1. SELLING TO THE SMALL AND MEDIUM SIZED BUSINESS: CREDIT, FINANCIAL AND LEGAL ISSUES FOR THE CREDIT TEAM
Scott Blakeley, Esq.
Susan Archibeque, CCE
Director of Credit,
Nicholas & Company, Inc
Ron Sereika, CCE

2. Summary of Small, Medium and Large Business Classifications
According to the SBA - Business Classifications
Small
Employees
$5 - $10 Million Annual Revenue
Limited Cap X
There at 28 million  n US - appx $54%
Medium
Employees
$20 Million - $1 Billion -annual  Revenue
Some Cap X
Likely more than one office
Large
1000 >  employees
Over $1 Billion annual Revenue
Large Cap X
Several Offices

3. What is a Small to Medium Sized Business? (SMB)
Revenue
Capital structure
Corporate form
Management and ownership
The life cycle of an SMB

4. New Account Set Up: Creating Transparency with the SMB
Startup or established?
It is essential that you use a credit application for each new account.
Serves as a legal document (must be signed by an officer)
Tells the customer what they can expect in; payment terms, Sales Tax, Interest charges
Contact information- who to contact to get paid, who is owner, EIN number or SS
Documenting the sale with T&C’s

5. New Account Set Up: Creating Transparency with the SMB
Gathering credit and financial information
Trade credit bureau reports
Supplier and bank references
Trade credit industry groups
Do you need to get a credit report on every new customer?
Look for company website, Google, LinkedIn.
Credit scoring
Do you have a Credit scoring model set up?
What factors are important in your credit scoring model?

6. Understand the SMB’s Business
Know the SMB’s customers
Industry trends? Where do they stand in the industry? 
Current loan structure?
A balance between short and long term debt to cover the rough spots?  
What does their bank say about the rate and formulas? 
The rate indicates the risk concerns of the bank 
They will know more than you may have access to
What is the potential for growth and profit?
Understand their cash to cash cycle as it relates to your terms
Be a consultant to the SMB

7. Preserving the SMB Through Contract and Credit Enhancements

8. Financing Alternatives for the SMB
Traditional bank lending
Small Business Administration (SBA) guaranteed loans
Fintech
Credit Cards
Supply Chain financing
Factoring
Asset based lending

9. Selling the SMB on Terms
Maintaining the relationship- balancing risk and collection practices
Payment channel- paper vs. E-forms
Alternative payment mechanisms:
Credit Card
Electronic check
ACH
Terms pushback
Robinson Patman considerations

10. Industry Information Regarding SMB's
Warning signs of delinquencies
A/R aging
High credit risk score
Timing for what is considered delinquent
Collections
Judgments
Liens
Bankruptcy
Likelihood of small business to become severely delinquent
Monitoring accounts
Tighter lending practices
Vendors as lenders
Social media and non-traditional sources to measure credit risk
Monitoring of bank lending, term dates and covenants

11. If the SMB Has Not Paid Managing A/R risk Managing preference risk
Alternative payment channel
Repayment Agreement

12. SMB Into Insolvency Survivability of out of court
Small business chapter 11
Chapter 13