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Scott Blakeley, Esq. SEB@BlakeleyLLP

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

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Scott Blakeley, Esq. SEB@BlakeleyLLP

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

  2. Summary of Small, Medium and Large Business Classifications

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

  4. New Account Set Up: Creating Transparency with the SMB • Startup or established? • It is essential that you use a credit application for each new account. • 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

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

  6. Understand the SMB’s Business • Know the SMB’s customers • Industry trends? Where do they stand in the industry?  • Current loan structure? • A balance between short and long term debt to cover the rough spots? • What does their bank say about the rate and formulas?  • The rate indicates the risk concerns of the bank  • 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

  7. Preserving the SMB Through Contract and Credit Enhancements

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

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

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

  11. If the SMB Has Not Paid • Managing A/R risk • Managing preference risk • Alternative payment channel • Repayment Agreement

  12. SMB Into Insolvency • Survivability of out of court • Small business chapter 11 • Chapter 13

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