1. Invoice Discounting Introduction –Manner in which to provide short-term, flexible, quick financing, day-to-day working capital for companies with revenues. –Involves outright purchase of receivables –Geared to SMEs: small-to-medium cos, including “start- ups”: periods of rapid growth ie Bulge financing need to increase cashflow require bridge financing ie new financing in negotiations when A/R exceed current lenders appetite/facility –Factoring is a huge and widely accepted practice across almost every industry: 2001: $3B in Canada, $166B USA, $1 trillion worldwide –Monthly transaction range: $10,000 - $2,000,000

2. Invoice Discounting Pros –Instant ready cash against invoices –Off balance sheet financing –Based on your customer’s strength vs your financials –Factor guarantees creditworthiness of your customer (non-recourse relationship) –Improves banking relationships –Decisions based on credit & standing of your customer vs your balance sheet –Allows for increase in turnover, volume and profit –Improve earnings substantially … ROCE –Financial resources to grow quickly

3. Invoice Discounting Pros cond –No minimum term contract required –Factors offer a more favourable risk assessment –Doesn’t compromise your balance sheet –No long term commitments: financing on a “as needed” basis –Allows the taking advantage of early payment and volume discounts from trade suppliers –No equity dilution –Factor acts as your A/R and credit dept: factor manages receivables performs/replaces 1) credit checking 2) lending 3) risk bearing (credit insurance)

4. Invoice Discounting Cons –Fees/costs for factoring financing: –fees 2% - 8% for standard 30, 60, 90 day terms. Premium charge for terms beyond 90 days –1/4 pt - full pt premium for non-recourse funding (Note: all transactions will be non-recourse for monthly funding requirements < $100,000) –Factor involvement with customers

5. Invoice Discounting Criteria/Issues –Profitable revenues are required to take advantage of factoring –Need creditworthy customers –Monthly invoice amounts $5,000 - $5,000,000 –Individual invoice amounts: $100 - $1,500,000 –Often no start-up or legal fees –30, 60 day terms. Beyond 60 day terms a premium applies –Advance within 24 hrs: 70% - 95%. Remainder upon invoice payment. –Fee range 2% - 8%, depending on: total volume, risk, size of facility, # of customers, # of invoices, payment terms, recourse agreement, aver invoice size, annual sales volume of customer –Purchase order and inventory financing also available

6. Invoice Discounting Process –To initiate relationship: complete application and submit supporting documentation –Agreement (“term sheet”) between seller (you) and the factor which specifies legal obligations of both parties and procedural arrangements. This process takes 6 - 9 business days. –Upon establishment of relationship: submit customer order(s) to factor for credit check and approval –Product is produced, shipped & invoiced to customer. Invoice to be stamped notifying the customer to remit payment directly to factor (“lender”). –Invoice submitted to factor who advances 70% - 90% (depending on term sheet) of invoice amount to you.

7. Invoice Discounting Next Steps –Contact David Dods at Omni-Rand: Direct: (905) 873-7151 Fax: (905) 873-6560 Mobile: (647) 227-3637 Email: info@omni-rand.ca