Invoice Discounting Introduction –Manner in which to provide short-term, flexible, quick financing, day-to-day working capital for companies with revenues. –Involves outright purchase of receivables –Geared to SMEs: small-to-medium cos, including “start- ups”: periods of rapid growth ie Bulge financing need to increase cashflow require bridge financing ie new financing in negotiations when A/R exceed current lenders appetite/facility –Factoring is a huge and widely accepted practice across almost every industry: 2001: $3B in Canada, $166B USA, $1 trillion worldwide –Monthly transaction range: $10,000 - $2,000,000

Invoice Discounting Pros –Instant ready cash against invoices –Off balance sheet financing –Based on your customer’s strength vs your financials –Factor guarantees creditworthiness of your customer (non-recourse relationship) –Improves banking relationships –Decisions based on credit & standing of your customer vs your balance sheet –Allows for increase in turnover, volume and profit –Improve earnings substantially … ROCE –Financial resources to grow quickly

Invoice Discounting Pros cond –No minimum term contract required –Factors offer a more favourable risk assessment –Doesn’t compromise your balance sheet –No long term commitments: financing on a “as needed” basis –Allows the taking advantage of early payment and volume discounts from trade suppliers –No equity dilution –Factor acts as your A/R and credit dept: factor manages receivables performs/replaces 1) credit checking 2) lending 3) risk bearing (credit insurance)

Invoice Discounting Cons –Fees/costs for factoring financing: –fees 2% - 8% for standard 30, 60, 90 day terms. Premium charge for terms beyond 90 days –1/4 pt - full pt premium for non-recourse funding (Note: all transactions will be non-recourse for monthly funding requirements < $100,000) –Factor involvement with customers

Invoice Discounting Criteria/Issues –Profitable revenues are required to take advantage of factoring –Need creditworthy customers –Monthly invoice amounts $5,000 - $5,000,000 –Individual invoice amounts: $100 - $1,500,000 –Often no start-up or legal fees –30, 60 day terms. Beyond 60 day terms a premium applies –Advance within 24 hrs: 70% - 95%. Remainder upon invoice payment. –Fee range 2% - 8%, depending on: total volume, risk, size of facility, # of customers, # of invoices, payment terms, recourse agreement, aver invoice size, annual sales volume of customer –Purchase order and inventory financing also available

Invoice Discounting Process –To initiate relationship: complete application and submit supporting documentation –Agreement (“term sheet”) between seller (you) and the factor which specifies legal obligations of both parties and procedural arrangements. This process takes business days. –Upon establishment of relationship: submit customer order(s) to factor for credit check and approval –Product is produced, shipped & invoiced to customer. Invoice to be stamped notifying the customer to remit payment directly to factor (“lender”). –Invoice submitted to factor who advances 70% - 90% (depending on term sheet) of invoice amount to you.

Invoice Discounting Next Steps –Contact David Dods at Omni-Rand: Direct: (905) Fax: (905) Mobile: (647)