SELLING TO THE SMALL AND MEDIUM SIZED BUSINESS

SELLING TO THE SMALL AND MEDIUM SIZED BUSINESS: CREDIT, FINANCIAL AND LEGAL ISSUES FOR THE CREDIT TEAM Scott Blakeley, Esq. Susan Archibeque, CCE SEB@Blakeley. LLP. com Director of Credit, Nicholas & Company, Inc Susan. Archibeque@nicholasandco. com Ron Sereika, CCE rsereika@coopervision. com

Summary of Small, Medium and Large Business Classifications According to the SBA Business Classification s Small 0 - 100 Employees $5 - $10 Million Annual Revenue Limited Cap X There at 28 million n US - appx $54% Medium 101 -500 Employees $20 Million - $1 Billion -annual Revenue Some Cap X Likely more than one office Large 1000 > employees Over $1 Billion annual Revenue Large Cap X Several Offices 2

What is a Small to Medium Sized Business? (SMB) q Revenue q Capital structure q Corporate form q Management and ownership q The life cycle of an SMB 3

New Account Set Up: Creating Transparency with the SMB Startup or established? q It is essential that you use a credit application for each new account. q q q Serves as a legal document (must be signed by an officer) Tells the customer what they can expect in; payment terms, Sales Tax, Interest charges Contact information- who to contact to get paid, who is owner, EIN number or SS Documenting the sale with T&C’s 4

New Account Set Up: Creating Transparency with the SMB q q Gathering credit and financial information o Trade credit bureau reports o Supplier and bank references o Trade credit industry groups o Do you need to get a credit report on every new customer? o Look for company website, Google, Linked. In. Credit scoring q Do you have a Credit scoring model set up? q What factors are important in your credit scoring model? 5

Understand the SMB’s Business q q q q Know the SMB’s customers Industry trends? Where do they stand in the industry? Current loan structure? o A balance between short and long term debt to cover the rough spots? What does their bank say about the rate and formulas? o The rate indicates the risk concerns of the bank o They will know more than you may have access to What is the potential for growth and profit? Understand their cash to cash cycle as it relates to your terms Be a consultant to the SMB 6

Preserving the SMB Through Contract and Credit Enhancements 7

Financing Alternatives for the SMB q Traditional bank lending q Small Business Administration (SBA) guaranteed loans q Fintech q Credit Cards q Supply Chain financing q Factoring q Asset based lending 8

Selling the SMB on Terms q q q Maintaining the relationship- balancing risk and collection practices Payment channel- paper vs. E-forms Alternative payment mechanisms: o Credit Card o Electronic check o ACH q Terms pushback q Robinson Patman considerations 9

Industry Information Regarding SMB's n n n Warning signs of delinquencies q A/R aging q High credit risk score q Timing for what is considered delinquent q Collections q Judgments q Liens q Bankruptcy q Likelihood of small business to become severely delinquent q Monitoring accounts n Tighter lending practices n Vendors as lenders Social media and non-traditional sources to measure credit risk Monitoring of bank lending, term dates and covenants 10