Introduction

1. 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

2. 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

3. 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)

4. 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

5. 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

6. 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 6 - 9 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.

7. Next Steps • Contact David Dods at Omni-Rand: • Direct: (905) 873-7151 • Fax: (905) 873-6560 • Mobile: (647) 227-3637 • Email: info@omni-rand.ca