium-sized businesses. These business owners often face the biggest challenge in getting more traditional financing and often have the most struggles with cash flow.

This study goes on to talk about why factoring is so beneficial to these business entities in specific and have a significant impact on company growth. Some of these reasons include:

• Not taking on debt — one of the challenges many business owners face is having well-established banking relationships. Even when they have excellent banking relationships however, they often do not have the balance sheets which will allow them to have a loan approved quickly.
• Need for immediate cash flow — when cash flow is drying up, business owners still must pay their employees, need cash on hand for bidding on contracts and acquiring materials, and have monthly obligations to pay. While a traditional loan can take weeks, or months to get approved, factoring offers near-immediate cash flow to the business.
• Costs of doing business — while there are costs associated with factoring, one way a company saves money with factoring is the elimination of the need to collect payment on invoices. Because factoring companies are buying your invoices, they also take responsibility for the collection of those invoices.

A Glimpse into the Global Factoring Market

More than 65 percent of the global factoring market is in Europe. These markets skyrocketed during the recession and are now showing signs of slowing. In the United States, factoring declined seriously through 2018, a result of fraudulent activities which many were slow to react to. Asia and other emerging markets will likely continue to see an increase in the use of factoring as more business owners get engaged in growth in these markets. What is particularly fascinating is the number of companies that offer factoring services in various regions. Keep in mind, in many global markets, factoring is dominated by big banks. Here’s how the number of factors looks globally:

• Europe 646
• Asia-Pacific 5,133
• North America 764
• Middle East and Africa 59
• Latin America 744

With tighter banking regulations, better security, and blockchain technology, the growth potential exists in the factoring market.

How the Current Markets May Impact Factoring

Business owners who have been shut down during the COVID19 pandemic are only beginning the reopening process. Many of them are facing unprecedented challenges including operating at a smaller capacity. Because there is every reason to believe this pandemic will put downward pressure on demand, more business owners will be searching for creative ways to keep their doors open and continue to grow. Factoring may provide that opportunity.

Currently, none of us has a magic ball which will tell us how business owners will survive the current downturn in consumer demand. We also cannot determine what will happen to lending restrictions once demand picks up. What we do know is that business owners will all have overhead costs to pay including salaries, taxes, and will need to purchase materials for their business.

Factoring growth in the United States has been much slower than other corners of the globe but during the upcoming period where businesses may face unprecedented challenges, this could provide an opportunity for factoring in the United States to exceed growth expectations.

 

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Emergency Funding Sources for Businesses during a Pandemic

Our economy has taken a real beating since early March when many states closed down non-essential businesses. This has resulted in numerous small and mid-sized business owners to scale down their operations, or in some cases, to scale up their operations because other businesses were unable to keep up with the current demand.

Defining Essential Businesses

Each state has determined individually what qualifies as an essential business during this pandemic. In many cases, these jobs were defined as anyone who provides food, utility services, medical care, or law enforcement services. Some were more broadly defined, leaving many business owners confused, or operating under new guidelines including having a process in place for keeping employees, customers, and vendors safe. These involved investments of different amounts depending on the industry.

CARES Act Loans Not Distributed to Many Business Owners

The CARES Act which was signed into law by President Trump offered businesses with up to 500 employees (defined as a small business) an opportunity to participate in the Payroll Protection Plan (PPP). This plan provided short-term loans for small businesses where they could recover up to six months of expenses provided they rehired their employees during the pandemic. If a company kept their employees on the payroll, the loan would be forgiven (i.e. turn into a grant). However, there have been numerous complaints about this program including:

• Few minority businesses were unable to secure funds
• Large banks lending to well-established businesses
• Contractors, women-owned businesses and those who used community banks were unsuccessful in making applications

The overall result of PPP has been disappointing for many small business owners because while there were significantly reduced requirements, many of the larger banks were able to approve loans more quickly than community banks and non-traditional lending institutions. This has left many business owners struggling with the funds needed to keep their businesses afloat during this challenging time.

Options Available Outside PPP

For those business owners who were unsuccessful in applying for funding under PPP, there may seem to be very few options. However, since there are still construction projects going on, many mom and pop stores remain open, and many restaurants are operating, there is still a need to fund some of the most vulnerable businesses during this time. This leaves business owners facing the awkward decision of how to keep their bottom line in the black while we all adjust to what may be a “new” normal. Here are some of the options available to those business owners:

• Borrowing from family and friends — unfortunately, for many, this option may be off the table. Since there are over 36 million people out of work, many are struggling with their own financial challenges and may be unable to help.
• Self-funding using credit cards — because these times are so uncertain, this may not be the time to max out your credit card bills. While most businesses are reopening, we still do not have any clear information which will tell us when customers will “return to normal”. Because of the fear of being infected with the coronavirus, many business owners will see a decrease in business, at least for the short term.
• Invoice factoring — since many businesses, including import and export businesses, temporary agencies, and distributors and suppliers will be facing unprecedented orders as businesses reopen. The fact is, many businesses have been closed for upwards of 60 days resulting in low or no inventory meaning importers and exporters, as well as suppliers and distributors, will be facing new strains. Because some employees will not feel comfortable returning to work or be facing childcare issues, temp agencies may see a significant influx in demand. All of these businesses will need cash on hand which may make invoice factoring the best option.

Why Invoice Factoring Makes Sense

Rather than attempt to get a new bank loan, which many acknowledge could be more challenging, using your future cash flow to fund increased demand for your products or services makes sense. Not only are you avoiding taking on new debt, but you will also be able to receive payment for those goods or services in a timelier manner, a lot faster than the normal 30 – 90-day cycle usually associated with accounts payable.

If you are one of the thousands of small or medium-sized business owners who are facing a cash crunch as your company prepares to reopen following a shutdown, or if you have been open all along but you need additional capital to meet demand, contact a highly-trained representative at Capstone Trade today at (212) 755-3636 and let us help you design a customized financing package designed to meet your specific needs.

 

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How to Strengthen Your Business for Growth In a post COVID -19 Environment

How Invoice Factoring Can Strengthen Your Business for Growth

The economic challenges of the Corona Virus have left a cash flow shortfall for many firms. Even in today’s high growth economy, the cards are still stacked against many small firms. With an impaired balance sheet as a result of your equity being eaten away by tighter operating margins, the rising cost of materials and labor, and the inability to pass on the additional costs means that bank financing is almost impossible to get. If you are lucky enough to have a bank line, the terms and conditions may have changed as new regulations have the potential to shift the profile for your relationship with the bank from a strong personal relationship into a loan that is categorized as ‘risky,’ thereby requiring the bank to increase its capital requirements. The ability to find and obtain needed financing to strengthen and grow businesses remains a true challenge. Cash flow management can either make or break a small business.

Without proper cash flow management, you will never be in a position to grow your balance sheet and change the lending profile of your company from the bank’s perspective. The demands within the construction industry seem to be constantly working against you. As more contractors and subcontractors bidding on the same jobs, to remain competitive, you must offer extended payment terms and earn less on the jobs that you successfully bid. Meanwhile, as the business owner, you must ensure you have the cash flow to make payroll, pay benefits, manage and collect accounts receivable, manage and pay suppliers, and find work to backlog. These demands create an almost perpetual cycle of cash flow deficiency for your business. To add insult to injury, a natural disaster such as the COVID-19 Virus can create a sharp decrease in work, and because of your constrained cash flow, you must pass on opportunities to increase your workload and backlog.

Stretched Cash = Business Risk

Firms across the nation face similar conditions each day in their businesses. Let’s take a look at Marc; Marc owns and operates a successful electrical firm supplying services to the City of New York, the Board of Education, and Mass Transit, to name a few clients. Working within the industry-standard practice of 90+ day payment terms was challenging enough. Then, COVID -19 hit.

The demand for his company’s services dramatically decreased and an immediate reduction of work was the result.

The delay in collecting accounts receivable, as a result of extended payment terms needed to gain the highly competitive business, was forcing the company to miss payroll and delay payment to its own suppliers, the lifeblood of the business. The residual impact of stretching inadequate cash flow leads to neglected bidding capacity. The company’s backlog of work was reduced from the typical six to 12 weeks to just two weeks. Realizing that stretching existing cash flow was no longer an option, the company approached local banks for financing help. Each one turned down the company’s loan applications but referred the company to alternative financing firms. Even those firms turned down the contractor due to strict credit conditions, balance sheet issues, and the existence of debt hangover and the company’s inability to meet other loan covenants.

Taking Control & Keep Up with Factoring

There is a multitude of companies that provide invoice factoring or spot factoring to small businesses. This is an effective strategy to help companies obtain the funding they need when traditional sources, such as banks, and finance companies, are not available or willing to help. This invoice factoring strategy refers to the sale of only that portion of a company’s accounts receivable needed to meet its cash flow needs.

In other words, the company sells its outstanding invoices for services the company has already provided, only if it needs the additional cash flow for operations. Companies are then able to sell a single invoice or a schedule of invoices in exchange for much-needed working capital. Those funds provide staying power until cash flow catches up with expenses. Invoice factors typically work with construction-related companies including electrical subcontractors, drywall subcontractors, mold remediation firms, and demolition companies.

Meet Extended Payment Terms & Grow Business

In today’s competitive market place, the ability to offer extended terms is crucial to winning business with large firms. Many businesses shy away from offering extended terms on their accounts receivable to their customers because they cannot handle the cash flow burden that comes along with the offering of extended credit terms. However, larger customers expect extended credit terms and prefer to do business with those vendors that can provide them.

Providing extended credit terms to customers ensures that the larger company is cash-flow positive and has lower costs of borrowing. Through invoice or spot factoring, your company will become a more valued supplier to your existing customer base and provide you with the potential to grow even more. With invoice factoring, the factoring firm waits to get paid while commercial firms get the working capital required to stay afloat while the accounts receivable matures. The cost of factoring is a percentage of the receivable, so astute small business owners will increase the cost of their goods to take into account the cost of factoring their invoices.

This pricing strategy essentially transfers the cost of factoring to their customers and allows the small business to grow to the extent it can with its large customers.

Repay Bank Loans

In addition to immediate cash flow needs, many small businesses also have debt hangovers from revolving credit facilities that have been termed out as a result of the COVID -19 and the change in their financial condition.

Capstone Capital Group, LLC is adept at working and negotiating with banks and finance companies that are unable to extend more credit to their existing borrowers. By entering into Limited Subordination Agreements (LSA), the bank permits Capstone to purchase accounts receivable that would have otherwise been part of the bank’s collateral.

This added liquidity ensures the business owner has sufficient working capital to operate with until their credit line is paid down. In many cases, as the business grows because of the use of the LSA, the bank or finance company is paid down quicker and at less cost to the business owner. This is accomplished through increased sales and overhead being allocated over more jobs.

The range of cash flow solutions provided by Capstone includes accounts receivable management services, funds control, providing credit information on accounts, and in some cases, trade finance or purchase order financing. These firms can provide needed cash now without the bureaucracy of a traditional bank or finance company. Invoice factoring gives you cash as needed when you need it.

Joseph F. Ingrassia is Managing Member of Capstone Capital Group, LLC, a factoring and trade finance firm that provides businesses with needed working capital through invoice factoring and custom purchase order financing solutions.

Capstone Electrical Eng COVID19

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A look back at 2019 business growth in America

Throughout 2019, we experienced a tremendous uptick in the economy resulting in low unemployment, low inflation, and increased household spending. Overall, one would believe this would lead to significant growth across a number of sectors of the economy. However, there were other forces which when combined, presented some challenges for some small and mid-sized business owners.

Trade Wars with China Threatening Economic Growth

Perhaps one of the more challenging issues which besieged business in the United States was the threat of reduced trade with China. As many import and export businesses are fully aware, this trade helps us keep costs lower for consumers. Higher tariffs imposed on Chinese goods meant higher costs to consumers and also presented some new supply challenges. Fortunately, the back and forth eased up towards the end of 2019, helped farmers and also created new demand for import and export business owners resulting in higher demand, and therefore, the need for additional funding.

Tech Business Growth Continues Upwards Trend but…

While tech businesses continued their upward trajectory, there was plenty of controversies. There were record fines imposed on some businesses, while others were subject to hacking, and other problems. Privacy issues, trust issues, and other problems continue to plague this industry while the demand for more technology solutions continues.

The Retail Apocalypse Continues

While retail sales have shown an increase, this is not well-reflected in brick-and-mortar establishments. Retail giants are continuing to cut their locations while giants like Amazon have continued to show improved signs of strength since 2008. Currently, this is good news for those who are in the import/export business but maybe more problematic for distributors who depend on retail giants for their revenue.

Small Business Lending in 2019

The Small Business Administration (SBA) reported a great year with small business loan volume increasing slightly over 2018 totals. As of October of 2019, the SBA reported there had been more than 60,000 loans offered to small businesses across the United States. While this number showed signs of increased lending, there are a total of 30 million small businesses across the United States meaning there are potentially several business owners who could not secure SBA loans or did not have access to other forms of lending.

Economic Uncertainty Seems to Have Increased

Perhaps one of the most unusual business stories released during 2019 was interest rate changes. The Federal Reserve cut interest rates three times during 2019 when they had originally been on the increase. While many believed that lower interest rates would help spur more business lending, in some cases, banks were tightening their belts and making it harder for some businesses to obtain loans.

The Usual Businesses Seem to be Left Behind

Unfortunately, as with the trends found in 2018, some business owners were left behind even during a booming economy. A careful review of business loans showed the following businesses and sectors seem to be still trying to secure additional capital and have been having more problems than usual. In fact, 32 percent of all small business owners (the same as 2018) showed access to capital was their primary concern. Some of these businesses and sectors including:

• Minority-owned businesses — for a number of reasons, many minority-owned businesses continue to face challenges growing their business due to a lack of capital. In many cases, this is because these businesses are often smaller operations and they do not have well-established banking relationships.
• Import-export businesses — because of continued changes in trade deals, and new trade restrictions, some import-export business owners are finding it more challenging to secure funding. This trend is likely to continue until such time as new trade deals are put into place.
• Construction businesses — there has always been a difference between how a construction project is funded and 2019 found this remains to be true. Subcontractors often face challenges purchasing the needed materials in order to fulfill their end of a contract. Without appropriate funding, this has been challenging. As unemployment rates continue to be at historic lows, these businesses also must raise wages to remain competitive.

At Capstone Capital Group, we understand the challenges business owners faced during 2019, as well as the challenges they are facing during 2020. This is why we remain committed to working with businesses to help them get the funding they need to help grow their businesses and have the capital on hand to take advantage of larger contracts. Please email us at info@capstonetrade.com or call us at (212) 755-3636. One of our highly-trained representatives will work with you to find a funding solution that helps you reach your goals.

 

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