Invoice Factoring, Debtors Discounting and Trade Finance are bridging facilities using your debtors, stock or movable assets to raise cash.

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1 Dear Sir / Madam, Re Bridging Facilities Invoice Factoring, Debtors Discounting and Trade Finance are bridging facilities using your debtors, stock or movable assets to raise cash. A key element is that the goods must have been delivered and/or work or service must have been performed. Benefits Increased sales: Sales are not limited so much by cash flow as you have cash on hand. Increased margins and improved credit rating: Take settlement discounts Reduced management time: Use your time to focus on areas of the business that make money Cash for expansion: Expand sales as you now have cash Reduced overheads: Stationary, equipment not needed Minimizing potential bad debts: Minimize the bad debts though effective controls. Improved return on capital: High levels of trading can be achieved to ensure refund on capital Expansion without loss of equity / control: No need to take on an investor and dilute ownership Cash for expansion: Expand sales as you now have cash Selective Invoice Factoring The term selective invoice refers to the fact that you can choose one or selected invoices to bridge, whereas Full Debtors Book means you will use your entire debtors book to raise cash and a full debtors management and debt collection service is offered in this case. Selective Invoice / Cheque Discounting works on the basis of the following: The Invoice is essentially bought from you after the goods have been delivered and / or the service has been performed. Up to 80 % of funds due on these outstanding invoices/orders is advanced to you 20% is held as retention for the purpose of security and paid out to you (less costs) once your client / debtor settles this account. A monthly discounting fee of up to 5 % (depending on the risk and debt) is charged. A once-off set up fee of up to 3 % (which is dependent on the deal size) is levied.

2 Additional Security The bridging company may also take additional security in the form debtors insurance or ask for fixed property as security. There may also be a specific amount, agreed upon by both the discount house and yourself, which is taken out of the initial deal and paid into a separate bank account in your name and ceded to the discount house, to be used in the event of a default by a debtor. This will only apply to the first deal, all further deals will be paid out at the full 75% of invoice value. Added to the security structure is the fact that cession of your debtor`s book and security cheques made out for the full invoice worth, may also be required. Credit Committee Approval After submission of all the documents, a presentation is made to the bridging house credit committee for assessment. In some instances additional documentation may be required. Once this is in place, the senior credit manager of the bridging company will assess the deal and give an approval or decline it. Terms If approved, you will receive a letter advising you that your facility has been approved. It also advises you on what terms the deal is to be structured. If you are in agreement, you will need to sign the letter of approval and fax it back to us. Once all of this has been received, the invoices are then validated to ensure that there is value in the paper that is being bought from you. If approved, the lenders attorney draws up the final contract for signature in the presence of one of bridging company s representatives. Agreements Once the bridging company has been informed that the contract has been signed, an agreement per debtor is drawn up. As an example, if 1 debtor has 10 invoices to be discounted one discounting transaction is drawn up. So each debtor will have its own separate discounting transaction drawn up. Once you have signed the transactions off, a three-party agreement is drawn up, which is signed by the debtor, the bridging company and yourself. This letter advises you that the bridging company has purchased invoices from you, the client, and the debt is legally owed to the bridging company. Once signed copies as well as the security cheques have been received, the bridging funds are transferred to your account via EFT. Discounting / Bridging fees only come into effect, when you actually discount invoices with the bridging company. If no invoices paid out then no charges! The facility lies dormant until utilized.

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4 Full Debtors Discounting This is a way to provide capital and accelerate cash flow to help businesses grow profitably from a sound base. It is flexible finance which is linked to turnover, with a professional Debtor Administration and Credit Control Service and is not borrowing but converts debtors into cash. An overdraft is a fixed amount but with debtors discounting as your debtors book grows, so does your cash flow. Full debtors normally encompasses management of and cash advance on your entire debtors book. How does the arrangement work? A contract is entered into with the South African bridging company and when goods are delivered or services rendered, an invoice is raised, a copy is sent to your customer, and a second copy, together with relevant proof of delivery, is sent to the bridging company. The invoice is processed and up to 80% of the invoice value is paid out to you. A full set of accounts is presented to you at the end of every month. Your debtor remits his payments to the factoring house and then the outstanding amount is paid over to you. i.e. 20% of invoice value less payout of up to 80%. Professional credit controllers administer the sales ledger and they assess the creditworthiness of customers, attend to credit control and debtor administration, take care of the collections and institute legal action if needed. The client is always in control. Some features of Debtors Factoring: Access to cash to support expansion Sales volumes are not hindered Professional credit controllers. 20 years of experience with over 1000 clients. Control of bad debts Real time status on your books via the website Costs Administration fee: Fees range between 0.5% and 2.0% of turnover and is based on the number of invoices to be processed, value of sales and credit worthiness of customers. Discount fee: A discount (interest) fee is charged, normally 1.0% to 2.0% above the ruling Prime Bank Overdraft Rate on the amounts advanced.

5 Pre-Qualifying Criteria for Debtor Finance, Invoice Factoring, Trade Finance, Inventory Finance, Purchase Order Bridging Must have been trading for at least 2 years. Trading Profitably ( A small loss could be acceptable). Customers / Debtors must be businesses, not private individuals. Must be Manufacturing, Wholesalers, Distribution or Service industry. Have annual sales in excess of R2 Million. Good prospects for growth. Sell on terms not greater than 90 days Acceptable product i.e. not open to disputes. Annual Financial Statements or Drafts must be available within 6 months of the year end. Businesses not suited to Factoring or Invoice Discounting Venture Capital Capital Goods Inter Company Transactions Retail Debtors i.e. to private individuals Documentation Required The documentation required to do a single invoice bridging / full debtors discounting / trade finance / inventory finance / purchase order bridging / motor dealership assessment, is the same and are as follows: Step 1 Copy of Memorandum and Article of Association or Founding Statements Audited Financial Statements (last two years) Budget and Cash flow - Projected Management Accounts ( latest ) Debtors Age Analysis Creditors Age Analysis Copies of Invoices, Statements, Credit Notes, Letterhead and Sales Literature Owners / Shareholders / Directors Identity Docs (if married COP then spouses ID) Owners / Shareholders / Directors Assets and Liabilities schedule ( signed) Copy of invoice to be bridged ( if single invoice ) On receipt of these, the bridging company will indicate its level of interest and call for the following documents if they wish to proceed.

6 Step 2 Cancelled Cheque Credit Application Form Bank Statements 3 months Contact details for Bank manager and Auditors, If judgments are pending or defaults have been lodged, proof of rescinding or payment arrangements must be submitted Letter from Auditor/Bookkeeper/Bank stating that the Debtor s Book has not been ceded to any third party Tax Clearance from Accountant - PAYE & VAT Landlord Details name, address, telephone numbers Company: List of Assets & Liabilities Current Invoices - 30 Day Security Cheques Security: If property/machinery is to be used as collateral or security detailed documents for property/ machinery must be attached as per below : Is property/machinery freehold or encumbered? Valuation Certificate Latest Bond Statement Copy of Title Deed, if there is one Full details of Machinery that is to be used for security (Special Notarial Bond) Debtor`s Details: Correct Legal Entity Bank Details Physical & Postal Address Contact Details Debtor s Registration Number Alternative types of bridging finance available to assist with cash flow Inventory Finance : You can convert stock ( inventory ) into cash with a Trade Facility. Import Finance : Letters of Credit, Standby Letters of Credit, Trade Facilities can be set up to facilitate the import of goods for yourself or for your clients. Export Trade Facility : If you have a confirmed buyer who has presented an Irrevocable, Confirmed, Documentary Letter of Credit to you but you cannot raise a Letter of Credit in favour of your supplier, then we can arrange to issue a Letter of Credit to your supplier to supply the goods to your client ( buyer). You get the profits on the transaction.

7 Purchase Order Bridging : If you have secured an order from a client and need to fund the purchase of the goods to be supplied, from local or overseas, then a Trade Finance facility can be set up. Trade Finance : This covers a broad range of funding facilities and credit lines that assist in securing new deals for you, funding deals larger than your cash flow and unlocking cash from your resources to facilitate growth. Property Equity Release : The equity in property can be unlocked and converted to cash. Equity is the current property value less the current bond. Minimum deal size is R Pension Bridging : If a pension payout is due, this can, then up to R of this can be advanced ( bridged) without security and if more needed then a property will need to be offered as security bridged. Provident Fund Bridging : Up to R of a provident find can be advanced to you and if more needed then you will need to provide alternative security.preferably property Developers Bridging : Where a development loan is in place ( from a bank) and pre-sales on property development have been secured, bridging finance programs are available. Panel Beaters Can bridge the work done for insurance companies and receive up to 75 % of the invoice value immediately. Deposit Guarantee : No need for a cash deposit to secure that property if you know that you will have the cash deposit before transfer takes place. Leave your money where it is and buy a Deposit Guarantee / Deposit Advantage, to give to the Sellers attorney Sellers Proceeds : If you have sold your property you can access the profits now with Sellers Proceeds Bridging. Yours Faithfully New Heights Finance

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