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Page intentionally left blank To maximize its usefulness, this guide is designed to be: Printed duplex Three-hole punched Inserted into a binder or folder Liquid Capital Southwest: Factoring Guide Page 1

Liquid Capital Southwest s Factoring Guide LCSTfactoring@MyLiquidCapital.com www.liquidcapitalsouthwest.com Ph: 210.587.7245 Fax: 210.485.1405 March 4, 2014 v1 Liquid Capital Southwest: Factoring Guide Page 2

4 Welcome to Liquid Capital CONTENTS 5 Liquid Capital s factoring process 7 Factoring checklist 8 Log in to the Client Web 9 Use the Client Web 10 Request customer credit 11 Decision Tickets 12 Customer credit application 13 Client activity reports 14 Purchase reports 16 Collection reports 17 OA s and cc s on Collection reports 19 Adjustment reports 21 Blue ribbon tips 22 Revise your invoices 23 Liquid Capital banking 24 Notices we send 25 Notes Liquid Capital Southwest: Factoring Guide Page 3

Welcome to Liquid Capital Contact us Corina 210.587.7106 210.776.8010 mobile Corina.Edinger@MyLiquidCapital.com Elizabeth 210.340.1891 Elizabeth.Edinger@MyLiquidCapital.com Patty 210.587.7245 Patty.Ibarra@MyLiquidCapital.com Robert 210.587.7206 210.667.5760 mobile Ron 210.587.6676 210.414.1514 mobile Robert.Edinger@MyLiqudCapital.com Ron.Edinger@MyLiquidCapital.com Our mailing address: 11703 Huebner Rd. #106-470 San Antonio, TX 78230 How to use this Guide This guide is designed to be used in conjunction with a customized Excel spreadsheet we send you. This Client Spreadsheet contains forms to fill out for your account setup and forms you will use when you factor invoices. You will find instructions for the forms at the top of each tab on the spreadsheet. Example: Invoice Journal form from the Client Spreadsheet + Liquid Capital Southwest: Factoring Guide Page 4

Liquid Capital s factoring process When you factor your invoices, you are selling them to us at a discount for immediate cash to support your working capital needs. There are a number of aspects to this process, as shown: 1. Receive order Client Receives an order for goods or services 2. Extend credit Client Liquid Requests a credit line for the customer on the online system. Reviews the credit standing of this customer and responds with an approval or a decline. 3. Provide credit protection Liquid Provides an option for credit protection 4. Sell invoice Client Client Client Provides goods or services to customer Sells and assigns the invoice, at full value, to Liquid Sends original invoice to customer; includes assignment/payable language 5. Post receivable Liquid Receives invoice data and posts the receivable. Liquid Maintains A/R records for five years. 6. Provide financing Liquid Client Provides the cash advance to you on the receivable electronially. Chooses whether to receive advance by wire transfer or ACH. Liquid Capital Southwest: Factoring Guide Page 5

7. Collect receivables Liquid Liquid Liquid Liquid Receives check or EFT, with remittance advice. Automated system performs cash aplication. Identifis shortages and/or adjustments to payments. Records detailed transaction information and send into to you electronically. Follows up on overdue payments. 8. Remit collected funds Liquid Credits client account for payments received Liquid Applies funds toward advance; forwards balance via EFT 9. Financial reporting Liquid Liquid Client Client Provides detailed records of transactions for convenient online access. Includes dispute and deduction information. Maintans records of transactions for five years. Reviews reports, makes journal entrie May customize and print various reports via the online system. Liquid Capital Southwest: Factoring Guide Page 6

Factoring checklist Customers and billing 1. Do your customers have an available credit line? 2. Do you have proof of delivery or job completion? 3. Do your invoices have the Liquid Capital assignment? We need this paperwork Email and fax numbers Deadlines and Timing Other things to remember: 4. Is your customer information up-to-date? 1. Invoice Journal: Email or fax 2. Cover sheet: Email or fax 3. Invoices and backup documentation: Email or fax 4. Client spreadsheet: EMAIL LCSTfactoring@MyLiquidCapital.com. Be subject line-specific. Fax: 210.485.1405. Include cover sheet with no. pages. Factoring requests: 10:30 Reserve release request (only): 11:00 ASAP wires: 9:30 Wire transfers: Post by the end of business day ACH Deposits: Post the next business day. NOTE: The next business day after Friday is Monday. Liquid Capital Southwest: Factoring Guide Page 7

Log in to the Client Website Our client website is available to you in real time, 24/7. When your account setup is complete, we issue you a Company (number) and a Password so you can monitor your account. Record your login here: Company: Password: Enter: https://www.liquidcapitalweb.com. The login screen appears. Enter your Company and Password. Login Screen Leave User ID blank. The Main Summary screen appears. From this screen, you use the drop-down lists to choose tasks: You can view, download, and print data; in the case of customer credit only, you enter data. Main Summary Screen Liquid Capital Southwest: Factoring Guide Page 8

Use the Client Web https://www.liquidcapitalweb.com Check your A-R DEBTOR LIST / AGING: Current day aging with balance 1. Expand view. 2. Click Invoice # to see invoice information. 3. To read any posted Collection Notes: Scroll down to Notes. Check ineligible invoices DEBTOR LIST / AGING: Invoice list Check: Ignore data range and Ineligible View reserve deposits/releases DEBTOR LIST / AGING: Reserve activity 1. Select date range 2. Expand all or click on the + hyperlink Check customer credit CREDIT INFORMATION: Debtor credit availability You will see debtor list/availability Enter a credit request Note: Check customer credit (above) before submitting a credit request. DATA ENTRY: Credit request 1. Select I am Entering a New Debtor Below or choose from the list. 2. If new customer, screen appears. Enter data (Reference # is a unique number of your choice.) 3. On next screen: Enter the TOTAL CREDIT LINE you would like. Note: If you are requesting an increase in credit, you still enter the TOTAL CREDIT LINE. View checks or EFTS received COLLECTION / PURCHASE HISTORY: Checks processed 1. Expand all or click on hyperlink. 2. Click on Check# hyperlink to view payment information. 3. Scroll down to view check or EFT image. Run various reports REPORTS VIEWED IN PDF 1. Select report you want 2. Choose your parameters. Check available cash reserves STATUS: Client summary Scroll to bottom left of screen NOTE: You may see an amount on this screen that is different from the amount you see when you log in. Available cash reserves take into account your ineligible invoices and any fees that accumulate. Print a copy of a report COLLECTION/PURCHASE: Processed batches 1. Select Starting date and as of date 2. Expand all or click on + hyperlink. NOTE: Cash Posting is a Collection. This will be a negative number (a credit).

How to request a customer credit line We pre-approved credit lines for your customers. These credit lines are intended not as credit guarantees but as guidelines and references to help you make good business decisions. You request customer credit on our client website by following these steps: 1. From Main Summary: Click the Data Entry tab for the droplist. Select Credit Request. 2. Selection screen appears. If this is a new customer select: I am Entering a New Debtor Below. For an existing customer, choose from the customer list. 3. Data entry screen appears (for new customer only Enter data in all fields. (Reference# is a unique number of your choice.) 4. Credit request screen appears. Enter credit request amount. Remember: If you are requesting a credit increase, enter the TOTAL credit line you would like, not the amount of the increase. (Shipping date can be today s date) In 24-48 hours, you will receive a Decision Ticket from our credit analyst. Liquid Capital Southwest: Factoring Guide Page 10

Credit Decision Tickets Once our credit analysts have finished their assessment, they send you a Decision Ticket to let you know whether your request has been approved or declined. Sample Decision Ticket #1 Credit approved Sample Decision Ticket #2 A B # 2 A. Current limit : The credit line in place before your request. B. New limit would be : You may have received the line you requested, but it could be less sometimes it is more. Credit declined C C. Current limit : Defaults to $2500. D D. Comments : You may see requires credit application Customer Credit Application If our analysts decline to grant credit, they may suggest you ask your customer to fill out a Customer Credit Application, which you can find on the next page. (If you would like an application in Microsoft Word format to customize with your logo, please let us know.) When you receive a completed Application, email or fax it to us, and we will forward it. Liquid Capital Southwest: Factoring Guide Page 11

Customer Credit Application Business Contact Information Company name: Phone: Fax: E-mail: Registered company address: City: State: ZIP Code: Date business commenced: Number of Employees Sole proprietorship: Partnership: Corporation: Other: BUSINESS AND CREDIT INFORMATION Exact Corporate Name (if Corp.) Incorporation Date: Primary business address: State of Incorporation: City: State: ZIP Code: How long at current address? Federal Tax ID: Telephone: Fax: E-mail: Bank name: Bank address: Phone: City: San Antonio State: ZIP Code: Type of account Account number or Banker s name and telephone Highest Balance Company name (1) BUSINESS/TRADE REFERENCES Address: City: State: ZIP Code: Phone: Fax: E-mail: Type of account: Credit limit: Company name (2) Address: City: State: ZIP Code: Phone: Fax: E-mail: Type of account: Credit limit: Company name (3) Address: City: State: ZIP Code: Phone: Fax: Email: Type of account: Credit limit: AGREEMENT I, the undersigned, legally authorized in the Company, do declare that the information given by myself is correct to the best of my knowledge. I authorize your Company to conduct a full investigation with my bank and/or trade references for the sole purpose of credit granting. I also acknowledge tha t this credit information will be periodically updated for the purpose of reviewing our credit standing. The credit granting remains your Company s prerogative and therefore could be cancelled at any time without notice. AUTHORIZED SIGNATURE: NAME,TITLE: Liquid Capital Southwest: Factoring Guide Page 12

Client Activity Reports The following section provides examples of the reports we send you whenever there is activity on your account: Purchase Reports: Detail factoring and reserve release activity Collection Reports: Provide the details of customer payments Adjustment Reports: Inform you about invoice charge backs or other adjustments to your account Liquid Capital Southwest: Factoring Guide Page 13

Client Activity Reports Purchase Reports When you factor invoices, we send you a purchase report on a Control Sheet. This sample reports the purchase of two invoices. The discount rate is 3%, and 20% is held in escrow reserves. The explanation is on the opposite page. Sample 1: Purchase Report #10113 4 1 Invoice # Debtor Date Funded Held/Denied Bought 3364 Goodson Co. 12/1/2013 2034.36 2642.03 3365 Johnson Inc. 12/1/2013 255.42 331.72 2289.78 2973.75 Adjustments Posted Against Control Sheet: Description Account Wire & Bank Charges 5650 18.00 Reserve Escrow Deducted (20% * face value): Invoices Sold: 2973.75 2 Fee Deducted (87.22) 3 Reserve Escrow Deducted (581.48) 5 Expenses Deducted: (18.00) Reserves Returned Proceeds Owed/Paid to Client 2220.71 Invoice #3364: $ 528.41 Invoice #3365: $ 66.34 Additional You receive a Purchase Report when we release cash reserves to you. When you factor invoices, we can release any available cash reserves. When we do that, you receive one Purchase Report that lists both the factoring and the reserve release transactions. Liquid Capital Southwest: Factoring Guide Page 14

Sample 1: Purchase Report, explained 1. Bought : The total face value of the two invoices purchased is $2,973.75. Bought equals Invoices Sold. 2. Fee deducted: 3% ($87.22) deducted from the advance. 3. Reserve Escrow deducted: 20% ($581.48) deducted from the advance. Escrow reserves (minus any extra fees) will be released into cash reserves when the invoices are paid. 4. Funded : $2289.78 is the difference between the Bought of $2,973.75 and the sum of Fee Deducted ($87.22) and Reserve Escrow Deducted ($581.48). 5. Expenses Deducted: Funds were advanced by wire transfer, for an $18 charge. How the Funded is calculated % of invoice face value 1 Bought $ 2,973.75 100% 2 Fee deducted (87.22) (3%) 3 Escrow reserve deducted (581.48) (20%) 4 Funded $2,289.78 77% Liquid Capital Southwest: Factoring Guide Page 15

Collection Reports Customer payments are reported on Collection Reports. One report may include multiple payments from multiple customers. This first example is a simple one, with one customer paying one invoice that is not overdue. The invoice paid is from Sample Report 1. Sample 2: Collection Report 1 2 Payor/Check# Invoice# Purchased Buy# Invoice Days Check Payment Adjust Type Adjust Escrow Fee earned Goodson Co. 2,642.03 5985 3364 12/1/2013 10113 2,642.03 19 2,642.03 528.41 0 Reserve held 3 4 5 Total Collected 2,642.03 Applied to A/R 2,642.03 Reserve Escrow Rebated 528.41 Additional cash Reserves Held (528.41) Owed/Paid to Client 0 Explanation: 1. Escrow amount: The 20% total we held back at funding. 2. Fee earned: There is no extra fee since the invoice was paid in under 30 days. 3. Applied to A/R: The amount is the face value of the purchased invoice ($2,642.03). 4. Reserve Escrow Rebated: The full 20%, as the invoice was paid within 30 days. 5. Additional Cash Reserves Held: Equal to the Reserve Escrow Rebated, since there were no extra fees deducted. This is a credit to Cash Reserves. Liquid Capital Southwest: Factoring Guide Page 16

About invoices prefixed with OA or cc In the next sample report, you will see two invoices with prefixes. One is prefixed by a cc and another by an OA. Here is an explanation of this coding: A. cc prefix: Denotes a payment for a small invoice we either did not factor or we previously charged back. A cc is credited directly to cash reserves. B. OA prefix: Denotes a payment for a larger invoice that does not match to an invoice in our system. An OA payment is not directly credited to cash reserves like a cc. Instead, it is posted as a credit to Accounts Receivable. OA s are usually, but not always, invoices that we did not factor. An OA can also indicate that the remittance advice on the check or EFT from which we posted was incomplete, incorrect, or missing. In this case, the OA could be for an invoice we have on file. When you send us the corresponding invoice or let us know to which invoice the OA applies, we remove the OA from your Accounts Receivable and post the funds as a credit to your cash reserves (as shown in Sample 4). To clear an OA, we need the corresponding invoice. Liquid Capital Southwest: Factoring Guide Page 17

Sample 3: Collection Report Sample 3: Collection Report Payor/Check# Invoice# Purchased Buy# Invoice Days Check Payment Adjust Type Adjust Escrow Johnson Co. 931.72 5985 3365 12/1/2013 10113 331.72 35 331.72 66.34 A B C cc-3360 0 0 100 C/B -100.00 oa-3250 0 500 931.72 66.34 Fee earned Reserve held 1 2 3 Total Collected 931.72 Applied to A/R (831.72) Reserve Escrow Rebated (66.34) Additional cash Reserves Held (64.68) Owed/Paid to Client Explanation A. Invoice #3365: Purchased 12/1/2013 Buy#: Reference to the Purchase Report. (See Sample 1. Purchase Report #10113.) Invoice and Payment: Show that the invoice was paid in full. Days: Payment posted 5 days over terms. B. Invoice cc-3360: An invoice we did not purchase. Adjust : The funds are credited to cash reserves. C. Invoice OA-3250: An invoice that could not be matched to an invoice in our system. The funds are posted as a credit to Accounts Receivable. There is no Escrow and no Adjust type as there is for the cc. 1. Applied to Accounts Receivable: The payment for Invoice #3365 and OA-3250 (but not cc-3360, as it is posted to cash reserves). 2. Reserve Escrow Rebated: $66.34 is the 20% we held back from the funding of Invoice #3365. 3. Additional Cash Reserves Held: $64.68 is $1.66 less than the reserve escrow rebated. The invoice was paid in 35 days, so a prorated daily fee was deducted. Liquid Capital Southwest: Factoring Guide Page 18

Adjustment Reports When we reconcile your account, we send you an Adjustment Report. The information on the report lets you know that: An on-account payment has been credited to your cash reserves, as shown in Sample 4. An invoice was charged back due to age or dispute or for another reason, as shown in Sample 5. Sample 4. Adjustment of an OA Explanation Sample 4. Adjustment Report Debtor Invoice# Invoice Date Age Buy# Invoice Adjust Type A/R Escrow Fee Earned Reserve Johnson OA- 18/02/2014 2 123 C/B (500) (500) Co. 3250 2 1 3 Write Off 1. A/R : Invoice OA-3250, in the amount of $500.00, was posted as a credit on the A/R. 2. Adjust Type: This is the code used to show the type of transaction. The C/B (chargeback) removes the invoice from your A-R. 3. Reserve : The $500 is credited to Cash Reserves. Liquid Capital Southwest: Factoring Guide Page 19

Sample 5. Charging back an over-age invoice When we charge back an invoice (e.g., because it is a duplicate or over-age or disputed), you are paying us back for what we advanced on the invoice when we purchased it, plus any additional fees (e.g., for days over 30). The chargeback is debited from cash reserves. Debtor Inv # Sample 5. Adjustment Report C B A Invoice Date Age Buy# Invoice Adjust Type A/R Escrow Fee Earned Reserve Goodson 1033 11/9/213 145 10113 1479.50 c/b 1479.50 295.90 149.43 1333.03 2 1 Write Off Explanation A. Invoice : The face value of the invoice, $1479.50. B. Buy#: 10113 is the number of the Purchase Report for this invoice. C. Age: The number of days the invoice was on our books. 1. The Reserve of $1333.03 is the total amount debited from cash reserves. 2. The Fee Earned, $149.43, is the additional fee for days over 30. You can refer to Purchase Report #10113 to see the Funded. You can also calculate it this way: Reserve : $ 1333.03 Fee Earned: (149.43) Funded : $ 1183.60 Liquid Capital Southwest: Factoring Guide Page 20

Our top ten list for a blue ribbon relationship 1. Use the Factoring Checklist: Go through this before you send us your funding request to make sure you re not forgetting anything. 2. Follow the Invoice Guidelines: Double-check your invoices against our guidelines, especially if you are making any changes in your invoices. 3. Give us time. When you send in a funding request, you can t count on how many folks are ahead of you, and we need time to do our verifications. 4. Go through the reports we send you: Let us know right away if there is an issue. 5. Enter your own customer credit requests: You are in the best position to know how much credit you need. Request credit before you take on a job. You want to know that you ll be paid. 6. Be specific in your email subject lines: We receive lots of emails, and it helps if what you are writing about is named on your subject line. 7. Learn to use the Client Web to answer basic questions. Although we are happy to look up information for you, this helps us all. 8. Record your login information: You ll always have it handy. 9. Send us your customer information, and keep it up-to-date: We need this information so we can send out our Notices, and our service center needs this information so they can follow up on any overdue invoices. 10. Give your customers a heads-up: Let them know that we re the folks helping you because you re growing. Liquid Capital Southwest: Factoring Guide Page 21

Revise your invoices Please follow these guidelines for your invoices: Company name and contact info: Use your company s legal name. If you plan to use a d/b/a, make sure you have filed with the County and the Secretary of State. Omit your mailing and physical address: To avoid misdirected payments, omit your address(es). Do include your contact information: Phone, fax, email, website. Liquid Capital s address at the top: This invoice is assigned and payable only to: Liquid Capital Exchange, Inc. P. O. Box 17000 Greenville, SC 29606 Invoice date and payment terms: Invoices cannot be post-dated. Payment terms: Make sure these are correct. Line 1 of the bill-to: Commercial invoices: The Customer s company name (not a contact at the company) Government invoices: The entity that pays, not the department or agency with whom you have the contract (e.g., DFAS not U.S. Air Force) Additional bill-to lines: Company address, phone, fax, email: We need the complete information for the AP department (because they pay the bills) You can add additional contacts (e.g., a job supervisor) Any specialized language: For the produce industry: PACA Liquid Capital Southwest: Factoring Guide Page 22

FAQ s What do I do if I receive a check from a customer? If you receive a check from a factoring customer, do not deposit it: Please let us know about it, and then send it directly to our service center so that you can receive credit as soon as possible. If you received an electronic payment, arrange to pay us by check or EFT. For reference, here are the banking instructions for Liquid Capital s service center: Liquid Capital Banking Mailing addresses Wire transfers ACH deposits Liquid Capital Exchange, Inc. P. O. Box 17000 Greenville, SC 29606 Overnight (non-usps) mail Liquid Capital Exchange, Inc. 25 Woods Lake Rd. #102 Greenville, SC 29607 Liquid Capital Exchange, Inc. Bank of America BOFAUS3N 1901 Main St. Columbia, SC 29201 ABA: 026 009 593 Acct: 000 776 425 883 Beneficiary: Liquid Capital Exchange, Inc. Additional information field: Reference your company and invoice(s) paid. Liquid Capital Exchange, Inc. Bank of America 1901 Main St. Columbia, SC 29201 ABA: 053 904 483 Acct: 000 776 425 883 FAQ: Should I notify my customers about Liquid Capital? It always helps to give customers the heads-up that we will be introducing ourselves to them. On the next page you will see examples of the Notices we send them. We emphasize your company s growth and our partnership. You can do the same in a quick email or phone call to them. Liquid Capital Southwest: Factoring Guide Page 23

Notice of Assignment: Commercial customers (Our client s company name) is pleased to announce that they have obtained the services of Liquid Capital Exchange, Inc. as a partner in processing accounts receivable and as a source of additional working capital. This will enable the Company to accommodate the changes that their continued growth brings, so they can provide you with the highest quality of service. This arrangement includes the assignment of all payments that are or become due on their accounts to Liquid Capital Exchange, Inc. under all applicable laws, including the Uniform Commercial Code. This requires that you remit all payments to Liquid Capital Exchange, Inc. Please make the notation on your ledger, and transmit payment according to these directions: Checks ACH Deposits Wire Transfers Liquid Capital Exchange, Inc. Liquid Capital Exchange, Inc. Liquid Capital Exchange, Inc. P. O. Box 17000 Bank of America Bank of America Greenville, SC 29606 ABA/Routing #053 904 483 ABA/Routing #026 009 593 Acct # 000 776 425 883 Acct # 000 776 425 883 On your remittance, please reference the invoice(s) so we can post your payment properly. This Notice and the instructions herein will remain in full force and effect until you are notified to the contrary in writing by Liquid Capital Exchange, Inc. If you have any questions, please call 210.587.7245 or contact us via email or fax, as listed on the cover sheet attached to this Notice. Thank you. Assignment of Claims: Government customers This has reference to contract No., dated, entered into between (your company name and address) and (the government entity) for all products and/or services covered by this Contract. Moneys due or to become due under the contract described above have been assigned to the undersigned under the provisions of the Assignment of Claims Act of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15. A true copy of the instrument of assignment executed by the contractor on January 20, 2014, is attached to the original notice. All payments due or to become due under this contract should be made to the undersigned assignee, Liquid Capital Exchange, Inc., Cage Code 4THK3 as follows: Liquid Capital Exchange, Inc. (CAGE CODE 4THK3) Bank of America New York, NY 10001 ABA: 053 904 483 Account: 000 776 425 883 Please return to the undersigned a copy of the Amendment of Solicitation/Modification of Contract and three copies of this notice with appropriate notations showing the date and hour of receipt, and signed by the person acknowledging receipt on behalf of the addressee. Liquid Capital Southwest: Factoring Guide Page 24

Notes Liquid Capital Southwest: Factoring Guide Page 25