About Southeastern Commercial Finance, LLC

Mission:

Through partnership with the banking community, offer a means of providing Professional Asset

Based Lending Services for our Banking Partners, the Bank’s Prospects and Customers.

Company Profile

• Founded March 1996 by experienced Asset-based Lending Professionals.

• Headquartered in Birmingham, Alabama.

• Southeastern has been profitable in every month of operation.

• LPO in Tennessee since 2001 and in Atlanta since 2008

• Significant Transaction Experience with Community, Regional, and National Banks.

Company Profile

•Transaction size ranges from as low as $300,000 and as high as $3,000,000, with the ability to do large transactions on a select basis.

•Southeastern has Closed and Funded in excess of 200 transactions in nine southeastern states.

• Completed over 50 Joint Transactions with Various Banks

• Broad Experience in Account Management, Treasury Management, Credit Underwriting and Audit

• Most customers graduate to traditional unmonitored banking relationships.

Traditional Functional Lending Areas

•Southeastern Direct Lending – Direct lending source for companies in Start-up, high growth, or turnaround stages (65%)

•Southeastern Bank Participation Program – Bank line of credit participation with commercial banks throughout the Southeast (30%)

•Southeastern Credit Services – Loan monitoring, field exam auditing, and troubled credit evaluation (5%)

Historical Portfolio ProfileHistorical Transaction Base

• Manufacturing 43.17%

• Distribution 26.06%

• Service 22.74%

• Transportation 8.04%

Historical Portfolio ProfileHistorical Geographical Distribution

• Alabama 35%

• Tennessee 35%

• Georgia 8%

• Florida 8%

• Kentucky 5%

• Mississippi 4%

• The Carolinas 3%

• Other 2%

Strategic Competencies

• Extensive experience at all levels in bank Asset-based lending and the community bank environment.

• Fully staffed with professionals experienced in all stages of Asset-based transactions, including: Analysis, Underwriting, Field Examination, Account and Problem Credit Management.

•Fully developed and proven state of the industry systems and technology.

• Demonstrated success and capability to adapt to multiple credit culture environments.

• Cohesive management team with a record of profitable growth and success in multiple environments.

Common Characteristics of Asset Based Borrowers

• Financial Leverage – Higher debt to worth ratios.

• Low Balance Sheet Liquidity – Assets centered in A/R and Inventory.

• Rapid Revenue Growth

• Seasonal or Cyclical Business

• In a turnaround mode due to economy or industry changes.

Common Loan Purposes for Asset Based Facilities

• Refinance existing debt – Graduate from an independent lender.

• Support sales growth

• Seasonal needs

• Acquisition of business or product line

• Turnaround situations

• Leveraged buy out

Common Requirements for Financing

• Quality Financial Statements

• Adequate reporting systems and financial controls

• Commercial accounts receivable that perform within terms and industry norms

• Inventory that has clearly defined value and is readily marketable

• Competent and experienced management

Key Components of the Asset-based Lending Process

I. Credit and Underwriting Issues

II. Collateral Field Examinations

III. Operational and Account Management

Key Credit and Underwriting Issues

I. Industry

a) Does the prospect operate in an industry that we understand sufficiently to make an informed credit decision?

b) Does the prospect operate in an industry that does not lend itself to Asset-Based Financing, such as construction?

c) Are there industry specific barriers, including dated terms, excessive foreign accounts, concentrations, or progress billings?

Key Credit and Underwriting Issues

II. Company

a)Will the prospect benefit in the long run from an Asset-based facility?

b)Do we understand the real purpose of the loan?

c)Do the financial statements support our analysis?

Key Credit and Underwriting Issues

III. The Collateral

a)The Accounts Receivable

1. Is A/R performing (Current/Past Due)

2. What is the diversity of the customer base – Geographic, Industry, Concentrated

3. Invoice Issues – Number, Average Size, Appropriate Terms, etc.

4. Nature of Invoices – Are they due from well known regional or national concerns or from “mom and pop” shops?

Key Credit and Underwriting Issues

III. The Collateral

b) The Inventory

1. What is the nature of the inventory – is there a broad market (steel, resins, lumber) or a very specialized market (circuit boards to NASA)?

2. Is the inventory valued appropriately – Is the market volatile?

3. Relative proportions of raw materials, work in process, finished goods?

4. What is necessary to liquidate the inventory – Are there liquidation costs?

Key Credit and Underwriting Issues

IV. Financial and Reporting Capabilities

a) Can the Borrower provide Southeastern with required collateral and financial information in a timely and accurate manner?

b) Does the Company have and follow professional and established credit and collection policies?

c) Are the accounting and information systems adequate to provide necessary information to monitor the line of credit?

Scope of Collateral Field Examinations

• Analysis of A/R, including agings, turnover, concentrations, ineligible accounts, confirmations, dilution, etc.

• Analysis of Inventory, including composition, turnover, obsolescence, marketability, location, etc.

• Reconciliation and verification of accuracy of previous receivables and inventory borrowing base reporting.

The Scope of Field Examination Audits can vary based on the situation, but generally are performed quarterly and focus on the following:

Scope of Collateral Field Examinations

• Comments on the adequacy of internal accounting systems and controls and borrower’s ability to provide timely and accurate reports.

• Analysis of accounts and notes payable.

• Analysis of cash receipts and compares to cash collection journals and A/R information.

• Reviews tax records for payment and compliance (941 Payroll Records)

Importance of Collateral Field Examinations

“The Results of Collateral Field Exams help to determine the appropriate structure, advance rates, risk rating, reporting requirements, red flags, and compliance with all lending guidelines, terms and conditions. The Collateral Field Exam is an integral part of the ongoing Risk Management function.”

Operation and Account Management

“The Mission of the Account Management Function is to know and understand, on a real time basis, the amount, validity, and collectability of the collateral underlying the loan. The Account Management function fulfills this mission through the ongoing achievement of Account Management Objectives and consistent implementation of Operation Procedures.”

Account Management Objectives

A. Identify, Communicate, and Manage Risk Exposure with AE

B. Service the working capital needs of the Customer

Operational Procedures

A. Establish, evaluate and make decisions based on required periodic reporting.

a) Collateral Loan Reporting is required to provide regular (daily/weekly) evaluation of loan and collateral activity and loan availability.

b) Additional monthly, quarterly and annual information allows for more detailed evaluation of the performance of collateral, loan and business.

Advance Request Information

• Collateral Loan Report

• Funds Request Form (contains routing information)

• Report of New Billings (sales summaries, daily sales journals)

• Report of Collections (cash receipts journals, credit memo report, all deposit evidence)

• Current A/R Aging Summary Report

• Inventory Summary Report (containing category dollar amounts to support available collateral.)

Monthly Reporting Requirements

• Detailed Accounts Receivable Aging with completed Reconciliation Form.

• Detailed Accounts Payable Aging.

• Detailed Inventory Valuation Report.

• Financial Statements, Balance Sheet and Income Statement.

• All reports due by the 10th of the following month.

Quarterly Reporting Requirements

• Updated customer list (including address, phone, and fax numbers)

• Form 941 Payroll Tax Returns (including proof of payment)

Annual Reporting Requirements

• Year-end Financial Statements

• Personal Financial Statements

• Certificate of Insurance on Inventory

Operational Procedures

B. Consistently apply internal collateral analysis procedures to ensure the integrity of the collateral and to protect assets.

a) Verification of accounts validates accuracy and collectability of accounts.

b) Reconciliation of Aging and Financial Statement information with Collateral Loan Reports validates the accuracy of reporting.

c) Statistical and Trend Analysis compares historical collateral performance with current performance.

Account Verification Policies

• 50-90% of Dollar Value of accounts are verified in Initial Collateral Field Exam.

• 10% of Dollar Value of accounts are verified randomly each month.

• High Dollar Concentration Invoices (as determined per customer) are verified when presented for funds advance.

Portfolio Quality Assurance

• Credit Reviews, one third of monthly portfolio and all watch accounts.

• Periodic Audits

• Stringent Credit Risk Rating System

• Monthly collateral, loan and financial statement reconciliation

• Comprehensive verification program

CONTACT INFORMATION

Danny Bittner

1501 1st Avenue North, Suite A119

Birmingham, AL 35203

Ph. (205) 250 - 8026

Cell (205) 862 - 2474

Email Address: danny.bittner@southeasterncommercial.com

Website: www.southeasterncommercial.com