[Title: Financial Resources - Accounts Receivable Funding - Factor Help ]
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Written By:   Debra Wilson
Edited By:  Robert A. Zadek, Esq.
In Collaboration With:  Darla Hill & Gail Schulte

I.  Introduction:

1.1  Mission Statement........................................................................................................ 6
1.2  How We Do Business..................................................................................................... 6
1.3  The Company's Structure.............................................................................................. 8
1.4  Standards of Conduct.................................................................................................... 9
1.5  Organizational Chart..................................................................................................... 10

II.  New Business:

2.1  The Process................................................................................................................. 11
2.2  Prospect Packages........................................................................................................ 13
2.3  Credit Committee.......................................................................................................... 14
2.4  Pre-Funding................................................................................................................. 14
2.5  Post Closing................................................................................................................. 14
2.6  Procedures for the Funding Process................................................................................ 15
2.7  Coordination of Funding................................................................................................. 16
2.8  Participations................................................................................................................ 19
2.9  Section II Exhibits: 21
          A.  Prospect Write-Up................................................................................................ 22
          B.  Prospect Summary............................................................................................... 23
          C.  Proposal Letter To Client....................................................................................... 24
          D.  Credit Committee Summary.................................................................................. 27
          E.  Credit Info Form................................................................................................... 28
          F.  Client Monitoring Form.......................................................................................... 29
          G.  Pre-Funding Checklist........................................................................................... 30
          H.  Credit Approval Summary..................................................................................... 31
          I.  Post Closing Checklist............................................................................................ 32
          J.  Top Ten Account Debtor List.................................................................................. 33
          K.  Client Advance & Reserve Disbursement Authorization Form.................................... 34

III.  Collateral Analysis:

3.1  Collateral..................................................................................................................... 35
3.2  Accounts Receivable...................................................................................................... 37
3.3  Determination of Ineligibles............................................................................................ 37
3.4  Determining Advance Rates........................................................................................... 45
3.5  Over-Advances Based on Inventory................................................................................. 47
3.6  Over-Advances Based on Machinery and Equipment......................................................... 53

IV.  Credit Analysis of Client:

4.1  The Goals of Underwriting............................................................................................. 57
4.2  Underwriting Analysis.................................................................................................... 58
4.3  Management Risks........................................................................................................ 58
4.4  Industry Risks............................................................................................................... 60
4.5  Production Risks........................................................................................................... 62
4.6  Demand Risks............................................................................................................... 63
4.7  Collection Risks............................................................................................................. 63
4.8  Financial Risks.............................................................................................................. 64
4.9  Accuracy of Financial Information................................................................................... 64
4.10  Profitability................................................................................................................. 68

V.  Field Examination:

5.1  Goals of the Examining Function..................................................................................... 70
5.2  Client Field Examinations............................................................................................... 70
5.3  Field Examination Time................................................................................................. 74
5.4  Overview of Client Exam................................................................................................ 75
5.5  Section V Exhibits: 77
         A.  Field Examination Summary................................................................................... 78
         B.  Approved List of Field Examiners............................................................................. 84
         C.  Field Examination Checklist..................................................................................... 85

VI.  Documentation:
 
6.1  Responsibilities............................................................................................................. 88
6.2  Files............................................................................................................................ 88
6.3  Documentation Process................................................................................................. 89
6.4  Documentation Formalities............................................................................................. 92
6.5  Agreements................................................................................................................. 93
6.6  Guarantees.................................................................................................................. 93
6.7  UCC Financing Statements / Searches............................................................................ 94
6.8  Other Documents.......................................................................................................... 96
6.9  Section VI Exhibits: 98
          A.  Account Debtor Notification Letter.......................................................................... 99
          B.  Account Debtor Notification Letter (Fax Alternative).................................................. 100

VII.  Portfolio Monitoring:

7.1  Monitoring Objectives.................................................................................................... 101
7.2  General Collateral Monitoring Guidelines.......................................................................... 102
7.3  Monitoring Responsibilities............................................................................................. 102
7.4  Basic Outline of Accounts Receivable Monitoring Program................................................. 105
7.5  Section VII Exhibits: 112
          A.  Schedule of Accounts............................................................................................ 113
          B.  Client Advance and Reserve Disbursement Authorization Form.................................. 114
          C.  Account Debtor Credit Limits................................................................................. 115
               C-1.  Credit Research Form................................................................................... 117
               C-2.  Large Account Debtor Cedit Approval Form..................................................... 118
               C-3.  Dun & Bradstreet Credit Matrix...................................................................... 119
               C-4.  Bank Reference Request............................................................................... 120
               C-5.  Trade Reference Request.............................................................................. 121
          D.  Account Debtor Excess Concentration Approval Form............................................... 122
          E.  Invoice Verification............................................................................................... 123
               E-1.  Written Verification....................................................................................... 125
               E-2.  Multiple Invoice Verification Form................................................................... 126
          F.  Bank Wire Letter................................................................................................... 127
          G.  Trend Reports...................................................................................................... 128

VIII.  Problem Transactions:

8.1  Overview..................................................................................................................... 129
8.2  Early Warning Signs...................................................................................................... 129
8.3  Early Action Strategies.................................................................................................. 131
8.4  Client Failure................................................................................................................ 134
8.5  Protection and Liquidation of Other Collateral................................................................... 137
8.6  Inventory, Machinery and Equipement............................................................................. 137
8.7  Potential Personal Liability of Clients, Officers and Directors.............................................. 137
8.8  Bankruptcy................................................................................................................... 138
8.9  Alternatives to Bankruptcy.............................................................................................. 142
8.10  Section VIII Exhibits: 143
           A.  Article 9 Letter to Account Debtor.......................................................................... 144

IX.  Glossary of Terms:

     Title Page...................................................................................................................... 145
     Glossary of Financing Terms............................................................................................ 146
   

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