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.
2. About Southeastern Commercial
Finance, LLC
Mission:
Through partnership with the banking community,
offer a means of providing Professional Asset
Based Lending Services for our Banking Partners,
the Bank’s Prospects and Customers.
3. 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.
4. Company Profile
•Transaction size ranges from as low as $300,000 and as
high as $3,000,000, with the ability to do large
transactions 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.
5. 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 credit
participation with commercial banks throughout the Southeast (30%)
•Southeastern Credit Services – Loan monitoring, field exam auditing,
and troubled credit evaluation (5%)
6. Historical Portfolio Profile
Historical Transaction Base
• Manufacturing 43.17%
• Distribution 26.06%
• Service 22.74%
• Transportation 8.04%
8. Strategic Competencies
• Extensive experience at all levels in bank Asset-based lending and
the community bank environment.
• Fully staffed with professionals experienced in all stages of Asset-
based transactions, including: Analysis, Underwriting, Field
Examination, Account and Problem Credit Management.
•Fully developed and proven state of the industry systems and
technology.
• Demonstrated success and capability to adapt to multiple credit
culture environments.
• Cohesive management team with a record of profitable growth and
success in multiple environments.
9. Common Characteristics of
Asset Based Borrowers
• Financial Leverage – Higher debt to worth ratios.
• Low Balance Sheet Liquidity – Assets centered in A/R and
Inventory.
• Rapid Revenue Growth
• Seasonal or Cyclical Business
• In a turnaround mode due to economy or industry changes.
10. 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
11. 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
12. Key Components of the
Asset-based Lending Process
I. Credit and Underwriting Issues
II. Collateral Field Examinations
III. Operational and Account Management
13. Key Credit and Underwriting Issues
I. 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?
14. Key Credit and Underwriting Issues
II. 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?
15. Key Credit and Underwriting Issues
III. 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?
16. Key Credit and Underwriting Issues
III. 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?
17. Key Credit and Underwriting Issues
IV. 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?
18. Scope of Collateral Field Examinations
The Scope of Field Examination Audits can vary based on the
situation, but generally are performed quarterly and focus on the
following:
• 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.
19. Scope of Collateral Field Examinations
• Comments on the adequacy of internal accounting systems and
controls and borrower’s ability to provide timely and accurate
reports.
• 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 Payroll
Records)
20. 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.”
21. Operation and Account Management
“The Mission of the Account Management Function is to know and
understand, on a real time basis, the amount, validity, and
collectability of the collateral underlying the loan. The Account
Management function fulfills this mission through the ongoing
achievement of Account Management Objectives and consistent
implementation of Operation Procedures.”
22. Account Management Objectives
A. Identify, Communicate, and Manage Risk Exposure with AE
B. Service the working capital needs of the Customer
24. 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.)
25. 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.
26. Quarterly Reporting Requirements
• Updated customer list (including address, phone, and fax
numbers)
• Form 941 Payroll Tax Returns (including proof of payment)
27. Annual Reporting Requirements
• Year-end Financial Statements
• Personal Financial Statements
• Certificate of Insurance on Inventory
28. Operational Procedures
B. 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.
29. 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.
