1. FEI Professional Development Session September 21, 2017
Chat with Our Senior Credit Officers Steps for Success When Positioning Your Company for Credit
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2. © 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Today’s Agenda
Introductions
Setting the Stage – Borrower’s Motivations & Views on Securing Financing
Discussion / Commentary from Kelly & Mark
Q&A
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3. © 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Setting the Stage
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4. Top Issues Facing U.S. Businesses
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5. Risk & Return Profiles are Very Different for Debt vs Equity Financing
© 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

6. Borrower’s Motivation To Secure Financing (Last 12 Months)
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7. Is it Easy or Difficult to Raise New Debt Financing?
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8. ~60% of Cash Flow Applications are Declined
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9. The Credit Process is Really not a Black Box!!
Credit Request
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10. Conventional vs Other Vehicles
SBA
Asset-Based
Factoring
No $ Limit - Operating companies need strong cash flows - Priced off of different interest indexes; LIBOR, prime, etc. - Can be used for passive (investment) & non-passive needs - Higher down payments - Covenants
Up to $5M - Made by bank & non-bank lenders - Guaranteed by the Federal government - Priced off of prime + spread - Limited to business purposes; i.e. real estate, working capital, equipment, acquisitions - Lower down payments - No covenants
For working capital - Revolving credit line based on a % of eligible accounts receivables and/or inventory
Accounts receivables are sold to a 3rd party & the 3rd party collects payment - It’s not a loan - Is primarily based on the quality of your customers credit, not your business
© 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

11. © 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
The Five C’s of Credit
Conditions The loan’s purpose
Capacity Cash flow - 1st source of repayment
Collateral Other assets – 2nd of source of repayment
Capital The amount owners have invested in equity
Character Owner(s) history in managing personal & business credit
© 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

12. Covenants – Why Do Banks Add These?
Maintain Loan Quality
Ensure Adequate Cash Flows
Keep an Updated Picture of the Borrower’s Financial Performance & Condition
© 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

13. © 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Covenant Types
Financial
Debt Service Coverage
Debt to Equity
Tangible Net Worth
Affirmative
Maintain Good Standing of Entity
Maintain Adequate Insurance Policies
Negative
Restrict Incurrence of Additional Debt or Acquisitions / Divestitures Without Lender Approval
© 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

14. © 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Q & A September 21, 2017
© 2017 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.