Harvard Law School Presentation December 7, 2016

SFS Business We provide working capital to small businesses throughout the U.S. Average financing is about $40,000 per deal Repayment is usually within 9 – 18 months Our typical client: Has a FICO score in the low to mid 600’s Has 1- 20 employees Revenue of $500,000 - $2 million Average factor rate is 1.34 over deal term to compensate for higher origination costs and default rates

Why SFS was Created Large market - 17 million active businesses in the U.S. with lending needs of 6 million served by banks Underserved by banks because: Not credit worthy due to: Unreliable or no financial statements Many have unresolved tax liens Many receive cash payments for services or products High seasonality or high customer concentration issues Small deal size is uneconomic for “old style” institutions Timing to process and fund is within a few days, banks cannot operate this quickly Regulators view our average customer as too risky to be funded by a federally- insured depository institution resulting in a higher equity charge

How Did SFS Obtain Capital? Personal investment combined with “friends and family” in 2006 Obtained a high cost (17.25%) line of credit in mid- 2006 Raised $2 Million of Equity in late 2006 Raised $5 Million of Equity in late 2007 and obtained a larger line of credit at 12.25% Raised $5 million of Equity in 2012 and refinanced our line of credit with a traditional bank (lowered our debt cost to 5.5%) Raised $25 Million of Equity from Pine Brook Partners in 2014 Increased our Line of Credit to about $100 Million Pine Brook Partners has invested an additional $15 Million of Equity since 2014

Regulatory Landscape In 2006 - no regulatory oversight as transaction was not a loan Primary issue was the state-by-state usury laws for commercial business As the industry grew, more regulation has entered the space: Class action law suits against Rewards Network and CAN in California as contracts were interpreted as a loan. Cases were settled out of court Is the contract a loan or a purchase of future receivables? What actions have been taken? Many companies started utilizing a “Bank Charter Partnership” “Madden vs Midland” case is challenging this based on the “True Lender” concept Operating in certain states and exporting “choice of law” Certain states now require lender licenses Other Regulatory Matters OCC considering National Charters for Fintech Companies Will the CFPB get involved in small business lending? Brokers to be licensed Risk models cannot include certain discriminatory data TCPA