Frequently-Asked Questions about Capital Solutions Bancorp

1. Why choose Capital Solutions Bancorp instead of one of your competitors?

   [hide] Why choose Capital Solutions Bancorp instead of one of your competitors?

   Three reasons:

   1. No one is more passionate about helping small and mid-sized companies achieve the success they deserve than we are.
   2. No one has a higher commitment to personalized service than we do. If you are not thrilled, then we are going to bend over backwards to make you thrilled
   3. We make the process of getting the cash you need as fast and as easy as possible.
2. What is the difference between Capital Solutions Bancorp and a traditional bank?

   [hide] What is the difference between Capital Solutions Bancorp and a traditional bank?

   When dealing with a bank, the bank decides whether or not to do business with you based on traditional criteria such as:

   • What collateral you have to offer as a guarantee of repayment for any line of credit they may extend to you.
   • Your ability to repay the loan based on your past track record in business and, possibly, in your personal life.

   For the bank to evaluate this, there is a tremendous amount of paperwork to complete, audits, records to provide and multiple steps to receive an approval — and there is no guarantee that you will be approved.

   Capital Solutions evaluates whether or not to do business with you based on the credit strength and past performance of your clients, rather than you. In fact, unlike a bank, our criteria can sometimes allow us to finance clients that are undergoing Chapter 11 proceedings.

3. How do you check the credit of my customers?

   [hide] How do you check the credit of my customers?

   We typically obtain a credit report from a traditional source such as Dun & Bradstreet or TRW. If more information is needed, we may seek other credit or trade references.

4. Do I have to submit all my accounts receivables to Capital Solutions?

   [hide] Do I have to submit all my accounts receivables to Capital Solutions?

   No. There is no requirement that Capital Solutions fund all of your receivables. However, many of our clients find it convenient to do so since we can also handle collections in addition to our financing services.

   But the choice is up to you. You can have us fund all of your receivables or a portion of your receivables. You can even choose to have us fund a portion of your receivables but have us handle collections for all of your receivables. We structure each agreement according to your needs AND you can also change your mind.

5. How does Capital Solutions Bancorp handle accounts receivable that are currently outstanding at the time we start working together?

   [hide] How does Capital Solutions Bancorp handle accounts receivable that are currently outstanding at the time we start working together?

   As long as Capital Solutions can verify your customer's credit and the validity of the invoices, we can fund those receivables.

6. How do I know you will treat my clients properly and not be heavy-handed with collections?

   [hide] How do I know you will treat my clients properly and not be heavy-handed with collections?

   We understand that your clients do not grow on trees. If we are heavy-handed with your clients, you will lose them and that means we will lose you. That is not good for your client, for you or for us. After all, we are interested in building a long-term relationship with you and alienating your clients would not help anybody.

   Instead, we will be talking with you on an almost daily basis about the status of your receivables and we will provide you with regular aging reports so we are all on the same page. And if a collections problem comes up, we will ask you for your input and suggestions as to how to handle the situation since you know your clients far better than we do.

7. I have some "slow payers" who are behind on their payments to us. Would you fund their receivables?

   [hide] I have some "slow payers" who are behind on their payments to us. Would you fund their receivables?

   In most cases, we would not fund receivables that are already past 90 days. We are not a collection agency and we are not in the business of going after delinquent accounts. Instead we are in business to fund your receivables and provide you with cash for growth.

8. Will Capital Solutions fund all the invoices I present to you?

   [hide] Will Capital Solutions fund all the invoices I present to you?

   Not necessarily. There are situations when Capital Solutions might not be able to fund certain invoices that you present to us. Some of those situations include:

   • When the client you have invoiced has significant credit problems.
   • When adding a new client with questionable credit turns your overall pool of invoices into a riskier proposition than our guidelines allow.
   • When our invoice verification process shows there is some dispute concerning the products or services delivered, or any of the contractual terms.

   More often than not, these are not "black or white" cases and we will usually work something out with you, like setting aside disputed invoices until they are resolved, and advancing you the balance.

9. For an established client of Capital Solutions, how long does it take to fund an invoice once I present it to you?

   [hide] For an established client of Capital Solutions, how long does it take to fund an invoice once I present it to you?

   We typically wire your money the same day we verify (or feel comfortable with the fact) that we are funding a bona-fide invoice. You can make this process move faster by:

   • Providing good documentation that is easy to understand and limits confusion so that everyone is on the same page.
   • Regularly sending us invoices from this particular client so that we have already checked their credit and we know that they will return phone calls from us verifying delivery of the goods you have sent.
   • Ensuring your client will accept your products without discounts (dilution) or returns. If we sense that the Client has any objections or hesitations about the quality of what you have sent, about keeping the product, or if they do not recognize the assignment of the receivable to us, the funding process will be on hold until the issue is solved.
   • Promptly resolving any outstanding quality issues between you and your client.
10. Will my clients know that the receivables are being funded?

    [hide] Will my clients know that the receivables are being funded?

    If your client is a big company, usually the only person that knows is the actual person in charge of your account in their Accounts Payable Department. For example, the buyer in charge of the buying of your product usually does not know that receivables are being funded, but someone in the accounting office would be aware of the arrangement.

    If your client is a smaller company, then the fact that you are selling your invoices is more likely to be known.

    In either case, your clients generally will not care one way or the other. For them, it is just a different address to which they send their payment. All they are interested in is that when they send the check, the invoice is considered paid.

    It is no different than if your home mortgage is assigned to a different mortgage company. You would simply note the change and begin to send your payments to the new address.

    Remember, although this may be something new for you, it may not be new to your clients. Accounts receivables financing been around for centuries. It is a common practice in the business world.

11. What contact will Capital Solutions have with my client? Could that contact endanger my relationship with my customer?

    [hide] What contact will Capital Solutions have with my client? Could that contact endanger my relationship with my customer?

    At Capital Solutions, we are very aware of your relationship with your client. We go to great lengths not to disrupt that relationship. However, there are times when we may have to contact your clients directly:

    • Occasionally we need to contact one of your clients during our credit check process. We would only do this after notifying you first.
    • We will send a notification letter to your client (under your signature) saying that invoices are now payable to Capital Solutions. This is a one time letter. Some of our clients like to add a cover letter as well.
    • Prior to funding an invoice from you, Capital Solutions will verify that the invoice is valid. This may require calling your client's accounts payable department to ensure they have received the goods/services and that all is in order.
    • If we have a collections issue. Most of your clients will probably not require any reminders to pay their invoices. Occasionally, some clients will require a friendly phone call as a reminder. If you would feel more comfortable, you are welcome to make this call for us.
12. What are the fees I can expect to pay?

    [hide] What are the fees I can expect to pay?

    We always want you to know what expenses you can expect. Our fee structure is very straight forward :

    • Set-Up Fees: A one time $350 fee to set you up in our systems and forms. This fee is 100% refundable when you leave the relationship. You do not even have to pay this fee to us upfront. We will deduct it from the first funding we send to you once you become a client.
    • Operation or Ongoing Fees:
      • Between 2.4 and 2.9% per month - from the date Capital Solutions funds the invoice, until it is paid
      • A flat (one time) administration fee of 0.5%
      • The cost of any expedited delivery services used for the benefit of the client, such as wire transfers or Federal Express. There is no additional charge for transfers of your reserve disbursement on the 15th and last day of each month. Additionally, there are several ways to reduce the cost of transferring funds and expedite the process. We will work with you to find what works best for your situation

    We will always structure our agreement to meet the particular needs of your operation. For example, in some cases, instead of a certain percentage every 10 days, we might arrange for a fee based on Prime Rate plus a few points. We will work with you to create a solution that fits your needs.

    A full description of our fee schedule and the specific rates applicable to you will be provided to you for further review when we provide you with a proposed contract.

13. Can Capital Solutions handle collections for invoices you are not funding? If so, what would it cost?

    [hide] Can Capital Solutions handle collections for invoices you are not funding? If so, what would it cost?

    Having Capital Solutions handle collections for you will pay for itself in terms of time and money saved by ending the annoyance of typical bank dealings. Right now, if you are like most businesses you receive a few checks each day from different customers that you have to go to the bank to deposit. Then you have to wait for the checks to clear and for your bank to make the funds available to you. You are never quite sure how much cash you actually have available at any given time.

    With Capital Solutions' collection service, you receive one single wire transfer to your account encompassing all your collections, making funds available to you immediately. No more daily trips to the bank and no more wondering what funds have been made available. And we will keep you informed about every transaction through our reporting system. Once you become used to the efficiency of Capital Solutions' collections service, you will wonder how you ever did it any other way.

    For invoices Capital Solutions is collecting on your behalf, but not funding you, we will sometimes charge a flat 0.40% to 0.50%, with a minimum of $5 per invoice. The money collected will be transferred to you immediately. We will continue our efforts for 90 days after the due date-or stop before, if you tell us. If there is no payment at that point, we will return the invoice back to you.

14. What criteria do you use to determine your fees?

    [hide] What criteria do you use to determine your fees?

    The final fee structure we set is based upon the following criteria:

    • Credit rating of the customers whose invoices you want us to fund.
    • The number of different customers you want us to fund. The more customers, the better the rate.
    • Your total monthly volume of business in dollars.
    • Size of your average invoice.
    • The credit terms you extend to your customers such payment terms
    • Your history of returns and quality claims.
    • Other factors such as the length of our experience with your customers.
15. Are there any other fees or expenses I should know about?

    [hide] Are there any other fees or expenses I should know about?

    There are some one-time expenses related to setting you up as a client that, as mentioned earlier, are only debited from the 'funding' once you become a client:

    • The actual cost of checking your background and setting you up: occasionally some attorney fees are required to discuss your particular case (UCC priorities, collateral, etc.), the actual UCC-1 filing, credit reports, etc. For your guidance, the expenses to set you up usually run about $200 to $250; if your particular case requires more than that, we will consult with you before additional lay outs.
    • The cost of checking your Clients up: this varies according to size and how available is the information. It usually runs between $18 and $30. We do n'ot necessarily check every single one of them.
16. What if a customer of mine refuses to address payment to Capital Solutions?

    [hide] What if a customer of mine refuses to address payment to Capital Solutions?

    Let us first assure you that this is a situation that very rarely comes up. In fact, they are probably doing something similar with another of their providers. Most commonly, they might call you to confirm that the notification they received (with your signature) is in fact correct.

    Also, they have no legal right to refuse because you have the right to assign those receivables to anybody you wish.

    Occasionally, your customers will make a mistake and send payment directly to you instead of to Capital Solution. If this happens, we simply ask that you send the same payment to us immediately (within 24 hours) to avoid any accounting issues.

17. Will my customer think I am in financial trouble if payments go to Capital Solutions?

    [hide] Will my customer think I am in financial trouble if payments go to Capital Solutions?

    Most of your customers will never think twice about this arrangement. However, you may be asked about this and you should view it as an opportunity to show them how much you care about them and their patronage of your business with a response like this:

    "Of course we are not in financial trouble! Quite the contrary. We find that our day-to-day operations, visiting clients and implementing product and marketing projects are leaving us with less and less time to take care of collections and daily banking in an efficient manner. We could continue things as they are now, but we realize that the quality of our products and dedication to customer service would suffer.

    To help us perform these functions efficiently, we have subcontracted this job to Capital Solutions. I have their firm commitment that they will treat you as well, if not better, than I have in the past. If you ever have any problem dealing with them, I want to know about it immediately."

18. How do you and I share the risks of getting paid?

    [hide] How do you and I share the risks of getting paid?

    There are two basic risks involved when Capital Solutions funds your accounts receivables:

    • The risk of a slow paying customer is borne by you. There is a clause in the agreement between you and Capital Solutions stating that you will buy back all invoices that are overdue a certain number of days (usually 90 days from invoice date). For example, if your client is slow paying his bills to you because there is an ongoing quality dispute then you will have to buy back the invoice. In cases where an invoice is not being paid on time due to a return or an issue of a defect in the goods provided, only you can work out a solution with your client.
    • The insolvency risk is borne by us. If your client goes Chapter 7 or Chapter 11 during the time that Capital Solutions is owner of the invoice, we are responsible for taking the risks of dealing with the bankruptcy process and acting as the creditor in the case.
19. If my company presently has a line of credit with a bank, would assigning the receivables to Capital Solutions create a conflict with them?

    [hide] If my company presently has a line of credit with a bank, would assigning the receivables to Capital Solutions create a conflict with them?

    When Capital Solutions enters into an agreement with a client, we file a UCC-1 on the client's receivables and inventory. This is so that the Client cannot pledge the same receivables as liens to more than one creditor.

    To the extent that usually Banks require a blanket UCC-1 on all assets before they lend any money, there would be a conflict. However, it is usually possible to negotiate with the bank for them to share the first position or subordinate their claim on the receivables to Capital Solutions, up to a certain limit while continuing their Senior Lien on the other assets. This is called 'Inter-Creditor Agreement'. There are standard forms for these Agreements and most banks are quite used to them.

20. Having Capital Solutions fund my receivables provides me with additional working capital, just as if I were to borrow money from a Bank. Do those two sources of capital affect my balance sheet differently?

    [hide] Having Capital Solutions fund my receivables provides me with additional working capital, just as if I were to borrow money from a Bank. Do those two sources of capital affect my balance sheet differently?

    With regards to your balance sheet, there are also substantial differences which can be pretty technical.

    Assume that whatever source of working capital you are using, you will use those funds to pay your suppliers, vendors, taxes and other creditors more promptly.

    If you open a line of credit at a bank, you are increasing your bank debt to pay other debt. It is not exactly a wash, since presumably the cost of the bank loan is lower than what the supplier charges you (for example, if your supplier offers very steep "prompt payment discounts"). Bottom line, you are shifting the composition of your debt, but your debt load remains basically the same. Two additional problems in this scenario:

    • If you are a growing company, you will sooner or later be maxed out with your suppliers and your bank.
    • Even though it is a shift from one debt to another, the new bank debt is now more heavily secured since suppliers rarely ask you for collateral, whereas Banks always do.

    If you assign your receivables to Capital Solutions to pay suppliers, you are, in fact, reducing your debt structure. You are actually using capital that is yours, but is "tied up" as a receivable. Once you start operating with Capital Solutions, an analysis of your Balance Sheet will show:

    • Lower debt because you used working capital to cancel outstanding debt to your suppliers.
    • An improved debt-to-equity ratio.
    • An improved debt-to-asset ratio.
    • A far better collection index as much or all your collections will be almost within 24 hours. Using your working capital wisely, together with an improved balance sheet will make your company much more attractive to other lenders and sources of capital for expansion.
21. What if I try your program for a few months and I find it doesn't work for me? Can I leave the program?

    [hide] What if I try your program for a few months and I find it doesn't work for me? Can I leave the program?

    You can leave the program at anytime, guaranteed. We would just finish any pending operations, balance off any monies owed and that's it. Assuming there are no outstanding issues, we would also release you of all UCC-1 filings.

    Also, as stated above, if you try the program and it doesn't work for you, we will return all refundable set-up fees.

    We want to make sure that it doesn't cost you anything to try. In fact, you always end-up with a few freebies just for trying it.

22. What if I need more money but I am not totally convinced yet about signing up with Capital Solutions, what other options do I have?

    [hide] What if I need more money but I am not totally convinced yet about signing up with Capital Solutions, what other options do I have?

    Other than working with Capital Solutions, if you are a small to medium size company in need of additional working capital, these are your options:

    • Going to a bank. This is often a difficult route. Currently banks have very strict guidelines as to how and to whom to lend. They will certainly assign you a credit limit and ask you for as much collateral as they can. Also, however much you borrow will show on your balance sheet as increased "debt".
    • Bringing in a new partner or merging. A very easy way of increasing your working capital — that is — if you do not mind diluting your ownership in the company and sharing decisions with this new person.
    • Attract venture capital/take your company public. Unless you have a very unique product or system, this is a long shot. If it is, in fact, feasible, it will take 12 to 18 months to see results. Note that it is quite expensive and you will also have to deal with a new and very demanding partner-your majority shareholders.
    • Do nothing. Pass up profits, pass up larger and new clients; pass up a better life style for you and your loved ones. That leaves you on a never-ending treadmill of "collecting from Peter to pay Paul," hoping that "leaving the profits in the company" will provide enough additional capital to keep on going. If you happen to have growth in mind, that strategy might work at a snail's pace.
23. Say we go through the Agreement and we find everything OK. Also, Capital Solutions, after doing the background checks, finds no major problems on us or our customers. How long will it take until we can send you the first invoice to be funded?

    [hide] Say we go through the Agreement and we find everything OK. Also, Capital Solutions, after doing the background checks, finds no major problems on us or our customers. How long will it take until we can send you the first invoice to be funded?

    Assuming there are no major hurdles in the background checks, filing the UCC-1 and signing of the Agreement, our experience shows that you could be sending us your first invoice in about 5 to 7 working days. Once we verify that your customer is OK with that invoice, you would receive your first actual funding in 24 hours after that. It happens that fast.

24. Once we get on board with Capital Solutions, there will be a lot of invoices being funded, invoices being paid, reserves being reimbursed, etc. What summary statements are you going to send me so I know at a glance what's going on?

    [hide] Once we get on board with Capital Solutions, there will be a lot of invoices being funded, invoices being paid, reserves being reimbursed, etc. What summary statements are you going to send me so I know at a glance what's going on?

    We make sure that you have as much detailed or summarized information as you choose to receive. We print out all these statements anyway and will be glad to fax them to you as often as you need them (and you can also have 24/7 password-protected access to them online).

    The reports we provide include:

    • Invoice Aging Report: This report tells you the aging for each of your clients by invoice as well as a total of your outstanding accounts receivable. The report will also show you the payment trend over the last few months-has your client been paying faster or has he been falling back. Many of our customers have found incredible value in this report, by restructuring their pricing and payment policies and by detecting impending credit problems. This report is one of the reasons many of our clients elect to run all their receivables through us, even if Capital Solutions doesn't advance on them.
    • Purchases and Advances Report: Keeps detailed tabs of the invoices we have funded, how much we have advanced, when they are due, etc. This report is sent to you every time we fund an invoice(s). It also details the wire transfer locator number as a confirmation to you the wire has been sent, allowing you to track the wire at your end if it is not received in a few minutes.
    • Reserve Report: Showing for each invoice, what fees you pay.
25. What other ways of financing my business can Capital Solutions help me with?

    [hide] What other ways of financing my business can Capital Solutions help me with?

    We also offer "Post-Dated check financing." Of course, this solution does not fit every situation, but in many cases it can be as useful as Accounts Receivable Financing.

Contact us if you want to take the next step. If you aren't ready right now, you can learn more about our different financing services, about what makes Capital Solutions different or what our clients have to say about us.