Business Funding In Today’s Environment Larry L Jones Vice President Commercial Loan /Special Assets Department (630)549-2463

Understand the bank’s Approach Three components of a credit decision Coverage Will the business be able to Service the debt? Credit Does the borrowers/operators have a history of paying ? 3. Collateral Will the pledged assets pay off the loan?

Coverage Formulas Debt Service Coverage Ratio (DSCR) Funds available for debt coverage Net Income $75,000 Interest $37,500 Depreciation $12,500 Total available for debt coverage $125,000 Debt Service Coverage Ratio (DSCR) Available for debt coverage / debt payment=DSCR Example: Total required debt service $100,000 Total DSCR 1.25/1

Credit Sources bank’s use as references Credit reports Current and past creditors Previous employers Suppliers Customers Other bank’s experience

Collateral Security Maximum Advance Real Estate Equipment Commercial Residential Equipment Rolling stock Accounts Receivable Contracts Goodwill 75% of appraised value 80% of appraised value 70% of depreciated value 70% up to 59 days 50% 60-89 days Over 90 days no value No value

Funding Structures (typical terms for types of loans) Funding structure consists of multiple credits Security Paymt Term Rate Time to Closing Comml R E P&I 25 yrs 5-6% 8 weeks Process: borrowers’ information gathering and analysis, appraisal, title commitment. ALWAYS close with title company. Equipment P&I 5 yrs 7-9% 4 weeks Process: borrowers’ information gathering and analysis, appraisal, UCC search, security verification Accounts Receivable (line of credit) Int only 12 mos 7-12% 2 weeks Process: borrowers’ information gathering and analysis, aging review, UCC search, verification from customer Construction Int only 6-9 mos 7-9% 8-10 weeks Process: same as R E plus plans approval

Over $17 billion in small business loans in 2012 SBA 504 The SBA 504 loan program is designed to assist small business in the acquisition of commercial real estate and heavy machine/equipment. It is truly one of the best financing options for small business owners today. SBA 504 20-Year Fixed Interest Rate for May 2014: 4.82% Difference in interest charge between 6.00% and 4.82% On $500,000 at 10 years: $35,000 Over $17 billion in small business loans in 2012

SBA 504 Eligible Projects Financing Structure Owner-Occupied Real Estate (20-Year Term/Fixed Rate) Machinery & Equipment (10-Year Term/Fixed Rate) Soft Costs may be included Financing Structure 10% equity down, up to 90% financing For real estate, equipment, renovation Long term (10 or 20 year notes) all-in on purchases

Larry L Jones Questions? Commercial Lender ljones@firststatebank.biz 620 E Main St St Charles, IL 60555 Office: (630)549-2463 Cell: (630)258-5553