Overview of Southeastern Commercial Finance, LLC


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Overview of Southeastern Commercial Finance, LLC, a non-bank Asset Based Lender providing Working Capital Lines of Credit from $300,000 up to $3,000,000, lending against Accounts Receivable and Inventory.

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Overview of Southeastern Commercial Finance, LLC

  1. 1. About Southeastern Commercial Finance, LLC Mission:Through partnership with the banking community, offer a means of providing Professional AssetBased Lending Services for our Banking Partners, the Bank’s Prospects and Customers.
  2. 2. 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.
  3. 3. Company Profile•Transaction size ranges from as low as $300,000 and ashigh as $3,000,000, with the ability to do largetransactions 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.
  4. 4. 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 creditparticipation with commercial banks throughout the Southeast (30%)•Southeastern Credit Services – Loan monitoring, field exam auditing, and troubled credit evaluation (5%)
  5. 5. Historical Portfolio Profile Historical Transaction Base• Manufacturing 43.17%• Distribution 26.06%• Service 22.74%• Transportation 8.04%
  6. 6. Historical Portfolio Profile Historical Geographical Distribution• Alabama 35%• Tennessee 35%• Georgia 8%• Florida 8%• Kentucky 5%• Mississippi 4%• The Carolinas 3%• Other 2%
  7. 7. Strategic Competencies• Extensive experience at all levels in bank Asset-based lending andthe community bank environment.• Fully staffed with professionals experienced in all stages of Asset-based transactions, including: Analysis, Underwriting, FieldExamination, Account and Problem Credit Management.•Fully developed and proven state of the industry systems andtechnology.• Demonstrated success and capability to adapt to multiple creditculture environments.• Cohesive management team with a record of profitable growth and success in multiple environments.
  8. 8. Common Characteristics of Asset Based Borrowers• Financial Leverage – Higher debt to worth ratios.• Low Balance Sheet Liquidity – Assets centered in A/R andInventory.• Rapid Revenue Growth• Seasonal or Cyclical Business• In a turnaround mode due to economy or industry changes.
  9. 9. 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
  10. 10. 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
  11. 11. Key Components of the Asset-based Lending ProcessI. Credit and Underwriting IssuesII. Collateral Field ExaminationsIII. Operational and Account Management
  12. 12. Key Credit and Underwriting IssuesI. 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?
  13. 13. Key Credit and Underwriting IssuesII. Company a)Will the prospect benefit in the long run from an Asset-based b)Do we understand the real purpose of the loan? c)Do the financial statements support our analysis?
  14. 14. Key Credit and Underwriting IssuesIII. 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?
  15. 15. Key Credit and Underwriting IssuesIII. 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?
  16. 16. Key Credit and Underwriting IssuesIV. 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?
  17. 17. Scope of Collateral Field ExaminationsThe Scope of Field Examination Audits can vary based on thesituation, but generally are performed quarterly and focus on thefollowing:• 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.
  18. 18. Scope of Collateral Field Examinations• Comments on the adequacy of internal accounting systems andcontrols and borrower’s ability to provide timely and accuratereports.• 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 PayrollRecords)
  19. 19. 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.”
  20. 20. Operation and Account Management“The Mission of the Account Management Function is to know andunderstand, on a real time basis, the amount, validity, andcollectability of the collateral underlying the loan. The AccountManagement function fulfills this mission through the ongoingachievement of Account Management Objectives and consistentimplementation of Operation Procedures.”
  21. 21. Account Management ObjectivesA. Identify, Communicate, and Manage Risk Exposure with AEB. Service the working capital needs of the Customer
  22. 22. Operational ProceduresA.
  23. 23. 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.)
  24. 24. 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.
  25. 25. Quarterly Reporting Requirements• Updated customer list (including address, phone, and fax numbers)• Form 941 Payroll Tax Returns (including proof of payment)
  26. 26. Annual Reporting Requirements• Year-end Financial Statements• Personal Financial Statements• Certificate of Insurance on Inventory
  27. 27. Operational ProceduresB. 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.
  28. 28. 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.
  29. 29. Portfolio Quality Assurance• Credit Revie ws, one third of month ly portfol io and all watch accou
  30. 30. 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.comWebsite: www.southeasterncommercial.com