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The Funding Market Affected By Declining Economic Times

I am writing you today to provide some guidance on the impact of the ongoing financial crisis on the Canadian Merchant Funding business in general & specifically to Synergy Merchant Services.

The most notable changes in our marketplace are as follows.

Canadian Market: The tightening of the credit markets across Canada has forced the big banks to limit the number of loans being offered to businesses & become more selective as to whom they are being offered to. Small business loans under $250,000 have become the black sheep of their portfolios with an estimated approval rating below 30% of all applications received. These "turn downs" increase the number of businesses looking for alternative funding opportunities through Synergy Merchant Services.

Lower Same Store Sales: Same store sales volumes are declining. This decrease will lengthen the anticipated turn in which our clients repay their Merchant Cash Advance and must be accounted for going forward.

Business Failures: We further believe that very small businesses such as home based, part time or life-style businesses that characteristically operate with little to no reserves for contingency are more likely than ever to fail than ever before.

In anticipation of these shifts in the market place we will be making the following changes to our merchant cash advance program.

1. Our minimum advance will be increased to $5,000.

2. The maximum allowable first time advance will increase from $100,000 to $125,000.

3. The maximum funding ratio will decrease from 125% to 110% of the processing average.

The rollout will occur as follows.

All changes will be effective by Monday, November 3rd, 2008. Any contracts generated prior to that date will be accepted if submitted unchanged before December 1st, 2008.

We have found that the above listed changes in our program will not affect the majority of our client base and is intended to ensure stability in the merchant cash advance market to ensure the funding options are available to hard working Canadian businesses for years to come, even through uncertain economic times.

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