SIRROM CAPITAL CORP, 497, 1996-06-18

SIRROM CAPITAL CORP
497, 1996-06-18
LOAN BROKERS

Previous: COUNTY SEAT INC, 10-Q, 1996-06-18

Next: PDT INC /DE/, DEF 14A, 1996-06-18

<PAGE> 1
Filed pursuant to Rules 497(c) and (h)
1933 Act File No. 333-4023

2,000,000 SHARES

SIRROM CAPITAL CORPORATION
COMMON STOCK
---------------------

The shares of common stock, no par value (the "Common Stock"), offered
hereby (the "Offering"), are being sold by Sirrom Capital Corporation ("Sirrom"
or the "Company"). The Company is a specialty finance company that makes loans
to small businesses and has elected to be treated as a business development
company (a "BDC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Company's investment objectives are to achieve both a high
level of income from interest on loans and other fees and long-term growth in
the value of its shareholders' equity through the appreciation of the equity
interests in its portfolio companies. See "Business." No assurances can be given
that the Company will continue to achieve these objectives.

The Common Stock is traded on The Nasdaq Stock Market's National Market
(the "Nasdaq National Market") under the symbol "SROM." On June 17, 1996, the
last reported sale price for the Common Stock was $28.00.

This Prospectus sets forth concisely the information about the Company that
a prospective investor should know before investing and should be retained for
future reference. Additional information about the Company has been filed with
the Securities and Exchange Commission (the "Commission") and is available upon
written or oral request without charge. See "Additional Information."

SEE "RISK FACTORS" ON PAGES 10 THROUGH 13 OF THIS PROSPECTUS FOR MATTERS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $27.50 $1.50 $26.00
- -------------------------------------------------------------------------------------------------
Total(3).......................... $55,000,000 $3,000,000 $52,000,000
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $575,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock on the same terms and conditions
set forth above, solely to cover over-allotments, if any. See
"Underwriting." If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, and Proceeds to the Company
will be $63,250,000, $3,450,000 and $59,800,000, respectively.
---------------------

The Common Stock is offered by the Underwriters named herein, subject to
prior sale, when, as, and if received and accepted by them, subject to their
right to reject orders, in whole or in part, and to certain other conditions. It
is expected that delivery of the certificates representing the Common Stock will
be made on or about June 21, 1996.

THE ROBINSON-HUMPHREY COMPANY, INC.
J.C. BRADFORD & CO.
EQUITABLE SECURITIES CORPORATION
June 17, 1996
<PAGE> 2

SIRROM CAPITAL CORPORATION

The following map sets forth, as of March 31, 1996, the 22 states in which
the Company's borrowers maintain their principal place of business and the
number of borrowers in each state.

[MAP]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"). SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and the financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.

THE COMPANY

Sirrom Capital Corporation is a specialty finance company that makes loans
to small businesses. The Company believes the market for small commercial loans
is underserved by traditional lending sources and that competitors generally are
burdened with an overhead and administrative structure that hinders them from
competing more effectively in this market. The Company's loans are typically
made in the form of secured debt with relatively high fixed interest rates and
with warrants to purchase an equity interest in the borrower. The objectives of
the Company are to achieve both a high level of current income from interest on
loans and other fees and long-term growth in the value of its shareholders'
equity through the appreciation of the equity interests in its portfolio
companies.

The Company, which was founded in May 1992, has experienced significant
growth in both the size and diversity of its loan portfolio. The Company's loan
portfolio balance at December 31, 1993, 1994 and 1995 was $42.4 million, $72.3
million and $144.9 million, respectively. At March 31, 1996, the Company had
loans outstanding with an aggregate principal balance of $166.9 million to 97
companies in a variety of industries located in 22 states. The average rate of
interest on the Company's loan portfolio at March 31, 1996, was 12.9%. The
Company's loans typically range from $500,000 to $4.0 million in size, are
non-amortizing, have a five-year maturity and are accompanied by warrants to
purchase an equity interest in the borrower at a nominal exercise price (usually
$.01 per share). The Company targets borrowers that it believes meet certain
criteria, including the potential for significant growth, adequate collateral
coverage, experienced management teams with a significant ownership interest in
the borrower, sophisticated outside equity investors and profitable operations.
To develop new lending opportunities, the Company markets to an extensive
referral network comprised of venture capitalists, investment bankers,
attorneys, accountants, commercial bankers and business brokers.

Sirrom, based in Nashville, Tennessee, is licensed as a small business
investment company ("SBIC") by the Small Business Administration ("SBA"). As an
SBIC, the Company is eligible to borrow up to $90.0 million from the SBA. As of
March 31, 1996, the Company had borrowed $83.3 million in debentures from the
SBA. The interest rate paid on the Company's long-term borrowings from the SBA
was 7.02% at March 31, 1996. The Company has supplemented its SBA borrowings
with equity capital and a $50.0 million revolving credit facility from First
Union National Bank of Tennessee and a syndicate of other banks (the "Revolving
Credit Facility"). The interest rate paid on the Revolving Credit Facility was
7.43% at March 31, 1996.

In order to provide the Company more flexibility in its financing
alternatives, the terms of the loans it originates and the nature of its
borrowers, the Company has requested permission from the Commission to create a
wholly-owned subsidiary for its SBIC activities. The Company intends to transfer
the majority of its assets, including its SBIC license, and all of its
liabilities, including its SBA debt and indebtedness under the Revolving Credit
Facility, to the new subsidiary. Following the transfer, the subsidiary would
carry on the Company's SBIC activities, and the Company would be able to provide
a broader range of financing opportunities to small businesses. Specifically,
following the reorganization, the Company would continue to make loans to small
businesses; however, the Company would be able to make loans outside the
specific parameters imposed by the SBA. In contemplation of this corporate
reorganization, the Company has signed an engagement letter and preliminary term
sheet with a financial institution to establish a special purpose borrowing
facility ("Special Purpose Facility") that would provide up to $100.0 million in
additional debt financing to support the Company's future loan origination
activities outside the SBIC subsidiary. Assuming the Commission and the SBA
approve the reorganization on the basis requested in the application, the
Company anticipates the reorganization to be effected during the second half of
1996, although there can be

3
<PAGE> 4

no assurance that the Commission or the SBA will grant the Company permission to
consummate the reorganization.

In order to broaden the range of services offered to businesses in its
target market, the Company has entered into an acquisition agreement pursuant to
which, upon satisfaction of various conditions, it would acquire Harris Williams
& Co., L.P. ("Harris Williams"), a merger and acquisition advisory firm located
in Richmond, Virginia. Harris Williams provides advisory services with respect
to small and medium sized companies throughout the United States that are
similar in size to Sirrom's portfolio companies. Upon consummation of the
acquisition, the owners of Harris Williams would receive approximately 950,000
restricted shares of the Company's Common Stock. One of the conditions to the
acquisition is receipt by the Company of an exemption from the Commission with
respect to certain provisions of the 1940 Act. There can be no assurance that
the Commission will grant the requested exemption.

The Company is also a non-diversified, closed-end investment company that
has elected to be treated as a BDC under the 1940 Act. In addition, it has
elected to be treated for tax purposes as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). As such,
the Company must distribute at least 90% of its net investment income (net
interest income plus net realized short-term capital gains) to shareholders on a
quarterly basis. The Company may retain all or a portion of realized long-term
capital gains, net of applicable taxes, to supplement equity capital and to
support growth in its portfolio.

Since inception, the Company has realized $12.4 million in gains from the
sale of its equity positions in portfolio companies. At March 31, 1996, the
combined value of these gains from equity positions and the $15.2 million in
unrealized appreciation of equity interests was $27.6 million. Since inception,
the Company has realized losses of $6.1 million on loans and equity interests
and at March 31, 1996, had provided for $3.5 million of unrealized depreciation
on loans.

THE OFFERING

Common Stock offered by the
Company.................. 2,000,000 shares

Common Stock to be
outstanding after the
Offering................. 11,130,116 shares

Nasdaq National
Market Symbol............ SROM

Use of Proceeds by
the Company.............. Origination of loans and investments. See "Use of
Proceeds."

Distributions.............. The Company has distributed and currently intends
to continue to distribute quarterly to its
shareholders at least 90% of its net investment
income. See "Distributions."

Risk Factors............... Investment in shares of the Common Stock involves
certain risks relating to the structure and
investment objectives of the Company that should be
considered by purchasers of the Common Stock. See
"Risk Factors."

Risk of Unavailability of Funds. As the Company
grows, it will have a continuing need for long-term
capital to finance its lending activities.
Generally, the Company's capital needs have been
met by borrowings under SBA programs, from
commercial banks and through the sale of equity
securities. The maximum amount of funding available
to an SBIC from the SBA is $90.0 million. At May
31, 1996, the Company had outstanding borrowings of
$83.3 million from the SBA and requested funding of
the remaining $6.7 million during May 1996. No
assurances

4
<PAGE> 5

can be made that the Company will receive such
funding from the SBA. At May 31, 1996, the Company
had outstanding borrowings of $32.5 million under
its $50.0 million Revolving Credit Facility. The
Company has signed an engagement letter and
preliminary term sheet with another financial
institution to establish the Special Purpose
Facility that would provide the Company with
additional funds in an amount of up to $100.0
million that would be collateralized by certain of
the Company's future small business loans and the
related equity interests. There can be no
assurances that the Company will obtain this
facility.

Risks Associated with Investments in Small,
Privately Owned Companies. The portfolio of the
Company consists primarily of loans to and
securities issued by small, privately owned
businesses. There is generally no publicly
available information about such companies, and the
Company must rely on the diligence of its employees
and agents to obtain information in connection with
the Company's investment decisions. In addition,
there is typically no public market for securities
of privately owned companies. The Company's
portfolio securities are and will usually be
subject to restrictions on resale or otherwise have
no established trading market. The illiquidity of
most of the Company's portfolio securities may
adversely affect the ability of the Company to
dispose of such securities in a timely matter and
at a fair price at times when the Company deems it
necessary or advantageous. The valuation of
securities in the Company's portfolio is determined
in good faith by the Company's Board of Directors.

Risk of Payment Default. The loans made by the
Company to small businesses carry a relatively high
fixed rate of interest. The small businesses may
have limited financial resources and may be unable
to obtain financing from traditional sources. In
addition, a small business' ability to repay its
loans may be adversely affected by numerous
factors, including the failure to meet its business
plan, a downturn in its industry, or negative
economic conditions. A deterioration in a
borrower's financial condition and prospects
usually will be accompanied by a deterioration in
collateral for the loan including the likelihood of
realizing on any guarantees obtained from the
borrower's management. Investment in small
businesses, therefore, involves a high degree of
business and financial risk, which can result in
substantial losses and accordingly, should be
considered speculative.

Leverage Risks. The Company's use of leverage and
the result of required interest payments to its
funding sources tends to increase the amount of
risk associated with the Company's operations.
Leverage magnifies the potential for gain and loss
on monies invested and, therefore, results in an
increase in the risks associated with an investment
in the Company's securities.

Risk of Voluntary or Involuntary Termination of
Pass-through Tax Treatment. The Company has
qualified for and elected to be taxed as a RIC. In
any year in which the Company qualifies as a RIC,
it generally will not be subject to federal income
tax on net investment income and net capital gains
distributed to its shareholders. However, the
Company may retain part or all of its realized
long-term capital gains, in which case the Company
would be required to pay tax on such capital gains
and the shareholders would receive a deemed
distribution and a tax credit for

5
<PAGE> 6

their pro-rata portion of the tax paid by the
Company. However, because the Company uses
leverage, it is subject to certain asset coverage
ratio requirements set forth in the 1940 Act and
could, under certain circumstances, be restricted
from making distributions necessary to qualify as a
RIC under Subchapter M of the Code. The election to
qualify as a RIC is made on an annual basis, and no
assurance can be given that the Company will
continue to elect or to qualify for such treatment.
Furthermore, once the new subsidiaries are created
in connection with the acquisition of Harris
Williams and the corporate reorganization of the
Company, it is possible that the Company and any of
its subsidiaries may not continue to meet the tests
for qualification as a RIC. Harris Williams will
not qualify or be taxed as a RIC and will therefore
pay taxes at the subsidiary level. If the Company
were to fail to qualify or elect not to qualify as
a RIC and its income became fully taxable, a
substantial reduction in the Company's net assets,
the amount of income available for distribution to
the Company's shareholders and the percentage of
such income actually distributed could result.

FEES AND EXPENSES

The purpose of the following table is to assist the investor in
understanding the various costs and expenses that an investor in the Company
will bear directly or indirectly.

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales load (as a percentage of offering price)............................. 5.5%(1)
Reinvestment Plan fees..................................................... None(2)
ANNUAL EXPENSES (as a percentage of net assets attributable to common
shares)(3)
Operating expenses......................................................... 3.9%(4)
Interest payments on borrowed funds........................................ 4.9%
Total Annual Expenses (estimated)............................................ 8.8%
=====
</TABLE>

- ---------------

(1) The underwriting discount, which is a one-time fee paid by the Company to
the Underwriters in connection with this Offering, is the only sales load
paid in connection with this Offering.
(2) The expenses of the Company's Dividend Reinvestment Plan are included in
stock record expenses, a component of "Operating expenses." The Company has
no cash purchase plan. The participants in the Reinvestment Plan will bear a
pro rata share of brokerage commissions incurred with respect to open market
purchases.
(3) Assumes a net asset value of $145.8 million, which will be the Company's
estimated shareholders' equity upon completion of the Offering. Operating
expenses and interest payments are calculated on an annualized basis based
on the three months ended March 31, 1996.
(4) Operating expenses consist primarily of compensation and employee benefits,
travel and other marketing expenses, rent and other similar expenses.

EXAMPLE

The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Company. These amounts assume no additional
leverage and are based upon the payment by an investor of a 5.5% sales load (the
underwriting discount paid by the Company in connection with this Offering) and
the payment by the Company of operating expenses at the levels set forth in the
table above.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- -------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming a 5.0% annual return................................ $ 142 $ 329 $535 $1,149
</TABLE>

6
<PAGE> 7

This example should not be considered a representation of the future
expenses of the Company, and actual expenses may be greater or less than those
shown. Moreover, while the example assumes (as required by the Commission) a
5.0% annual return, the Company's performance will vary and may result in a
return greater or less than 5.0%. In addition, while the example assumes
reinvestment of all dividends and distributions at net asset value, participants
in the Company's Dividend Reinvestment Plan (the "Reinvestment Plan") may
receive shares purchased by First Union National Bank, as administrator of the
Reinvestment Plan (the "Reinvestment Plan Administrator") at the market price in
effect at the time, which may be at, above or below net asset value. See
"Reinvestment Plan."

7
<PAGE> 8

SUMMARY HISTORICAL FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FROM THREE MONTHS
INCEPTION YEAR ENDED ENDED
THROUGH DECEMBER 31, MARCH 31,
DECEMBER 31, ---------------------------- -------------------
1992 1993 1994 1995 1995 1996
------------ ------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total operating income....... $ 918 $ 4,214 $ 8,238 $ 15,575 $ 2,965 $ 5,783
Interest expense............. 127 1,427 3,124 4,771 999 1,790
General, administrative and
amortization expenses..... 218 928 1,313 2,702 703 1,404
------------ ------- ------- -------- ------- -------
Pretax operating income...... $ 573 $ 1,859 $ 3,801 $ 8,102 $ 1,263 $ 2,589
========== ======= ======= ======== ======= =======
Pretax operating income per
share..................... $ 0.22 $ 0.55 $ 0.88 $ 0.99 $ 0.19 $ 0.27
Dividends per share.......... -- -- -- 0.89(1) 0.14(1) 0.24(1)
Fully diluted weighted
average number of shares
outstanding............... 2,650 3,376 4,324 8,174 6,666 9,733
OTHER OPERATING DATA:
Number of portfolio companies
with loans outstanding at
period end................ 17 38 57 91 68 97
Number of new portfolio
companies................. 17 24 25 44 12 10
Principal amount of loans
originated................ $ 14,639 $31,470 $40,785 $101,505 $27,792 $32,324
Principal amount of loan
repayments................ 0 2,013 7,585 14,414 1,560 4,775
Net interest spread(2)....... 5.6% 5.8% 5.5% 5.8% 5.6%(3) 5.8%(3)
General and administrative
expenses as a percentage
of assets................. 1.5% 1.6% 1.3% 1.4% 2.3%(4) 2.4%(4)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(5)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 78 $ 51,503
Loans.............................................................. 166,936 166,936
Equity interests................................................... 22,549 22,549
Warrants........................................................... 11,199 11,199
Total assets....................................................... 206,206 257,631
Revolving Credit Facility.......................................... 24,916 24,916
Debentures payable to SBA.......................................... 83,260 83,260
Total shareholders' equity......................................... 94,406 145,831
</TABLE>

- ---------------

(1) For the year ended December 31, 1995, includes $.26 per share in dividends
declared and paid in the first quarter of 1996 related to 1995 earnings and,
with respect to the three months ended March 31, 1995 and 1996, represents
dividends per share paid in the following quarter on income earned and gains
realized in the respective three month periods presented.
(2) Net interest spread represents the weighted average gross yield on the
Company's interest bearing investments less the weighted average cost of
long-term borrowed funds.
(3) Calculated on an annualized basis.
(4) Calculated on an annualized basis. Includes accrual and payment of annual
bonuses.
(5) Adjusted to reflect the sale by the Company of 2,000,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."

8
<PAGE> 9

THE COMPANY

The Company was incorporated under the laws of the State of Tennessee in
November 1994. The Company's principal executive offices are located at 500
Church Street, Suite 200, Nashville, Tennessee 37219 and its telephone number is
(615) 256-0701.

The Company is the successor to Sirrom Capital, L.P., a Tennessee limited
partnership (the "Partnership"), which was organized under the laws of Tennessee
in 1991. Pursuant to a conversion (the "Conversion") consummated on February 1,
1995, all partners of the Partnership (the "Partners") transferred their
Partnership interests to the Company in exchange for the issuance of 5,050,116
shares of Common Stock. The Common Stock was received by each Partner in
proportion to the Partner's percentage interest in the Partnership. As a result
of this exchange, the Partnership was dissolved and liquidated by operation of
law, with all of the assets and liabilities of the Partnership (including the
SBIC license which was obtained by the Partnership in May 1992) being thereby
assigned and transferred to the Company. Unless otherwise indicated, all
references to the Company include the Partnership and its historical operations.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
N-2 (the "Registration Statement") under the Securities Act, with respect to the
shares of Common Stock offered by this Prospectus. This Prospectus, which is a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement or the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock, reference
is made to the Registration Statement, including the exhibits and schedules
thereto.

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. The Registration Statement and the exhibits and
schedules thereto filed with the Commission, as well as such reports, proxy
statements and other information, may be inspected, without charge, at the
public reference facility maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Seven World Trade Center, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a web site that contains reports, proxy
statements and other information regarding registrants, including the Company,
that file such information electronically with the Commission.

9
<PAGE> 10

RISK FACTORS

The purchase of the shares offered by this Prospectus involves a number of
significant risks and other factors relating to the structure and investment
objectives of the Company. As a result, there can be no assurance that the
Company will continue to achieve its investment objectives. In addition to the
other information contained in this Prospectus, the following risk factors
should be carefully considered in evaluating an investment in the Common Stock.

RISK OF UNAVAILABILITY OF FUNDS

The Company has a continuing need for capital to finance its lending
activities. Generally, the Company's capital needs have been met by borrowings
under SBA programs and from commercial banks, and through the sale of equity
securities. The maximum amount of funding available to an SBIC from the SBA is
$90.0 million. As of May 31, 1996, the Company had borrowed $83.3 million from
the SBA. In May 1996, the Company requested funding of the remaining $6.7
million; however, there is no assurance that the Company will be able to obtain
such funding. From the time the Company obtains such additional SBA funding
until repayment of the outstanding debentures, it will not be eligible to borrow
additional funds from the SBA. The Company also has the $50.0 million Revolving
Credit Facility, which had an outstanding balance of $32.5 million on May 31,
1996. In addition, the Company has signed an engagement letter and preliminary
term sheet with a financial institution to establish the Special Purpose
Facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition, Liquidity and Capital Resources."
The financial institution has not issued a commitment letter for the Special
Purpose Facility nor has definitive documentation with respect thereto been
executed, and no assurance can be given that such commitment or definitive
documentation will be negotiated on terms satisfactory to the Company.
Reductions in the availability of funds from commercial banks or other sources
on terms favorable to the Company could have a material adverse effect on the
Company. Furthermore, because the Company presently distributes to its
shareholders at least 90% of its investment company taxable income, such
earnings are not available to fund loan originations.

RISKS ASSOCIATED WITH INVESTMENTS IN SMALL, PRIVATELY OWNED COMPANIES

The portfolio of the Company consists primarily of loans to and securities
issued by small, privately owned businesses. There is generally no publicly
available information about such companies, and the Company must rely on the
diligence of its employees and agents to obtain information in connection with
the Company's investment decisions. Typically, small businesses depend for their
success on the management talents and efforts of one person or a small group of
persons, and the death, disability or resignation of one or more of these
persons could have a material adverse impact on their company. Moreover, small
businesses frequently have smaller product lines and market shares than their
competition. Small companies may be more vulnerable to economic downturns and
often need substantial additional capital to expand or compete. Such companies
may also experience substantial variations in operating results. Investment in
small businesses therefore involves a high degree of business and financial
risk, which can result in substantial losses and accordingly should be
considered speculative. The Company's operating history is relatively limited
and it has not operated in recessionary economic periods during which the
operating results of small business companies such as those in the Company's
portfolio often are adversely affected. While the Company generally seeks to
make senior secured loans, its loans are often made on a subordinated basis,
which results in a higher degree of risk of collection. The Company also has the
ability to make unsecured loans or invest in equity securities which likewise
may involve a higher degree of risk.

RISK OF PAYMENT DEFAULT

The Company makes non-amortizing, five-year term loans with relatively high
fixed rates of interest to small companies that may have limited financial
resources and that may be unable to obtain financing from traditional sources.
These loans are generally secured by the assets of the borrower. A borrower's
ability to repay its loan may be adversely affected by numerous factors,
including the failure to meet its business plan, a downturn in its industry or
negative economic conditions. A deterioration in a borrower's financial
condition

10
<PAGE> 11

and prospects usually will be accompanied by a deterioration in the collateral
for the loan, including the likelihood of realizing on any guaranties obtained
from the borrower's management. Although the Company seeks to be the senior,
secured lender to a borrower, the Company is not always the senior lender, and
its collateral for a loan may be subordinate to another lender's security
interest.

RISK OF LOAN LOSSES EXCEEDING CURRENT ESTIMATES

There is typically no public market for the debt or equity securities of
small, privately owned companies. As a result, the valuation of securities in
the Company's portfolio is subject to the good faith determination of the
Company's Board of Directors. See "Determination of Net Asset Value." Unlike
certain lending institutions, the Company does not establish reserves for loan
losses, but adjusts quarterly the valuation of its portfolio to reflect the
Company's estimate of the current realizable value of the loan portfolio. At
March 31, 1996, management's estimate of potential loan losses in its loan
portfolio was $3.5 million. There can be no assurance that this estimate
reflects the amounts that ultimately will be realized on these loans. See
"Business -- Operations."

RISK OF ILLIQUIDITY OF PORTFOLIO INVESTMENTS

Liquidity relates to the ability of the Company to sell either a debt or
equity security in a timely manner at a price that reflects the fair market
value of that security. Most of the investments of the Company are or will be
securities acquired directly from small, privately owned companies. The
Company's portfolio securities are and will usually be subject to restrictions
on resale or otherwise have no established trading market for such securities.
The illiquidity of most of the Company's portfolio securities may adversely
affect the ability of the Company to dispose of such securities in a timely
manner and at a fair price at times when the Company deems it necessary or
advantageous.

INTEREST RATE RISK

The Company's income is materially dependent upon the "spread" between the
rate at which it borrows funds and the rate at which it loans these funds. The
Company anticipates that it will utilize a combination of long-term and
short-term borrowings to finance its lending activities, and that it will engage
in interest rate risk management techniques, including various interest rate
hedging activities. In order to manage the interest rate risk associated with
the variable interest rate provided for under the Revolving Credit Facility, the
Company entered into an interest rate swap agreement that effectively converts
the variable rate on a portion of the Revolving Credit Facility to a fixed rate.
Under this agreement, in April 1996, the Company began converting up to $30.0
million under the Revolving Credit Facility to a fixed rate in $3.0 million
increments per month. It is also anticipated that a newly formed subsidiary of
the Company would enter into appropriate swap agreements to attempt to hedge the
interest rate risk related to the Special Purpose Facility inherent in the
maturing and reissuing of commercial paper at market rates. The Company
anticipates entering into similar arrangements to convert its variable rate debt
obligations into fixed rate obligations in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Financial Condition, Liquidity and Capital Resources." Since inception the
Company's net interest spread has averaged 5.7% (570 basis points). There can
be no assurance that the Company can maintain this net interest spread or that
a significant change in market interest rates would not have a material
adverse effect on the Company's profitability.

LEVERAGE RISKS

The Company has borrowed funds from the SBA and pursuant to its Revolving
Credit Facility, and as a result, the Company is leveraged. Leverage magnifies
the potential for gain and loss on monies invested and, therefore, results in an
increase in the risks associated with an investment in the Company's securities.
The Company's creditors have claims on the Company's assets superior to the
claims of the Company's shareholders. At March 31, 1996, the Company's debt as a
percentage of total liabilities and shareholders' equity was 52.5%. In addition,
the ability of the Company to achieve its investment objectives may depend in
part on its ability to achieve leverage on favorable terms, and there can be no
assurance that such terms can be obtained.

11
<PAGE> 12

On May 31, 1996, the Company had borrowed $83.3 million from the SBA
evidenced by debentures having a fixed rate of interest, a ten-year term and a
prepayment option after five years without penalty. These debentures have
maturities ranging from the years 2002 to 2006 and interest rates varying from
6.12% to 8.20% per annum. Amounts outstanding under the Revolving Credit
Facility bear interest at a variable rate based on LIBOR plus 1.75% and are
secured by all assets of the Company. The Revolving Credit Facility matures on
December 27, 1998. As of May 31, 1996, there was approximately $32.5 million
outstanding under the Revolving Credit Facility. The interest rate paid on the
Revolving Credit Facility was 7.28% at May 31, 1996. In order for the Company to
cover annual interest payments on the debt described above, it must achieve
annual returns of at least 3.0% on its portfolio.

The purpose of the following table is to illustrate the effect of leverage
on returns to a shareholder on an investment in the Company's Common Stock
assuming various annual returns, net of expenses. The calculations set forth in
the table are hypothetical and actual returns may be greater or less than those
appearing below.

<TABLE>
<CAPTION>
ASSUMED RETURN ON THE
COMPANY'S PORTFOLIO
(NET OF EXPENSES)
-----------------------------------------
-10% -5% 0% 5% 10%
----- ----- ---- --- ----
<S> <C> <C> <C> <C> <C>
Corresponding return to shareholder(1)................. -22.6% -13.9% -5.3% 3.4% 12.0%
</TABLE>

- ---------------

(1) Assumes (i) $252 million in investments, (ii) an average cost of funds of
7.10%, (iii) $108.2 million in debt outstanding and (iv) $145.8 million of
shareholders' equity.

POSSIBLE VOLUNTARY OR INVOLUNTARY TERMINATION OF PASS-THROUGH TAX TREATMENT

The Company historically has qualified for and elected to be taxed as a
RIC. To qualify, the Company must meet certain income distribution and
diversification requirements. However, because the Company uses leverage, it is
subject to certain asset coverage ratio requirements set forth in the 1940 Act
and could, under certain circumstances, be restricted from making distributions
necessary to qualify as a RIC under Subchapter M. See "Tax Status." In any year
in which the Company so qualifies, it generally will not be subjected to federal
income tax on net operating income and net capital gains distributed to its
shareholders. However, the Company may retain part or all of its realized
long-term capital gains, in which case the Company would be required to pay tax
on such capital gains and the shareholders would receive a deemed distribution
and a tax credit for their pro rata portion of the tax paid by the Company. The
election to qualify as a RIC is made on an annual basis, and no assurance can be
given that the Company will continue to elect or to qualify for such treatment.
See "Tax Status." Furthermore, following the creation of new subsidiaries in
connection with the acquisition of Harris Williams, the consummation of the
corporate reorganization of the Company and the establishment of the Special
Purpose Facility, it is possible that the Company and any of its subsidiaries
that currently intend to elect RIC status may not continue to meet the tests for
qualification as a RIC. Harris Williams will not qualify or be taxed as a RIC
and therefore, will pay tax at the subsidiary level. If the Company were to fail
to qualify or elect not to qualify under Subchapter M and its income became
fully taxable, a substantial reduction in the Company's net assets and the
amount of income available for distribution to the Company's shareholders and
the percentage of such income actually distributed could result. For financial
accounting purposes, the Company does not currently provide for deferred taxes
on the amount of unrealized appreciation of its equity securities because of the
uncertainty as to whether any long-term capital gain will be distributed to
shareholders when realized. If the Company were to retain substantially all of
its realized gains as a matter of general practice, the Company would be
required to provide for deferred taxes on the amount of unrealized gains in its
portfolio. In so doing, the Company would accrue a one time charge to earnings
and shareholders' equity for financial reporting purposes for taxes on
accumulated unrealized appreciation at that time, and thereafter would recognize
unrealized appreciation net of long-term capital gains tax. See "Tax Status" and
"Regulation."

12
<PAGE> 13

COMPETITIVE MARKET FOR INVESTMENT OPPORTUNITIES

A large number of entities and individuals compete for the types of
investments made by the Company. Many of these entities and individuals have
greater financial resources than the Company. As a result of this competition,
the Company may from time to time be precluded from entering into attractive
transactions. There can be no assurance that the Company will be able to
identify and complete investments which satisfy the Company's investment
objectives or that it will be able to invest fully its available capital.

CONTROL BY CERTAIN SHAREHOLDERS

Upon completion of this Offering, the Company's executive officers and
directors will beneficially own 28.6% of the outstanding shares of Common Stock.
Accordingly, these shareholders, through their stock ownership, control the
Company. See "Principal Shareholders."

RISK OF FAILURE TO COMPLETE CORPORATE REORGANIZATION

The Company has filed an application with the Commission requesting
approval of a corporate reorganization of the Company that would allow the
Company to transfer its SBIC related assets and liabilities to a wholly-owned
subsidiary. The Commission's approval of the corporate reorganization must occur
prior to the creation of any new subsidiaries of the Company, although there can
be no assurance that the Commission or the SBA will grant the Company permission
to consummate the reorganization. In addition, a new, bankruptcy remote
subsidiary must be created in order to establish the Special Purpose Facility.
Therefore, failure to obtain approval of the corporate reorganization will
prevent the Company from establishing the Special Purpose Facility.

RISK OF FINANCIAL ADVISORY BUSINESS

The Company has agreed to acquire Harris Williams, a company which provides
merger and acquisition financial advisory services with respect to small and
medium sized businesses. This business combination is subject to various
conditions, including approval by the Company's shareholders and receipt of an
exemption from the Commission with respect to certain provisions of the 1940
Act, and there can be no assurance that the Commission will grant the requested
exemption. Harris Williams' income is derived from fees received for its
financial advisory engagements, which typically provide for a monthly retainer
and a success fee contingent upon the closing of each transaction. If the
acquisition is consummated, there can be no assurance that Harris Williams' fee
income will continue at or exceed historical levels or levels anticipated by the
Company in entering into the acquisition agreement. See "Business -- Pending
Acquisition."

DEPENDENCE ON MANAGEMENT

The Company is dependent for the selection, structuring, closing and
monitoring of its loans and investments on the diligence and skill of
management, particularly of George M. Miller, II, the loss of whose services
could have a material adverse effect on the operations of the Company. See
"Management." Under the Revolving Credit Facility, if either Mr. Miller or David
M. Resha ceases to be employed by the Company, the lenders have the ability to
accelerate the repayment of any amounts outstanding. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources."

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this Offering, the Company will have 11,130,116 shares
of Common Stock outstanding. Following the Offering, sales of substantial
amounts of the Common Stock in the public market pursuant to Rule 144 or
otherwise, or the availability of such shares for sale, could adversely affect
the prevailing market prices for the Common Stock and impair the Company's
ability to raise additional capital through the sale of equity securities should
it desire to do so. See "Description of Capital Stock -- Registration Rights"
and "Shares Eligible for Future Sale."

13
<PAGE> 14

USE OF PROCEEDS

The net proceeds to be received from this Offering by the Company are
estimated to be approximately $51.4 million (after deducting underwriting
discounts and estimated expenses). The Company intends to use the net proceeds
to originate new loans. The Company estimates that the net proceeds will be
applied as set forth above by the end of 1996. Pending such application, the
Company intends to invest the net proceeds of this Offering in time deposits and
income producing securities with maturities of 15 months or less that are issued
or guaranteed by the federal government or agencies thereof. See "Investment
Objectives and Policies."

DISTRIBUTIONS AND PRICE RANGE OF COMMON STOCK

The Company has distributed and currently intends to continue to distribute
to its shareholders at least 90% of its net operating income and net realized
short-term capital gains, if any, on a quarterly basis. Net realized long-term
capital gains may be retained to supplement the Company's equity capital and
support growth in its portfolio, unless the Board of Directors determines in
certain cases to make a distribution. Pursuant to the Reinvestment Plan, a
shareholder whose shares are registered in his own name can elect to have all or
a portion of the distributions reinvested in additional shares of Common Stock
by the Reinvestment Plan Administrator, by letter to the Company received prior
to the corresponding record date. There is no assurance that the Company will
achieve investment results or maintain a tax status that will permit any
specified level of cash distributions or year-to-year increases in cash
distributions. See "Reinvestment Plan," "Regulation" and "Tax Status."

The Common Stock is quoted on the Nasdaq National Market under the symbol
SROM. On June 17, 1996, the last reported sale price of the Common Stock was
$28.00 per share (a 178% premium to net asset value per share as of April 30,
1996). The following table sets forth the range of high and low closing sale
prices of the Common Stock as reported on the Nasdaq National Market, the net
asset value per share, the premium of high closing sale price to net asset value
and the premium of low closing sale price to net asset value for the period from
February 6, 1995, when public trading of the Common Stock commenced, through
June 17, 1996. The Common Stock has historically traded at a premium to net
asset value per share.

<TABLE>
<CAPTION>
CLOSING SALE PREMIUM OF PREMIUM OF
PRICE NET ASSET HIGH CLOSING SALE LOW CLOSING SALE
----------------- VALUE PER PRICE TO NET PRICE TO NET DIVIDEND
HIGH LOW SHARE(1) ASSET VALUE ASSET VALUE DECLARED
------ ------ --------- ----------------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter (beginning
February 6, 1995)....... $11.63 $10.75 $7.86 48% 37% $ 0.14
Second Quarter............. 13.75 11.13 8.05 71 38 0.26
Third Quarter.............. 18.75 13.25 10.11 85 31 0.23
Fourth Quarter............. 20.00 16.75 9.23 117 81 0.26
1996
First Quarter.............. 23.75 18.63 9.70 145 92 0.24
Second Quarter (through
June 17, 1996).......... 29.50 23.25 10.09(2) 192(2) 130(2) N/A
</TABLE>

- ---------------

(1) Fully diluted net asset value per share is determined as of the last day in
the relevant quarter and therefore may not reflect the net asset value per
share on the date of the high and low sale price. Historically, the
Company's net assets have been highest at the end of the quarter.
(2) Net asset value is as of April 30, 1996.

14
<PAGE> 15

SELECTED FINANCIAL DATA

The following tables set forth selected financial data of the Company, which
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the Company's Financial
Statements and Notes thereto included elsewhere in this Prospectus. The selected
financial data set forth below as of and for the period from inception to
December 31, 1992, and as of and for each of the three years in the period ended
December 31, 1995, have been derived, in part, from the financial statements of
the Company which have been audited by Arthur Andersen LLP, independent public
accountants, whose report for the period from inception to December 31, 1992,
and each of the three years in the period ended December 31, 1995, is included
elsewhere in this Prospectus. Also included are unaudited financial statements
for the three months ended March 31, 1995 and 1996. The selected financial data
for the three months ended March 31, 1996, has been derived from the unaudited
financial statements of the Company which, in the opinion of management, include
all adjustments (which consist of only normal recurring adjustments) necessary
for a fair presentation of the financial condition and results of operations of
the Company for that period.

<TABLE>
<CAPTION>
FROM
INCEPTION THREE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------------------ -----------------------
1992 1993 1994 1995 1995 1996
------------ ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating income:
Interest on investments.......................... $ 636 $ 3,515 $ 7,337 $ 13,452 $ 2,424 $ 4,862
Loan processing fees............................. 282 699 901 1,900 541 921
Other income..................................... -- -- -- 223 -- --
------------ ---------- ---------- ---------- ---------- ----------
Total operating income..................... 918 4,214 8,238 15,575 2,965 5,783
Operating expenses:
Interest expense................................. 127 1,427 3,124 4,771 999 1,790
Salaries and benefits............................ -- -- -- 1,082 451 739
Management fees.................................. 210 709 1,073 -- -- --
Other operating expenses......................... -- 166 122 1,412 222 477
State income tax on interest..................... -- 231 457 109 52 --
Amortization expense............................. 8 54 118 208 30 188
------------ ---------- ---------- ---------- ---------- ----------
Total operating expenses................... 345 2,587 4,894 7,582 1,754 3,194
------------ ---------- ---------- ---------- ---------- ----------
Net operating income............................... 573 1,627 3,344 7,993 1,211 2,589
Realized gain (loss) on investments.............. 198 (799) (538) 1,759 50 5,756
Change in unrealized appreciation (depreciation)
of investments................................. 1,813 (50) 3,357 4,694 1,603 2,241
Provision for income taxes......................... -- -- -- (1,020) -- (2,135)
------------ ---------- ---------- ---------- ---------- ----------
Net increase in partners' capital and shareholders'
equity resulting from operations................. $ 2,584 $ 778 $ 6,163 $ 13,426 $ 2,864 $ 8,451
============ ========= ========= ========= ========= =========
Per share:
Pretax operating income.......................... $ 0.22 $ 0.55 $ 0.88 $ 0.99 $ 0.19 $ 0.27
Net increase in partners' capital and
shareholders' equity resulting from
operations..................................... 0.98 0.23 1.43 1.64 0.43 0.87
Dividends........................................ -- -- -- 0.89(1) 0.14(1) 0.24 (1)
Fully diluted weighted average shares
outstanding...................................... 2,650,000 3,376,000 4,324,000 8,174,000 6,666,000 9,733,000

OPERATING STATISTICS:
Number of portfolio companies with loans
outstanding at period end........................ 17 38 57 91 68 97
Number of new portfolio companies.................. 17 24 25 44 12 10
Principal amount of loans originated............... $ 14,639 $ 31,470 $ 40,785 $ 101,505 $ 27,792 $ 32,324
Principal amount of loan repayments................ -- 2,013 7,585 14,414 1,560 4,775
Loan portfolio at period end....................... 14,639 42,441 72,336 144,855 97,378 166,936
Average net interest spread at period end(2)....... 5.6% 5.8% 5.5% 5.8% 5.6%(3) 5.8%(3)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
DECEMBER 31, -----------------------
----------------------------------------- AS
1992 1993 1994 1995 ACTUAL ADJUSTED(4)
-------- -------- -------- -------- -------- -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 4,601 $ 1,633 $ 137 $ 195 $ 78 $ 51,503
Loans....................................................... 14,639 42,441 72,336 144,855 166,936 166,936
Equity interests............................................ 4,233 3,591 7,577 15,912 22,549 22,549
Warrants.................................................... 951 4,219 7,549 11,513 11,199 11,199
Total assets................................................ 24,850 53,289 90,969 177,030 206,206 257,631
Revolving credit facility................................... -- -- 6,389 13,200 24,916 24,916
Debentures payable to SBA................................... 10,000 34,000 51,000 73,260 83,260 83,260
Total shareholders' equity.................................. 14,702 18,651 32,383 88,346 94,406 145,831
</TABLE>

- ---------------
(1) For the year ended December 31, 1995, includes $.26 per share in dividends
declared and paid in the first quarter of 1996 related to 1995 earnings and,
with respect to the three months ended March 31, 1995 and 1996, represents
dividends per share paid in the following quarter on income earned and gains
realized in the respective three month periods presented.
(2) Net interest spread represents the weighted average gross yield on the
Company's interest bearing investments less the weighted average cost of
long-term borrowed funds.
(3) Calculated on an annualized basis.
(4) Adjusted to reflect the sale by the Company of 2,000,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."

15
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with the preceding "Selected
Financial Data," the Company's Financial Statements, the Notes thereto and the
other financial data included elsewhere in this Prospectus. The financial
information provided below has been rounded in order to simplify its
presentation. However, the ratios and percentages provided below are calculated
using the detailed financial information contained in the Financial Statements,
the Notes thereto and the financial data included elsewhere in this Prospectus.
Due to the limited operating results and history of the Company, there can be no
assurances that the Company's historical financial performance is indicative of
the Company's future results of operations.

RESULTS OF OPERATIONS

The Company's principal investment objectives are to achieve both a high
level of income from interest on loans and fees and long-term growth in its
shareholders' equity through the appreciation in value of equity interests in
its portfolio companies. Therefore, the Company's loans are typically made in
the form of secured debt with relatively high fixed interest rates and with
warrants to purchase equity securities of the borrower. In addition to interest
on investments, the Company also typically collects an up-front processing fee
on each loan it originates.

The Company's financial performance in the Statements of Operations is
composed of three primary elements. The first is "Net operating income," which
is the difference between the Company's income from interest, dividends and fees
and its total operating expenses, including interest expense. The second element
is "Realized gain (loss) on investments," which is the difference between the
proceeds received from the disposition of portfolio assets in the aggregate
during the period and their stated costs at the beginning of the period. The
third element is the "Change in unrealized appreciation (depreciation) of
investments," which is the net change in the fair values of the Company's
portfolio assets compared with their fair values at the beginning of the period
or their stated costs, if purchased during the period. Generally, "Realized gain
(loss) on investments" and "Change in unrealized appreciation (depreciation) of
investments" are inversely related in that when an appreciated asset is sold to
realize a gain, a decrease in unrealized appreciation occurs when the gain
associated with the asset is transferred from the "unrealized" category to the
"realized" category. Conversely, when a loss is realized on a depreciated
portfolio asset, the reclassification of the loss from "unrealized" to
"realized" causes an increase in unrealized appreciation and an increase in
realized loss.

Three Months Ended March 31, 1996 and 1995

Net Operating Income. During the quarter ended March 31, 1996, interest on
investments was
$4.9 million, a 104.2% increase over the $2.4 million earned in the same quarter
of 1995. During the first quarter of 1996, the Company collected $921,000 in
processing fees, a 70.2% increase over the $541,000 collected in the same
quarter of 1995. This increase in interest income and processing fees is a
result of the increase both in the dollar amount of loans outstanding during the
quarter and of loans originated during the period and a result of the
recognition and collection of certain contingent processing fees in the first
quarter of 1996 for loans closed during the fourth quarter of 1995. The
Company's loan portfolio increased 71.4% to $166.9 million at March 31, 1996,
from $97.4 million at March 31, 1995. The $32.3 million of loans originated
during the first quarter of 1996 was a 16.2% increase over the $27.8 million of
loans originated in the same quarter of 1995. In addition, the weighted average
interest rate charged on the loan portfolio at March 31, 1996 was 12.9%, as
compared to 12.6% at March 31, 1995.

The most significant portion of the Company's total operating expenses is
interest expense. The Company's interest expense, most of which is related to
the SBA-guaranteed debentures of the Company and the Revolving Credit Facility,
increased to $1.8 million in the first quarter of 1996, an 80.2% increase over
the $999,000 paid in the first quarter of 1995. The increase in interest expense
from 1995 to 1996 is primarily attributable to increased borrowings from the SBA
and establishment of and borrowing under the Revolving Credit Facility.
Borrowings from the SBA were $83.3 million on March 31, 1996, and $51.0 million
on

16
<PAGE> 17

March 31, 1995. Amounts outstanding under the Revolving Credit Facility at March
31, 1996, were $24.9 million.

The other significant components of total operating expenses are (i)
overhead, which relates to employee compensation, travel and marketing expenses,
office expenses and legal fees, (ii) amortization of borrowing costs and (iii)
state taxes. These expenses totaled $1.4 million in the first quarter of 1996,
an 85.4% increase over the $755,000 of such expenses in the same quarter of
1995. These increases can be largely attributed to the increase in the number of
employees from 10 in the first quarter of 1995 as compared to 16 in the first
quarter of 1996. Although the dollar amount of these expenses increased,
overhead expenses (or general and administrative expenses) as a percentage of
average assets decreased slightly from 2.6% to 2.5% from the first quarter of
1995 to the first quarter of 1996, respectively. The first quarter overhead
expenses for both years include the accrual and payment of annual bonuses, and
thus, first quarter overhead expenses have historically been higher as a
percentage of average assets than in other quarters.

For the quarter ended March 31, 1996, the Company paid dividends of $2.4
million from net operating income. The Company paid no dividends in the first
quarter of 1995.

Taxes. Beginning in February 1995, the Company elected to be taxed as a
RIC under Subchapter M of the Code. If the Company, as a RIC, satisfies certain
requirements relating to the source of its income, the diversification of its
assets and the distribution of its net income, the Company is generally taxed as
a pass through entity which acts as a partial conduit of income to its
shareholders. In order to maintain its RIC status, the Company must in general
derive at least 90% of its gross income from dividends, interest and gains from
the sale or disposition of securities; derive less than 30% of its gross income
from the sale or disposition of securities held for less than three months; meet
investment diversification requirements defined by the Code; and distribute to
shareholders 90% of its net income (other than long-term capital gains). The
Company presently intends to meet the RIC qualifications in 1996. However, no
assurance can be given that the Company will continue to elect or qualify for
such treatment after 1996. For the quarter ended March 31, 1996, the Statements
of Operations include a provision for taxes totaling $2.1 million for federal
income tax at a 35% rate on realized gains not distributed to shareholders. The
majority of this tax related to the retained long-term capital gain of $6.3
million on the Company's sale of half of its equity position in Premiere
Technologies, Inc.

Realized Gain (Loss) on Investments. The Company's net realized gain on
investments was $5.8 million during the quarter ended March 31, 1996, largely
resulting from gains of $6.7 million on the sale of equity positions in Premiere
Technologies, Inc. and American Remedial Technologies, Inc., which were
partially offset by a $1.1 million loan write-off of Medical Associates of
America, Inc. The net realized gain for the first quarter of 1995 was $50,000,
primarily resulting from $560,000 in gains on the sale of equity positions in
Republic Automotive Parts, Inc. and American Retirement Corporation, which were
largely offset by a write-off of $515,000 of equity positions in Medical
Associates of America, Inc. Management does not attempt to maintain a comparable
level of realized gains from year to year, but instead attempts to maximize
total investment portfolio appreciation.

Change in Unrealized Appreciation (Depreciation) of Investments. For the
quarters ended March 31, 1996, and 1995, the Company recorded net increases in
unrealized appreciation of investments of $2.2 million and $1.6 million,
respectively. These increases are the result of the Company's quarterly
revaluation of its portfolio in accordance with its Valuation Policy to reflect
the fair value of each of its portfolio assets.

Fiscal Years Ended December 31, 1995, 1994 and 1993

Net Operating Income. During the fiscal year ended December 31, 1995, the
Company earned interest on investments of $13.5 million, an 84.9% increase over
the $7.3 million earned in 1994, which was a 108.6% increase over the $3.5
million earned during fiscal 1993. During fiscal 1995, the Company collected
$1.9 million in processing fees, a 110.9% increase over the $901,000 collected
in 1994, which was a 28.9% increase over the $699,000 collected in 1993. These
increases in interest income and processing fees are a result of increases in
the dollar amount of loans outstanding and originated during the applicable
periods. The Company's loan portfolio increased to $144.8 million at December
31, 1995, an increase of 100.3% from

17
<PAGE> 18

$72.3 million at December 31, 1994, which in turn was a 70.5% increase from
$42.4 million at December 31, 1993. The $101.5 million of loans originated
during fiscal 1995 was a 148.8% increase over the $40.8 million of loans
originated in 1994, which was a 29.5% increase over the $31.5 million originated
in 1993. In addition, the weighted average interest rate charged on the loan
portfolio at December 31, 1995 was 12.8%, as compared to 12.3% and 12.5% at
December 31, 1994 and 1993, respectively. The Company also earned income from
miscellaneous sources in an amount equal to $223,000 in 1995, primarily from
interest paid on loans to employees made in connection with purchases of equity
in the Company.

The Company's interest expense, most of which was related to the
SBA-guaranteed debentures of the Company, increased to $4.8 million in 1995, a
54.8% increase over the $3.1 million paid in 1994, which in turn was a 121.4%
increase over the $1.4 million of interest expense in 1993. The increase in
interest expense from 1993 to 1995 was primarily attributable to increased
borrowings from the SBA, which were $73.3 million on December 31, 1995, $51.0
million on December 31, 1994 and $34.0 million on December 31, 1993.

Overhead, amortization of borrowing costs and state taxes totaled $2.8
million in fiscal 1995, a 55.6% increase over the $1.8 million of such expenses
in 1994, which in turn was a 50.0% increase over the total of such expenses in
1993. These increases can be largely attributed to the increase in the number of
employees from four in 1993 to 13 in 1995 and the Company's relocation to new
office space in 1995. Although the dollar amount of these expenses increased
over the three-year period, overhead expenses as a percentage of total assets
remained fairly constant at 1.4%, 1.3% and 1.6% for fiscal 1995, 1994 and 1993,
respectively.

During 1995, the Company paid dividends of $5.2 million, $4.0 million of
which was derived from net operating income and $1.2 million of which was
derived from realized capital gains. The Company also elected to designate $2.1
million of the undistributed realized capital gains as a "deemed" distribution
to shareholders of record as of the end of the year. Accordingly, $1.4 million,
net of taxes of $737,000, of this "deemed" distribution has been retained and
reclassified from undistributed net realized earnings to Common Stock.

For the years ended December 31, 1995, 1994 and 1993, the Statements of
Operations include a provision for state income taxes on interest totaling
$109,000, $457,000 and $231,000, respectively. For the year ended December
31,1995, the Company also provided for federal income tax at a 35% rate and
excise tax at a 4% rate on taxable net investment income and realized gains not
distributed to shareholders. The provision for income taxes includes the
$737,000 of tax related to the retained "deemed" distribution discussed above.

Realized Gain (Loss) on Investments. The Company's net realized gain on
investments was $1.8 million during the year ended December 31, 1995, largely
resulting from gains of $3.9 million on the sale of equity positions in American
Retirement Corporation, BiTec Southeast, Inc., Central Tennessee Broadcasting,
Inc., Patton Management Corporation, PMT Services, Inc., Termnet Merchant
Services, Inc., Truckload Management, Inc., One Stop Acquisitions, Inc. and
Republic Auto Parts, Inc., which were largely offset by a $515,000 write-off of
Medical Associates of America, Inc. equity positions and a $1.5 million
write-off of a loan to Quality Care Networks, Inc. The realized loss on
investments for 1994 was $538,000, primarily resulting from $1.6 million of
write-offs, including loans to ETC Peripherals, Inc., Stewart Foods, Inc. and
TCOM Systems, Inc., offset partially by approximately $1.1 million in gains on
the sale of equity positions in PMT Services, Inc. and Softkey International,
Inc. The realized loss on investments for 1993 was $799,000, primarily resulting
from a $1.0 million loan write-off of ETC Peripherals, Inc., offset slightly by
gains on the sale of equity positions in Anasazi, Inc. and Ideals Publications,
Inc. Management does not attempt to maintain a comparable level of realized
gains from year to year, but instead attempts to maximize total investment
portfolio appreciation.

Change in Unrealized Appreciation (Depreciation) of Investments. For the
years ended December 31, 1995 and 1994, the Company recorded net increases in
unrealized appreciation of investments of $4.7 million and $3.4 million,
respectively, and a net decrease of $50,000 for the year ended December 31,
1993. These increases are the result of the Company's quarterly revaluation of
its portfolio in accordance with its Valuation Policy to reflect the fair value
of each of its portfolio assets.

A description of all of the Company's investments is included in the
Financial Statements that are presented in this Prospectus under the caption
"Portfolio of Investments as of March 31, 1996."

18
<PAGE> 19

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company had $78,000 in cash and cash equivalents,
and approximately $8.3 million of the Company's investment portfolio consisted
of publicly-traded securities, which have an ascertainable market value and
represent an additional source of liquidity. However, the Company's ability to
realize such values on a short-term basis is limited by market conditions and
various securities law restrictions. See "Summary of Significant Accounting
Policies" in the Notes to Financial Statements.

The Company's principal sources of capital to fund its portfolio growth
have been borrowings through the SBA sponsored SBIC debenture program, sales of
the Company's equity securities, both privately and publicly, and funds borrowed
from banking institutions. In February 1995, the Company consummated an initial
public offering of 2,645,000 shares of Common Stock resulting in net proceeds of
$26.5 million. In August 1995, the Company consummated a second public offering
of 1,500,000 shares of Common Stock generating net proceeds to the Company of
approximately $21.2 million. The Company used $32.6 million of these proceeds to
originate new loans and $15.1 million to repay indebtedness outstanding on the
Company's Revolving Credit Facility, which was subsequently reborrowed to
originate additional loans.

During the first quarter of 1996, the Company borrowed an additional $10.0
million from the SBA, bringing total SBA borrowings to $83.3 million at March
31, 1996. Each borrowing from the SBA has a term of ten years and can be prepaid
without penalty after five years. The interest rate on these borrowings was
7.02% as of March 31, 1996, and none of these borrowings mature prior to 2002.
Based on the Company's leverageable capital (as defined by the SBA), it is
eligible to borrow up to a total of $90.0 million from the SBA, the maximum
amount of SBA loans available to an SBIC. In May 1996, the Company requested the
remaining $6.7 million of SBA funding available to it. Given the increased
demand for borrowings under the SBA sponsored SBIC debenture program and
concurrent decrease in funds appropriated by Congress to the SBA, no assurances
can be given as to the amount or timing of additional SBA borrowing that might
be granted to the Company.

As of March 31, 1996, the Company had $24.9 million outstanding under its
$50.0 million Revolving Credit Facility, which is secured by all of the
Company's assets. The interest rate on these borrowings was 7.43% at March 31,
1996. The Revolving Credit Facility matures on December 27, 1998. The Revolving
Credit Facility requires that the Company obtain the lenders' consent prior to,
among other things, encumbering its assets, merging or consolidating with
another entity and making investments other than those permitted by the SBA. In
addition, the Revolving Credit Facility provides that the repayment of any
amounts outstanding can be accelerated if either George M. Miller, II or David
M. Resha ceases to be employed by the Company.

In order to manage the interest rate risk associated with the variable
interest rate provided for under the Revolving Credit Facility, the Company
entered into an interest rate swap agreement that effectively converts the
variable rate on a portion of the Revolving Credit Facility to a fixed rate of
8.15% per annum. Under this agreement, in April 1996, the Company began
converting $30.0 million to this fixed rate in $3.0 million increments per
month.

The Company has signed an engagement letter and preliminary term sheet with
a financial institution to establish the Special Purpose Facility in the amount
of $100.0 million. The Special Purpose Facility would be collateralized by
certain of the Company's future small business loans and their related equity
interests. Under the Special Purpose Facility, it is anticipated that the
Company would form a special purpose, bankruptcy remote subsidiary ("Newco"),
that would buy new loans and the related warrants originated by the Company and
use the loans and warrants purchased as collateral to secure the issuance of
commercial paper by the financial institution. Newco would pay a spread to the
financial institution over the rate paid on the commercial paper issued, along
with other fees to originate and administer the Special Purpose Facility. It is
anticipated that Newco would enter into appropriate swap agreements to attempt
to hedge the interest rate risk inherent in the maturing and reissuing of
commercial paper at market rates. Based on current commercial paper rates, the
total cost of the debt is anticipated to be approximately 8.25%. The Special
Purpose Facility will require Newco to be capitalized with a minimum of $20.0
million in equity, so it is anticipated that some or all of the new loans
originated from the proceeds of this Offering will be contributed as equity to
Newco. The financial institution has not issued a commitment letter for the
Special Purpose Facility nor has definitive

19
<PAGE> 20

documentation with respect thereto been executed, and no assurance can be given
that such commitment or definitive documentation will be negotiated on terms
satisfactory to the Company.

The Company believes that the net proceeds of this Offering, anticipated
borrowings from the SBA and under the Revolving Credit Facility, together with
cash flow from operations (after distributions to shareholders), will be
adequate to fund the continuing growth of the Company's investment portfolio
through early 1997. In order to provide the funds necessary for the Company to
continue its growth strategy beyond that period, the Company expects to incur,
from time to time, additional short and long-term borrowings from the SBA (to
the extent allowed) and other sources, and to issue, in public or private
transactions, its equity and debt securities. The availability and terms of any
such borrowings will depend upon interest rate, market and other conditions.
There can be no assurance that such additional funding will be available on
terms acceptable to the Company.

20
<PAGE> 21

BUSINESS

The Company, which was founded in May 1992, has experienced significant
growth in both the size and diversity of its loan portfolio. The Company's loan
portfolio balance at December 31, 1993, 1994 and 1995 was $42.4 million, $72.3
million and $144.9 million, respectively. At March 31, 1996, the Company had
loans outstanding with an aggregate principal balance of $166.9 million to 97
companies in a variety of industries located in 22 states. The rate of interest
on the Company's loan portfolio at March 31, 1996, was 12.9%. The Company's
loans typically range from $500,000 to $4.0 million in size, are non-amortizing,
have a five-year maturity and are accompanied by warrants to purchase an equity
interest in the borrower at a nominal exercise price (usually $.01 per share).
The Company targets borrowers that it believes meet certain criteria, including
the potential for significant growth, adequate collateral coverage, experienced
management teams with a significant ownership interest in the borrower,
sophisticated outside equity investors and profitable operations.

Sirrom, based in Nashville, Tennessee, is licensed as an SBIC by the SBA.
As an SBIC, the Company is eligible to borrow up to $90.0 million from the SBA.
As of May 31, 1996, the Company had borrowed $83.3 million in debentures from
the SBA and requested the remaining $6.7 million in May 1996. The average
interest rate paid on the Company's long-term borrowings from the SBA was 7.02%
at May 31, 1996. The Company has supplemented its SBA borrowings with equity
capital and a $50.0 million Revolving Credit Facility. The interest rate paid on
the Revolving Credit Facility was 7.28% at May 31, 1996. In contemplation of the
corporate reorganization described below under "-- Proposed Corporate
Reorganization," the Company has signed an engagement letter and preliminary
term sheet with a financial institution to establish a Special Purpose Facility
which would provide up to $100.0 million in additional debt financing to support
the Company's future loan origination activities outside the newly formed SBIC
subsidiary.

STRATEGY

The Company's strategic objective is to provide financial services to small
and medium sized growth businesses. The Company traditionally has focused and
will continue to focus on making loans with equity features to borrowers that
the Company believes meet certain criteria. In order to broaden the range of
services it offers to businesses in its target market, the Company recently
agreed to acquire Harris Williams, a merger and acquisition advisory firm
located in Richmond, Virginia. Harris Williams provides merger and acquisition
advisory services with respect to small and medium sized companies throughout
the United States that are similar in size to Sirrom's portfolio companies.
Sirrom's management believes that the acquisition of Harris Williams provides
the Company an opportunity to obtain significant fee income and cross-sell
services between the two companies. See "-- Pending Acquisition."

The Company targets borrowers that it believes meet certain criteria,
including the potential for significant growth, adequate collateral coverage,
experienced management teams with a significant ownership interest in the
borrower, sophisticated outside equity investors and profitable operations. To
develop new lending opportunities, the Company markets to an extensive referral
network comprised of venture capitalists, investment bankers, attorneys,
accountants, commercial bankers and business brokers.

Generally, the Company's investments are structured as loans evidenced by
debt securities that are accompanied by warrants to acquire equity securities of
the borrower. These warrants usually have a nominal exercise price (usually $.01
per share). Typically, the loans are collateralized by a security interest in
assets of the borrower and are generally senior to the investments of
sophisticated equity investors. The personal

21
<PAGE> 22

guaranty of the major shareholder of the borrower or other collateral may also
be required. The debt securities issued to evidence the Company's loans
generally carry a fixed rate of interest and have a maturity of five years from
their respective dates of issuance. In most cases, the loans are structured to
require the payment of interest only on a monthly basis, with a single payment
of principal at maturity. The Company typically charges borrowers a processing
fee of approximately 2.0% to 2.5% of the amount of each loan. Unlike most
lenders, the Company does not impose prepayment penalties on borrowers that
repay loans prior to maturity. Instead, the Company's warrants typically contain
a "ratchet" provision that increases the Company's equity position, by one to
three percentage points per year, until repayment of the loan in full. Although
the Company's loans provide for a five year maturity, the warrant "ratchet" may
have the effect of encouraging borrowers to repay loans as soon as possible. The
Company benefits from such repayments, because of the direct relationship that
exists between the Company's ability to generate asset turnover (i.e., redeploy
capital) and the return on equity to shareholders.

The Company seeks to maximize the difference, or "spread," between the rate
at which it borrows long-term funds from the SBA and other sources and the rate
at which it loans these funds to small companies. At March 31, 1996, the
weighted average coupon on the Company's loans outstanding was 12.9%, and its
weighted average cost of funds from the SBA and the Revolving Credit Facility
was 7.11%. On March 14, 1996, the Company borrowed $10.0 million from the SBA at
an annual interest rate of 7.08%.

The Company has also recently begun making debtor-in-possession ("DIP")
loans. The aggregate principal amount of loans to these borrowers at March 31,
1996, was $2.6 million, which constituted less than 2.0% of total loans
outstanding. It is the Company's intention to make DIP loans to borrowers who,
when emerging from bankruptcy, would generally meet the criteria applied to the
Company's other borrowers. The Company believes these DIP loans should involve
risks similar to those of other loans in its portfolio because the Company is
granted a super priority security interest in the assets of the DIP borrower
during bankruptcy. Additionally, the Company believes it has the potential for
greater returns on these loans, as the Company generally receives a larger
equity position in the borrower upon emergence from bankruptcy than it typically
receives for its other loans. All of the borrowers of the $2.6 million in DIP
loans had successfully emerged from bankruptcy as of March 31, 1996.

SELECTION OF LOAN AND INVESTMENT OPPORTUNITIES

Since inception, the Company has identified certain common characteristics
in lending to emerging growth businesses. These criteria, which are listed
below, are applied to all investment decisions, although all criteria may not be
met in every instance and their importance may vary depending on the relevant
circumstances.

Growth. In addition to generating sufficient cash flow to service the
prospective loan, the potential borrower typically must have an annual
projected growth rate of at least 20%. Anticipated growth is a key factor
in determining the potential valuation of warrants in the Company's equity
portfolio.

Liquidation Value of Assets. While the Company does not market itself
as an asset-based lender, the liquidation value of assets securing the
loans is an important component in the credit decision. Valuations include
both hard assets (accounts receivable, inventory, and property, plant and
equipment), as well as intangibles, such as customer lists, networks,
databases, and recurring revenue streams.

Sophisticated Equity Shareholders. Many of the borrowers in the
Company's portfolio have sophisticated equity investors whose equity
position is subordinate to the debt securities of the Company. These
investors allow the Company to maximize its resources by enhancing the due
diligence process and financial sophistication of the borrower, and by
providing increased controls and a source of potential additional follow-on
capital. The interest and support of sophisticated equity investors tends
to increase the Company's confidence in the borrower, its management team
and the potential long-term value of the borrower's business.

Experienced Management Teams. The Company seeks to identify potential
borrowers that have management teams that are experienced, have a
significant ownership interest in the borrower and

22
<PAGE> 23

include a chief executive officer and chief financial officer who
demonstrate the ability to accomplish the objectives set forth in the
borrower's business plan.

Profitable Operations. The Company focuses on portfolio companies
that have positive earnings from operations (before interest, depreciation
and amortization). The Company does not typically lend to start-up
companies.

Exit Strategy. Prior to making an investment, the Company analyzes
the potential for the borrower to repay its loan and to experience a
liquidity event that would allow the Company to realize value for its
equity position. Liquidity events include, without limitation, an initial
public offering, a sale of the borrower and a repurchase by the borrower of
the Company's equity position.

LOAN REPAYMENT; VALUATION AND REALIZATION OF EQUITY INVESTMENTS

The Company's investments in small businesses are made with the intent of
having the loans repaid within five years and liquidating the equity portion of
the investments for cash within five to ten years. If an investment is
successful, not only will the loan made by the Company have been repaid with
interest, but the Company may be in a position to realize a gain on the equity
security obtained in connection with the loan. Although the Company expects to
dispose of an investment after a certain time, situations may arise in which it
may hold equity securities for a longer period. Since inception, $220.7 million
of loans have been originated and $28.8 million or 13.0% have been repaid.

Each loan the Company makes generally has a related five-year warrant to
buy common stock of the borrower. These warrants are exercisable at a nominal
price (usually $.01 per share) and typically represent 3% to 15% of a borrower's
fully diluted common stock. The warrants are generally structured to provide
both registration rights that entitle the Company to sell the equity securities
of the borrower in a public offering and a put option that requires the borrower
to repurchase the warrant after five years at the fair market value of the
shares issuable. As of March 31, 1996, the Company had four stock positions in
publicly traded companies that had a fair market value of $11.6 million on that
date. In accordance with the Company's valuation policy, the securities were
carried at a fair value of $8.3 million at March 31, 1996. In addition, at that
date, the Company owned common stock and preferred stock investments in 24
non-public companies with a fair value of approximately $14.3 million. The
Company has also converted 17 equity positions to cash since inception with
gains approximating $12.4 million. At March 31, 1996, the Company held warrant
positions in 94 companies that it carried at a fair value, as determined in good
faith by the Board of Directors in accordance with the Company's Valuation
Policy, of approximately $11.2 million. For a discussion of the Company's
Valuation Policy see "Summary of Significant Accounting Policies" in the Notes
to Financial Statements included elsewhere in this Prospectus.

TEMPORARY INVESTMENTS

Pending investment in the types of securities described above, the Company
will invest its otherwise uninvested cash in (i) federal government or agency
issued or guaranteed securities that mature in 15 months or less; (ii)
repurchase agreements with banks whose deposits are insured by the Federal
Deposit Insurance Corporation (the "FDIC") (an "insured bank"), with maturities
of seven days or less, the underlying instruments of which are securities issued
or guaranteed by the federal government; (iii) certificates of deposit in an
insured bank with maturities of one year or less, up to the amount of the
deposit insurance; (iv) deposit accounts in an insured bank subject to
withdrawal restrictions of one year or less, up to the amount of deposit
insurance; or (v) certificates of deposit or deposit accounts in an insured bank
in amounts in excess of the insured amount if the insured bank is deemed
"well-capitalized" by the FDIC.

OPERATIONS

Marketing. The Company currently employs four lending officers who cover
certain geographic territories. In order to originate loans, these lending
officers make use of an extensive referral network comprised of investment
bankers, venture capitalists, attorneys, accountants, commercial bankers and
business brokers. A lending officer typically receives between five and ten
informational packages per week from these sources. On average, each lending
officer closes one loan per month. In an effort to expand its geographic

23
<PAGE> 24

presence, the Company has entered into a consulting arrangement with an
experienced small business finance professional located in northern California
who assists the Company in identifying potential borrowers and referral sources
in the western United States and structuring loan and warrant transactions with
small businesses so identified. It is the Company's intention to open a loan
production office in the San Francisco area and management is in the process of
locating office space for that purpose. The Company is also considering
expanding its presence into other geographic markets.

Loan Approval Process. The Company's lending officers review informational
packages in order to identify potential borrowers. After identifying applicants
that meet the Company's investment criteria, the loan officer, in conjunction
with the Chief Operating Officer, selects applicants that merit additional
consideration. See " -- Selection of Loan and Investment Opportunities." The
lending officer then conducts a more thorough investigation and analysis ("due
diligence") of the applicant. The due diligence process usually includes on-site
visits, review of historical and prospective financial information, interviews
with management, employees, customers and vendors of the applicant, background
checks and research on the applicant's product, service or particular industry.

Upon the completion of due diligence, the lending officer completes a
standard borrower profile that summarizes the borrower's historical financial
statements, its industry and management team, and its conformity to the
Company's investment criteria. The lending officer then presents the profile,
along with his due diligence findings, to a Loan Approval Committee comprised of
the Chief Executive Officer, Chief Operating Officer, the Company's Vice
President -- Workouts and the Chief Financial Officer, which committee evaluates
the merits and risks of each potential loan and must approve each loan.
Additional due diligence is conducted by the Company's attorneys prior to
funding the loan.

Loan Grading. In 1994, the Company implemented a system by which it graded
all loans on a scale of 1 to 6. The system was intended to reflect the
performance of the borrower's business as well as the collateral coverage of the
loan and other factors considered relevant. During late 1995, the system was
refined to reflect management's additional experience in monitoring its growing
loan portfolio. Each loan is evaluated by the respective lending officer and the
Chief Operating Officer based on the financial performance of the borrower and
other borrower-specific risk factors that may include management quality,
capitalization, collateral coverage, value of intangible assets and availability
of working capital. All new loans are assigned a grade 3 for a period of six
months in the absence of an extraordinary event during that period. After the
initial six months, loans are assigned a grade of 1 to 6. Thereafter, all loans
are reviewed and graded on at least a quarterly basis.

Management believes that loans with a grade 1 involve the least amount of
risk in the Company's portfolio, as the borrower is performing well above
expectations financially, and other risk factors are clearly favorable.
Management believes that loans with a grade 2 involve low risk relative to other
loans in the Company's portfolio, as the borrower is performing above
expectations financially and the majority of risk factors are favorable.
Management believes that loans with a grade 3 involve an acceptable risk, as the
borrower is performing as expected financially and the other risk factors are
generally favorable.

Management believes that loans with a grade 4, while still involving an
acceptable level of risk, require additional attention from the lender. A loan
with a grade 4 typically involves a borrower that is performing marginally below
expectations, and short term trends or negative events have occurred that have
created some concern. However, other risk factors are favorable. Loans in this
category require a proactive action plan to be executed by the borrower's
management that is monitored by the lender. A grade 4 is considered to be a
temporary rating (generally no longer than six months) that will result in
either an upgrade or downgrade. The loan is usually serviced by the lending
officer or a member of the workout area.

Management believes that loans with a grade 5 involve greater than an
acceptable level of risk. The borrower is performing substantially below
expectations financially and negative trends persist. Other risk factors are
marginal and the execution of an action plan is critical to the long term
viability of the borrower. The loan may be in default, and interest is probably
not being accrued, but Sirrom's management believes the borrower's management is
capable of executing a plan to return the borrower to an acceptable risk level.

24
<PAGE> 25

Management believes that loans with a grade 6 involve an unacceptable level
of risk with substantial probability of loss. The borrower has grossly failed to
perform financially over an extended period and other unacceptable risk factors
exist. Sirrom has or will most likely assume management control of the borrower
and will most likely be responsible for executing an action plan to return the
borrower to a satisfactory risk level or to liquidate the borrower or its
collateral. Interest is not being accrued and the Company has or fully expects
to realize a loss on some or all of the loan's principal balance.

Loans graded 5 or 6 are placed on the Company's Credit Watch List and are
serviced by a member of the workout area. The workout area consists of two
officers of the Company. See "Business -- Delinquency and Collections."

Loan Portfolio. During the three months ended March 31, 1996, the Company
originated loans to 29 companies, including 10 new borrowers, in the aggregate
principal amount of approximately $32.3 million, in several industries. During
the same period, the Company realized $6.9 million in gains, $6.3 million of
which represented gains realized upon the sale of equity interests in Premiere
Technologies, Inc., and realized approximately $1.1 million in loan losses. The
following table sets forth, the amount of the Company's loans originated,
renewed and repaid for the periods indicated, as well as the realized and
unrealized gain on investments.

<TABLE>
<CAPTION>
FROM THREE MONTHS
INCEPTION ENDED
THROUGH YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, ---------------------------- ------------------
1992 1993 1994 1995 1995 1996
------------ ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans originated.................... $ 14,639 $31,470 $40,785 $101,505 $27,792 $ 32,324
Loan repayments, including
renewals.......................... -- 2,013 7,585 14,414 1,560 4,775
Loan amounts converted to equity.... -- 500 2,150 3,751 -- 890
Realized (losses) on loans.......... -- (1,155) (1,155) (1,500) -- (1,100)
Loans receivable -- end of period... 14,639 42,441 72,336 144,855 97,378 166,936
Net realized gains on equity
investments....................... 198 355 617 3,220 50 6,856
Change in unrealized appreciation
(depreciation) of investments..... 1,813 (50) 3,356 4,694 1,603 2,241
</TABLE>

25
<PAGE> 26

The table below sets forth, as of March 31, 1996, the 22 states in which
the Company's borrowers maintain their principal place of business, the number
of borrowers and the percent of total loan principal balance outstanding to
borrowers located in such states.

<TABLE>
<CAPTION>
% OF TOTAL
LOAN PRINCIPAL
BALANCE NUMBER OF
STATE OUTSTANDING BORROWERS
--------------------------------------------- ----------------- ---------
<S> <C> <C>
Alabama...................................... 1.9% 2
California................................... 3.7 3
Connecticut.................................. 2.8 2
Florida...................................... 16.8 18
Georgia...................................... 10.4 9
Kentucky..................................... 6.3 4
Michigan..................................... 3.1 2
North Carolina............................... 8.0 9
New Jersey................................... 2.6 3
Ohio......................................... 2.7 3
South Carolina............................... 3.6 3
Tennessee.................................... 10.7 14
Texas........................................ 9.8 7
Virginia..................................... 7.2 9
*Other states(8)............................. 10.5 9
------ ------
Total.............................. 100.0% 97
============= =======
</TABLE>

- ---------------
* The other states in which the Company has only a single borrower are Colorado,
Iowa, Illinois, Maryland, Mississippi, Oklahoma, Pennsylvania and Wisconsin.
The Company also has one borrower in Washington, D.C.

DELINQUENCY AND COLLECTIONS

When a borrower fails to make a required payment by the tenth of the month,
it is notified by telephone by the Company's Controller who discusses with the
borrower the expected timing of the payment. If the payment is delinquent more
than 30 days, the Chief Operating Officer and responsible lending officer
jointly determine an appropriate course of action on the account, which could
include transferring responsibility for the loan to the Company's workout area.
When a loan reaches 60 days past due, the Company normally discontinues accruing
interest, and all loans over 60 days past due become the responsibility of the
Company's workout area. Management determines the most appropriate course of
action given the particular circumstances with respect to protecting its
interest in a defaulted loan, which may involve, among other things, the sale of
the borrower or foreclosure proceedings.

At March 31, 1996, the Company had seven loans with an aggregate principal
balance of $11.3 million that were graded a 5 or 6 for which accrued interest
payments of $46,000 were delinquent for 60 days or more. Based on the particular
circumstances involved, the Board of Directors estimated the aggregate fair
value of these loans to be $7.8 million, and therefore provided for unrealized
depreciation of $3.5 million on these loans.

CUSTODIAL SERVICES

First American National Bank (Trust Department) acts as the custodian of
all the Company's portfolio assets pursuant to a Custodial Services Agreement
and in accordance with SBA Regulations and the 1940 Act.

26
<PAGE> 27

THE COMPANY'S OPERATIONS AS A BDC

As a BDC, the Company may not acquire any asset other than Qualifying
Assets unless, at the time the acquisition is made, Qualifying Assets represent
at least 70% of the value of the Company's total assets. The principal
categories of Qualifying Assets relevant to the business of the Company are the
following:

(i) securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer is an "eligible
portfolio company." An eligible portfolio company is defined as any issuer
that (a) is organized and has its principal place of business in the United
States, (b) is not an investment company other than a SBIC wholly-owned by
the BDC and (c) does not have any class of publicly-traded securities with
respect to which a broker may extend margin credit;

(ii) securities received in exchange for or distributed with respect
to securities described above, or pursuant to the exercise of options,
warrants or rights relating to such securities; and

(iii) cash, cash items, Government securities, or high quality debt
securities maturing in one year or less from the time of investment.

The Company may not change the nature of its business so as to cease to be,
or withdraw its election as, a BDC unless authorized by vote of a majority, as
defined in the 1940 Act, of the Company's shares. Since the Company made its BDC
election, it has not made any substantial change in its structure or in the
nature of its business. The Company has requested permission from the Commission
to create a wholly-owned subsidiary into which it will transfer its SBIC
operations. Following this reorganization, the subsidiary will operate as an
investment company and an SBIC and the Company will continue to operate as a
BDC.

As a BDC, the Company is entitled to borrow money and issue senior
securities representing indebtedness as long as its indebtedness has asset
coverage to the extent of at least 200%. This limitation is not applicable to
borrowings made by the Company from the SBA, which totaled $83.3 million at May
31, 1996. In December 1995, the Company obtained the $50.0 million Revolving
Credit Facility which is secured by all of the Company's assets. The interest
rate on amounts outstanding under the Revolving Credit Facility at May 31, 1996,
was 7.28%. The Revolving Credit Facility matures on December 27, 1998. At May
31, 1996, there were $32.5 million outstanding under the Revolving Credit
Facility. The Revolving Credit Facility requires that the Company must obtain
the lenders' consent prior to, among other things, encumbering its assets,
merging or consolidating with another entity and making investments other than
those permitted by the SBA.

In order to manage the interest rate risk associated with the variable
interest rate provided for under the Revolving Credit Facility, the Company
entered into an interest rate swap agreement that effectively converts the
variable rate on a portion of the Revolving Credit Facility to a fixed rate of
8.15% per annum. Under this agreement, in April 1996, the Company began
converting up to $30.0 million borrowed under the Revolving Credit Facility to
this fixed rate in $3.0 million increments per month.

PROPOSED CORPORATE REORGANIZATION

The Company has filed an application under the 1940 Act for an order of the
Commission granting exceptions from certain sections of the 1940 Act (the
"Application") to permit the establishment and operation of a wholly-owned
subsidiary of the Company. As stated in the Application, the proposed
reorganization would permit the Company to engage in investment opportunities in
which SBICs cannot participate. The SBA has established specific criteria for
SBIC investments that take into account, among other things, the size of the
portfolio company and the terms of the investment. The Company believes that
there are many companies that offer good investment opportunities, but that do
not meet the SBA requirements for size or type of business or otherwise are not
within the terms specified by SBA regulations. In creating a parent-subsidiary
organization, the Company could continue to provide loans meeting the SBA
requirements through its SBIC subsidiary, but also would be able to take
advantage of the additional investment opportunities that exist beyond those
parameters. The proposed reorganization would allow the Company to seek debt
financing under the Special Purpose Facility, which it would be unable to do
under its current structure. The Company has also requested approval from the
SBA to permit the reorganization.

27
<PAGE> 28

There can be no assurance, however, that the Commission or the SBA will grant
the Company permission to consummate the reorganization.

In the proposed reorganization, the Company intends to transfer a majority
of its assets, including its license to operate as an SBIC and excluding the net
proceeds of this Offering, to a new wholly-owned subsidiary, Sirrom Investments,
Inc. ("Investments"). In return, Investments would assume all of the Company's
indebtedness outstanding to the SBA and under the Revolving Credit Facility and
issue to the Company all of its outstanding capital stock. Following the
transfer, Investments would carry on the SBIC activities previously conducted by
the Company and the Company would expand its operations to include a broader
range of financing and other services to small businesses. After the application
of the net proceeds of this Offering, the Company presently intends to keep
Investments fully invested at all times and to make loans through Investments
when funds are available in that subsidiary. Therefore, upon completion of the
corporate reorganization, the Company would continue to make loans until the net
proceeds of this Offering are fully invested and then make loans through the
SBIC subsidiary as long as funds are available in that subsidiary to so do. When
Investments is fully invested, the Company will begin making loans with funds
available to it under the Special Purpose Facility. In the event that funds
thereafter become available at the SBIC level through repayments, realized
gains, etc., the SBIC would make the next loan available from the Company's
pipeline.

COMPETITION

The Company's principal competitors include financial institutions, venture
capital firms and other non-traditional lenders. Many of these entities have
greater financial and managerial resources than the Company. The Company
believes that it competes effectively with such entities primarily on the basis
of the quality of its service, its reputation, and the timely credit analysis
and decision-making processes it follows, and to a significantly lesser degree
on the interest rates, maturities and payment schedules it offers on the loans
to borrowers.

EMPLOYEES

The Company currently has 17 employees. The Company believes its relations
with its employees are excellent. The Company believes that it has maintained
low overhead as a percentage of its assets as a result of outsourcing all job
functions not directly related to the marketing or underwriting of small
business loans or the executive management of the Company.

PENDING ACQUISITION

The Company has entered into an acquisition agreement pursuant to which it
will acquire Harris Williams. Harris Williams is a merger and acquisition
advisory firm that currently focuses exclusively on providing advisory services
with respect to small and medium sized companies throughout the United States
that are similar in size to Sirrom's portfolio companies. Harris Williams'
clients have included divisions of large companies, portfolio companies of
professional investor groups, and privately owned businesses. The typical Harris
Williams engagement includes a monthly retainer and a success fee contingent
upon closing the transaction. The firm has consistently grown since inception
with the number of professionals increasing from two to nine over the past three
years, and Harris Williams anticipates adding an additional five professionals
by August 1996. Management believes that future growth of Harris Williams is
attainable through adding additional merger and acquisition professionals, by
gaining additional market share and by realizing the benefits of its rapidly
increasing client base, which should expand as a result of its relationship with
the Company. However, no assurance can be given that such growth can be
achieved.

28
<PAGE> 29

The following table sets forth selected financial and operating data for
Harris Williams for the years ended December 31, 1993, 1994 and 1995 and the
three months ended March 31, 1995 and 1996.

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------------- ---------------
1993 1994 1995 1995 1996
---- ------ ------ ---- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues......................................... $569 $1,682 $2,578 $645 $1,392
Pretax operating income.......................... 207 553 812 194 795
Number of transactions closed.................... 4 5 8 1 3
</TABLE>

Consummation of the acquisition of Harris Williams is subject to certain
conditions, including (i) that the transaction will qualify for pooling of
interests accounting treatment, (ii) receipt of approval from the shareholders
of the Company, (iii) receipt by the Company of a fairness opinion that the
consideration being given by the Company in the acquisition is fair from a
financial point of view to the shareholders of the Company, which the Company
received on June 5, 1996, and (iv) receipt of an exemptive order from the
Commission required under the 1940 Act because of the common ownership by John
A. Morris, Jr., M.D., Chairman and a director of the Company, in each of the
Company and Harris Williams, and there can be no assurance that the Commission
will grant the requested exemption.

Subject to the satisfaction of such conditions, the Company will acquire
Harris Williams in exchange for 950,000 shares of the Company's Common Stock,
which amount shall be adjusted in the event the average bid price of the Common
Stock, as quoted on the Nasdaq National Market, for the 15 trading days
preceding the acquisition is less than $21.00 or greater than $26.00. The shares
to be issued by the Company will not be registered under the Securities Act and
therefore will not be immediately transferable. In connection with the
consummation of the acquisition, the two principals of Harris Williams will each
enter into a four-year employment agreement that will contain non-competition
provisions. After the acquisition, the Harris Williams professionals will be
eligible to participate in the Company's stock incentive plans.

The acquisition is currently expected to be effected through (i) the merger
of a wholly-owned subsidiary of the Company ("Acquisition Sub") with Harris
Williams & Co., a Virginia corporation ("HW Corp") that has elected to be
treated as an S corporation under the Code, and the general partner and holder
of 80% of the partnership interest of Harris Williams and (ii) an acquisition by
Acquisition Sub of the 20% limited partnership interests in Harris Williams
owned by Sirrom, Ltd., a Tennessee limited partnership, an affiliate of John A.
Morris, Jr., M.D., Chairman of the Company.

PRO FORMA FINANCIAL INFORMATION

HW Corp was formed in 1991 and Harris Williams was later formed in August
1994, upon investment of Sirrom Ltd. (the "Minority Interest"). At that time, HW
Corp began conducting all of its operations through Harris Williams. HW Corp's
operations after August 1994 consist solely of its investment in Harris
Williams.

The pro forma statement of operations data for the three months ended March
31, 1996, has been prepared based on unaudited statements of operations of each
of the respective companies. The pro forma statement of operations data for the
years ended December 31, 1995 and 1994 have been prepared based on audited
statements of operations of the Company and HW Corp, which are presented
elsewhere in this Prospectus. The minority interest deduction included in the HW
Corp financial statements is eliminated in the pro forma presentation because
the Company is acquiring the Minority Interest. The pro forma statement of
operations data may not be indicative of future results of operations or of the
actual results of operations had the acquisition described above been effective
on January 1 of each respective year.

29
<PAGE> 30

SIRROM CAPITAL CORPORATION

PRO FORMA STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------------------
SIRROM
CAPITAL MINORITY
CORPORATION HW CORP INTEREST ADJUSTMENTS PRO FORMA
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME:
Interest on investments.......... $ 4,862,463 $ -- $ -- $ -- $ 4,862,463
Advisory fees.................... -- 1,391,500 -- -- 1,391,500
Loan processing fees............. 921,250 -- -- -- 921,250
Other income..................... -- 17,142 -- -- 17,142
----------- ---------- ---------- ----------- -----------
Total operating income... 5,783,713 1,408,642 -- -- 7,192,355
OPERATING EXPENSES:
Interest expense................. 1,789,982 -- -- -- 1,789,982
Salaries and benefits............ 739,020 498,402 -- -- 1,237,422
Other operating expenses......... 477,064 114,822 -- -- 591,886
Amortization expense............. 188,397 -- -- -- 188,397
----------- ---------- ---------- ----------- -----------
Total operating
expenses............... 3,194,463 613,224 -- -- 3,807,687
----------- ---------- ---------- ----------- -----------
Net operating income............... 2,589,250 795,418 -- -- 3,384,668
Realized gain on investments....... 5,756,489 -- -- -- 5,756,489
Change in unrealized appreciation
of investments................... 2,240,559 -- -- -- 2,240,559
Provision for income taxes......... (2,134,960) -- -- (278,396)(1) (2,413,356)
Minority interest.................. -- (159,095) 159,095 -- --
----------- ---------- ---------- ----------- -----------
Net increase in shareholders'
equity resulting from
operations.................... $ 8,451,338 $ 636,323 $ 159,095 $ (278,396) $ 8,968,360
========= ========= ========= ========= ==========
Per share:
Pretax operating income............ $ 0.27 $ 0.32
Net increase in shareholders'
equity resulting from
operations....................... 0.87 0.84
Fully diluted weighted average
shares outstanding............... 9,733,000 950,000(2) 10,683,000
</TABLE>

- ---------------
(1) Reflects the provision and accrual for federal income taxes on operations of
HW Corp and Minority Interest at statutory rates.

(2) Reflects the impact of the shares issued in connection with the proposed
acquisition.

30
<PAGE> 31

SIRROM CAPITAL CORPORATION

PRO FORMA STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------
SIRROM
CAPITAL MINORITY
CORPORATION HW CORP INTEREST ADJUSTMENTS PRO FORMA
----------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME:
Interest on investments............ $13,451,742 $ -- $ -- $ -- $13,451,742
Advisory fees...................... -- 2,577,841 -- -- 2,577,841
Loan processing fees............... 1,899,692 -- -- -- 1,899,692
Other income....................... 223,456 78,544 -- -- 302,000
----------- ---------- -------- ----------- -----------
Total operating income..... 15,574,890 2,656,385 -- -- 18,231,275
OPERATING EXPENSES:
Interest expense................... 4,771,131 -- -- -- 4,771,131
Salaries and benefits.............. 1,081,478 1,314,723 -- -- 2,396,201
Other operating expenses........... 1,412,358 530,052 -- -- 1,942,410
State income tax on interest....... 109,035 -- -- -- 109,035
Amortization expense............... 207,792 -- -- -- 207,792
----------- ---------- -------- ----------- -----------
Total operating expenses... 7,581,794 1,844,775 -- -- 9,426,569
----------- ---------- -------- ----------- -----------
Net operating income................. 7,993,096 811,610 -- -- 8,804,706
Realized gain on investments......... 1,759,513 -- -- -- 1,759,513
Change in unrealized appreciation of
investments........................ 4,693,544 -- -- -- 4,693,544
Provision for income taxes........... (1,020,321) -- -- (284,064)(1) (1,304,385)
Minority interest.................... -- (162,361) 162,361 -- --
----------- ---------- -------- ----------- -----------
Net increase in shareholders'
equity resulting from
operations...................... $13,425,832 $ 649,249 $162,361 $(284,064) $13,953,378
========== ========= ======== ========= ==========
Per share:
Pretax operating income.............. $ 0.99 $ 0.98
Net increase in shareholders' equity
resulting from operations.......... 1.64 1.53
Fully diluted weighted average shares
outstanding........................ 8,174,000 950,000(2) 9,124,000
</TABLE>

- ---------------
(1) Reflects the provision and accrual for federal income taxes on operations of
HW Corp and Minority Interest at statutory rates.

(2) Reflects the impact of the shares issued in connection with the proposed
acquisition.

31
<PAGE> 32

SIRROM CAPITAL CORPORATION

PRO FORMA STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------------
SIRROM
CAPITAL MINORITY
CORPORATION HW CORP INTEREST ADJUSTMENTS PRO FORMA
----------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME:
Interest on investments........... $ 7,336,816 $ -- $ -- $ -- $7,336,816
Advisory fees..................... -- 1,681,951 -- -- 1,681,951
Loan processing fees.............. 901,340 -- -- -- 901,340
Other income...................... -- 10,909 -- -- 10,909
----------- ---------- -------- ----------- ----------
Total operating income.... 8,238,156 1,692,860 -- -- 9,931,016
OPERATING EXPENSES:
Interest expense.................. 3,123,461 -- -- -- 3,123,461
Salaries and benefits............. -- 884,396 -- -- 884,396
Management fees................... 1,072,833 -- -- -- 1,072,833
Other operating expenses.......... 122,339 255,597 -- -- 377,936
State income tax on interest...... 457,035 -- -- -- 457,035
Amortization expense.............. 117,992 -- -- -- 117,992
----------- ---------- -------- ----------- ----------
Total operating
expenses................ 4,893,660 1,139,993 -- -- 6,033,653
----------- ---------- -------- ----------- ----------
Net operating income.............. 3,344,496 552,867 -- -- 3,897,363
Realized (loss) on investments...... (538,025) -- -- -- (538,025)
Change in unrealized appreciation of
investments....................... 3,356,316 -- -- 3,356,316
Provision for income taxes.......... -- -- -- (193,503)(1) (193,503)
Minority interest................... -- (25,468) 25,468 -- --
----------- ---------- -------- ----------- ----------
Net increase in shareholders'
equity resulting from
operations..................... $ 6,162,787 $ 527,399 $ 25,468 $(193,503) $6,522,151
----------- ---------- -------- ----------- ----------
Per share:
Pretax operating income............. $ 0.88 $ 0.83
Net increase in shareholders' equity
resulting from operations......... 1.43 1.24
Fully diluted weighted average
shares outstanding................ 4,324,000 950,000(2) 5,274,000
</TABLE>

- ---------------
(1) Reflects the provision and accrual for federal income taxes on operations of
HW Corp and Minority Interest at statutory rates.

(2) Reflects the impact of the shares issued in connection with the acquisition.

32
<PAGE> 33

SIRROM CAPITAL CORPORATION

PRO FORMA BALANCE SHEET DATA

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------------------------
SIRROM CAPITAL MINORITY
CORPORATION HW CORP INTEREST ADJUSTMENTS PRO FORMA
-------------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
Loans........................... $ 166,936,281 $ -- $ -- $ -- $166,936,281
Equity interests................ 22,548,818 -- -- -- 22,548,818
Warrants........................ 11,198,843 -- -- -- 11,198,843
-------------- ---------- --------- ----------- ------------
Total investments....... 200,683,942 -- -- -- 200,683,942
=========== ========= ========= ========= ===========
Cash and cash equivalents......... 78,283 1,782,594 -- (550,075)(1) 1,310,802
Interest receivable............... 2,534,774 -- -- -- 2,534,774
Debenture costs, net.............. 2,095,634 -- -- -- 2,095,634
Furniture and equipment, net...... 214,734 67,914 -- -- 282,648
Other assets...................... 598,473 149,885 -- -- 748,358
-------------- ---------- --------- ----------- ------------
Total assets............ $ 206,205,840 $2,000,393 $ -- $(550,075) $207,656,158
=========== ========= ========= ========= ===========
LIABILITIES
Debentures payable to SBA......... $ 83,260,000 $ -- $ -- $ -- $ 83,260,000
Revolving credit facility......... 24,916,000 -- -- -- 24,916,000
Interest payable.................. 1,281,333 -- -- -- 1,281,333
Accrued taxes payable............. 2,310,268 -- -- 278,396(1) 2,588,664
Accounts payable and accrued
expenses........................ 32,016 364,859 -- -- 396,875
-------------- ---------- --------- ----------- ------------
Total liabilities....... 111,799,617 364,859 -- 278,396 112,442,872
-------------- ---------- --------- ----------- ------------
Commitments and contingencies
Minority interest................. -- 610,262 (610,262) --
Shareholders' equity:
Common stock -- no par value,
50,000,000 shares authorized,
9,195,116 issued and
outstanding.................. 73,919,184 60,783 -- -- 73,979,967
Notes receivable from
employees.................... (1,980,000) -- -- -- (1,980,000)
Undistributed net realized
earnings..................... 10,413,179 964,489 610,262 (828,471)(1) 11,159,459
Unrealized appreciation of
investments.................. 12,053,860 -- -- -- 12,053,860
-------------- ---------- --------- ----------- ------------
Total shareholders'
equity................ 94,406,223 1,025,272 610,262 (828,471) 95,213,286
-------------- ---------- --------- ----------- ------------
Total liabilities, and
shareholders'
equity................ $ 206,205,840 $2,000,393 $ -- $(550,075) $207,656,158
=========== ========= ========= ========= ===========
</TABLE>

- ---------------

(1)Reflects the provision, accrual and payment of federal income taxes on
operations of HW Corp and Minority Interest at statutory rates.

33
<PAGE> 34

SIRROM CAPITAL CORPORATION

PRO FORMA BALANCE SHEET DATA

<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------------------
SIRROM
CAPITAL MINORITY
CORPORATION HW CORP INTEREST ADJUSTMENTS PRO FORMA
------------ -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
Loans.......................... $144,854,517 $ -- $ -- $ -- $144,854,517
Equity interests............... 15,912,467 -- -- -- 15,912,467
Warrants....................... 11,513,183 -- -- -- 11,513,183
------------ -------- -------- ----------- ------------
Total investments...... 172,280,167 -- -- -- 172,280,167
------------ -------- -------- ----------- ------------
Cash and cash equivalents........ 195,069 737,682 -- (266,011)(1) 666,740
Interest receivable.............. 2,119,567 -- -- -- 2,119,567
Debenture costs, net............. 2,020,030 -- -- -- 2,020,030
Furniture and equipment, net..... 203,860 72,421 -- -- 276,281
Other assets..................... 211,165 74,425 -- -- 285,590
------------ -------- -------- ----------- ------------
Total assets........... $177,029,858 $884,528 $ -- $(266,011)(1) $177,648,375
=========== ======== ======== ========= ===========
LIABILITIES
Debentures payable to SBA...... $ 73,260,000 $ -- $ -- $ -- $ 73,260,000
Revolving credit facility...... 13,200,000 -- -- -- 13,200,000
Interest payable............... 936,818 -- -- -- 936,818
Accrued taxes payable.......... 1,073,525 -- -- -- 1,073,525
Accounts payable and accrued
expenses.................... 213,901 44,418 -- 284,064(1) 542,383
------------ -------- -------- ----------- ------------
Total liabilities...... 88,684,244 44,418 -- 284,064 89,012,726
------------ -------- -------- ----------- ------------
Commitments and contingencies
Minority interest................ -- 451,161 (451,161) -- --
Shareholders' equity:
Common stock -- no par value,
50,000,000 shares
authorized, 9,195,116 issued
and outstanding............. 73,919,184 60,783 -- -- 73,979,967
Notes receivable from
employees................... (1,980,000) -- -- -- (1,980,000)
Undistributed net realized
earnings.................... 6,593,144 328,166 451,161 (550,075)(1) 6,822,396
Unrealized appreciation of
investments................. 9,813,286 -- -- -- 9,813,286
------------ -------- -------- ----------- ------------
Total shareholders'
equity............... 88,345,614 388,949 451,161 (550,075) 88,635,649
------------ -------- -------- ----------- ------------
Total liabilities and
shareholders'
equity............... $177,029,858 $884,528 $ $(266,011) $177,648,375
=========== ======== ======== ========= ===========
</TABLE>

- ---------------

(1)Reflects the provision and accrual for federal income taxes on operations of
HW Corp and Minority Interest at statutory rates.

34
<PAGE> 35

INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT POLICIES

The Company's investment objectives are to achieve both a high level of
income from interest on loans and other fees and long-term growth in its
shareholders' equity through the appreciation of the equity interests in its
portfolio companies. Except for the fundamental policies described below, the
Company's investment objectives may be changed by a majority vote of its Board
of Directors.

In making loans and managing its portfolio, the Company will adhere to the
following fundamental policies, which may not be changed without the approval of
the holders of the majority, as defined in the 1940 Act, of the Company's
outstanding shares of Common Stock. The percentage restrictions set forth below,
as well as those contained elsewhere in this Prospectus, apply at the time a
transaction is effected, and a subsequent change in a percentage resulting from
market fluctuations or any cause other than an action by the Company will not
require the Company to dispose of portfolio securities or to take other action
to satisfy the percentage restriction.

1. The Company will at all times conduct its business so as to retain
its status as a BDC. In order to retain that status, the Company may not
acquire any assets (other than non-investment assets necessary and
appropriate to its operations as a business development company) if, after
giving effect to such acquisition, the value of its "Qualifying Assets"
amounts to less than 70% of the value of its total assets. For a summary
definition of "Qualifying Assets," see "Regulation." The Company believes
that the securities it has acquired and it proposes to acquire, as well as
temporary investments it makes with its idle funds, will generally be
Qualifying Assets. Securities of public companies, on the other hand, are
generally not Qualifying Assets unless they were acquired in a
distribution, in exchange for or upon the exercise of, a right relating to
securities that were Qualifying Assets.

2. The Company may issue the maximum amount of SBA debentures
permitted by the Small Business Investment Act of 1958, as amended (the
"SBIA"), and the regulations promulgated thereunder (the "SBA
Regulations"). At May 31, 1996, the Company had borrowed $83.3 million from
the SBA evidenced by debentures that have a fixed rate of interest, a ten
year term and may be prepaid after five years without penalty. These
debentures have maturities ranging from 2002 to 2006 and interest rates
varying from 6.12% to 8.20% per annum. The maximum amount which the Company
may borrow from the SBA under the SBIA varies based upon the amount of the
Company's leverageable capital (as defined by the SBA). The maximum amount
the Company can borrow is $90.0 million provided the Company's leverageable
capital is at least $45.0 million. The Company's leverageable capital was
approximately $69.6 million at March 31, 1996, and accordingly the maximum
amount the Company can borrow from the SBA is currently $90.0 million.
However, in determining whether to approve a small business investment
company's application to issue SBA debentures, the SBA considers factors in
addition to the amount of its leverageable capital, such as the ratio of
the applicant's outstanding indebtedness that is senior to SBA debentures
to its leverageable capital.

3. The Company may borrow funds to the extent permitted by the 1940
Act. A BDC may borrow funds through the issuance of "Senior Securities" if,
immediately after such issuance, the securities will have asset coverage of
at least 200%. Indebtedness created by the sale of debentures to the SBA is
exempt from this restriction. At March 31, 1996, the Company had in place
the $50.0 million Revolving Credit Facility which is secured by all of the
Company's assets. The interest rate paid on the Revolving Credit Facility
was 7.28% at May 31, 1996. As of May 31, 1996, there were $32.5 million
outstanding under the Revolving Credit Facility. For the risks associated
with the use of leverage, see "Risk Factors -- Leverage." The Company may
be deemed to have received income on debt obligations, such as those that
were initially issued at a discount. The Company may borrow funds or sell
temporary investments or other assets to meet its distribution requirements
with regard to the interest income it will be deemed to have received on
these securities. See "Tax Status."

4. The Company will not concentrate its investments in any particular
industry or particular group of industries. Therefore, the Company will not
acquire any securities (except upon the exercise of a right

35
<PAGE> 36

related to previously acquired securities) if, as a result, 25% or more of
the value of its total assets consists of securities of companies in the
same industry.

5. The Company will not (i) act as an underwriter of securities of
other issuers (except to the extent that it may be deemed an "underwriter"
of securities purchased by it that subsequently must be registered under
the Securities Act before they may be offered or sold to the public), (ii)
purchase or sell real estate or interests in real estate or real estate
investment trusts (except that the Company may purchase and sell real
estate or interests in real estate in connection with the orderly
liquidation of investments or the foreclosure of mortgages held by the
Company), (iii) sell securities short, (iv) purchase securities on margin
(except to the extent that it may purchase securities with borrowed money),
(v) write or buy put or call options (except to the extent of warrants or
conversion privileges obtained in connection with its loans, and rights to
require the issuers of such investments or their affiliates to repurchase
them under certain circumstances), (vi) engage in the purchase or sale of
commodities or commodity contracts, including futures contracts (except
where necessary in working out distressed loan or investment situations),
or (vii) acquire the voting stock of, or invest in any securities issued
by, any other investment company, except as they may be acquired as part of
a merger, consolidation or acquisition of assets.

6. The Company may make loans and loans with equity features, as well
as investments in equity securities of small business concerns. It is
anticipated that substantially all of the Company's investments in small
business concerns will continue to be secured loans with warrants or other
equity features issued in connection therewith. The Company may also make
loans as permitted under its Amended and Restated 1994 Stock Option Plan
and its 1996 Incentive Stock Option Plan, as described in this Prospectus
under "Management -- Employee Stock Options".

The Company's policies with respect to the following matters are not
fundamental policies and may be changed, subject to the SBIA and SBA
Regulations, by the Company's Board of Directors without shareholder approval.

1. The Company may make investments in the form of loans, loans with
equity features and equity securities. At March 31, 1996, 79.0% of the
Company's total assets were invested in loans with related warrants, 16.4%
in equity securities, 1.9% in convertible debt and 2.7% in other assets.
The Company will not make loans to any single small business concern or its
affiliates that exceed 25% of the Company's regulatory capital. Under the
SBA Regulations, without prior SBA approval, loans to any single small
business concern and its affiliates may not exceed 20% of the Company's
regulatory capital.

2. The Company must invest funds that are not being used to make small
business concern loans in investments permitted by the SBA Regulations.
These permitted investments include direct obligations of, or obligations
guaranteed as to principal and interest by, the United States with a term
of 15 months or less and deposits maturing in one year or less issued by an
institution insured by the FDIC. The percentage of the Company's assets so
invested will depend on, among other things, loan demand, timing of equity
infusions and SBA funding and availability of funds under the Company's
credit facility.

PORTFOLIO TURNOVER

During the three months ended March 31, 1996, the Company made loans to 29
companies totaling approximately $32.3 million and received 6 repayments (either
partial or full) aggregating $4.8 million. During the year ended December 31,
1995, the Company made loans to 44 companies totaling approximately $101.5
million and received ten repayments (either partial or full) aggregating $14.4
million. During the year ended December 31, 1994, the Company made loans to 34
companies totaling approximately $40.8 million and received six repayments
aggregating approximately $7.6 million. During the year ended December 31, 1993,
the Company made loans to 31 companies totaling approximately $31.5 million and
received three repayments aggregating $2.0 million. Since inception, the Company
has originated $220.7 million in total loans and $28.8 million, or 13.0%, have
been repaid. The Company cannot control changes in its portfolio of investments,
as borrowers have the right to prepay loans made by the Company without penalty,
and the first loans made by the Company begin maturing May 1997.

36
<PAGE> 37

INVESTMENT ADVISOR

The Company has no investment advisor and is advised by its executive
officers under the supervision of its Board of Directors.

PORTFOLIO COMPANIES

The following table sets forth certain information as of March 31, 1996,
regarding each portfolio company in which the Company has an equity investment.
Unless otherwise noted, the only relationship between each portfolio company and
the Company is the Company's investment. As an SBIC, the Company is deemed to
make available significant managerial assistance to its portfolio companies. The
amount and general terms of all loans to portfolio companies is set forth on
pages F-28 and F-35.

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Affinity Corporation................. Telecommunications Warrant to purchase 8.6%
20975 Swenson Drive Common Stock
Suite 150
Waukesha, WI 53186
Amscot Holdings, Inc................. Check Cashing Service Warrant to purchase 17.5
8430 North Armenia Avenue Common Stock
Tampa, FL 33614
Ashe Industries, Inc................. Building Products Warrant to purchase 16.5
4505 Transport Drive Common Stock
Tampa, FL 33605
Associated Response Services, Inc.... Direct Mail Warrant to purchase 34.3
9900 Brookford Street Common Stock
Charlotte, NC 28273
Assured Power, Inc................... Environmental Warrant to purchase 16.0
4816 Sirus Lane Common Stock
Charlotte, NC 28208
Auto Rental Systems, Inc............. Auto Leasing Warrant to purchase 8.0
25 Century Blvd. Common Stock
Suite 204
Nashville, TN 37214
B&N Company, Inc..................... Software Warrant to purchase 4.0
3060 Peachtree Rd., NW, Suite 1460 Common Stock
Atlanta, GA 30305
BankCard Services Corporation........ Debit Card Warrant to purchase 24.0
3400 McClure Ridge Rd. Common Stock
Bldg. E, Ste. B
Duluth, GA 30136
BiTec Southeast, Inc................. Specialty Gas Warrant to purchase 10.0
8405-G Benjamin Rd. Common Stock
Tampa, FL 33634
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

37
<PAGE> 38

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Caldwell/VSR Inc..................... Contract Manufacturing Warrant to purchase 15.9%
17151 Darwin Avenue Common Stock 100.0
Hesperia, CA 92345 Preferred Stock
Capital Network System, Inc.......... Telecommunications Warrant to purchase 3.5
600 Congress Avenue Common Stock
Suite 1400
Austin, TX 78701
Cardiac Control Systems, Inc......... Pacemaker Manufacturer Warrant to purchase 2.9
3 Commerce Blvd. Common Stock
Palm Coast, FL 32164
Carter Kaplan Holdings, L.L.C........ Investment Banking Membership interest in 24.0
629 East Main Street L.L.C.
Suite 1200
Richmond, VA 23219
CCS Technology Group, Inc............ Computer Systems Warrant to purchase 2.0
900 Winderly Place Design Common Stock
Maitland, FL 32751
CellCall, Inc........................ Radio/Telephone Warrant to purchase 1.2
103 Jerrico Drive Communications Common Stock
Suite 200
Lexington, KY 40509
CF Data Corp......................... Check Verification Warrant to purchase 20.5
9441 LBJ Freeway Common Stock
Dallas, TX 75243
Champion Glove Manufacturing Co., Sports Equipment Warrant to purchase 6.9
Inc................................ Common Stock
12121 E. 51st St. #102
Tulsa, OK 74146
C.J. Spirits, Inc.................... Distilled Spirits Warrant to purchase 10.0
2903 Pointer Place Common Stock
Seffner, FL 33584
Clearidge, Inc....................... Bottled Water Warrant to purchase 7.9
2710 Landers Avenue Common Stock
Nashville, TN 37211
CLS Corporation...................... Management Services Warrant to purchase 4.9
4 Century Parkway Common Stock
Suite 110
Blue Bell, PA 19422
Colonial Investments, Inc............ Retail Warrant to purchase 18.0
4530 Harding Rd. Common Stock
Nashville, TN 37205
Concept Technologies Group, Inc...... Professional Audio Common Stock 0.1
6632 Central Avenue Pike Equipment
Knoxville, TN 37912
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

38
<PAGE> 39

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Consumat Systems, Inc................ Environmental Warrant to purchase 20.0%
P.O. Box 9379 Common Stock
Richmond, VA 23227
Consumer Credit Associates, Inc...... Credit Card Services Warrant to purchase 15.5
950 Thread Needle Common Stock
Houston, TX 77079-2903
Continental Diamond Cutting Jewelry Replacement Warrant to purchase 12.2
Company............................ Common Stock
4427 W. Kennedy Blvd.
Suite 300
Tampa, FL 33609
Corporate Flight Management, Inc..... FBO Airport Warrant to purchase 10.0
Smyrna Airport Common Stock
Hangar 625
Smyrna, TN 37167
Cougar Power Products, Inc........... Lawn Equipment Warrant to purchase 22.6
361 Dabbs House Road Common Stock
Richmond, VA 23223
Dalcon Technologies, Inc............. Computer Services Warrant to purchase 25.0
1321 Murfreesboro Road Common Stock 100.0
4th Floor Preferred Stock --
Nashville, TN 37217 Series B
Dalt's, Inc.......................... Restaurant Warrant to purchase 25.0
250 East Wilson Bridge Rd. Common Stock
Suite 190
Worthington, OH 43085
DentureCare, Inc..................... Dental Services Preferred Stock -- 2.6
3109 Poplarwood Court Series D 12.6
Suite 300 Warrant to purchase
Raleigh, NC 27604-1025 Common Stock
Eastern Food Group L.L.C............. Grocery Warrant to purchase 15.0
2400 S. Memorial Drive interest in L.L.C.
Greenville, NC 27834 Class B Preferred 100.0
Units
Educational Medical, Inc............. Technical Schools Warrant to purchase 8.0
1327 Northmeadow Parkway Common Stock
Suite 132
Roswell, GA 30076
Electronic Merchant Services......... Payment Processing Warrant to purchase 12.5
1401 Main Street Common Stock
Suite 850 Preferred Stock -- 100.0
Columbia, SC 29201 Series B
Emerald Pointe Waterpark, L.P........ Waterpark Warrant to purchase 10.0
P.O. Box 7949 Partnership Units
Greensboro, NC 27417
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

39
<PAGE> 40

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Encore Orthopedics, Inc.............. Orthopedics Warrant to purchase 7.4%
8900 Shoal Creek Blvd., Bldg. 300 Common Stock
Austin, TX 78757
Express Shipping Centers, Inc........ Shipping Warrant to purchase 3.0
P.O. Box 1599 Common Stock
Fairfield, IA 52556
FCOA Acquisition Corp................ Retail Warrant to purchase 2.5
745 Birginal Drive Common Stock
Bensenville, IL 60106-2104
Front Royal, Inc..................... Environmental Common Stock 1.6
2200 Gateway Blvd. Insurance Warrant to purchase 3.6
Suite 205 Common Stock
Morrisville, NC 27560
Fycon Technologies, Inc.............. OEM Warrant to purchase 15.0
4100 Barringer Drive Common Stock
Charlotte, NC 28217 Preferred Stock -- 100.0
Series A
Gardner Wallcovering, Inc............ Wallcovering Warrant to purchase 2.0
3300 Canton Pike Common Stock
Hopkinsville, KY 42240
Gates Communications, L.P............ Publishing Warrant to purchase 47.0
P.O. Box 5181 Partnership Units
Richmond, VA 23220
Global Finance & Leasing, Inc........ Leasing Warrant to purchase 25.0
P.O. Box 9406 Common Stock
Wyoming, MI 49509
Gold Medal Products, Inc............. Manufacturing Warrant to purchase 30.0
1500 Commerce Rd. Common Stock
Richmond, VA 23214
Golf Corp. of America, Inc........... Golf Driving Ranges Common Stock 3.8
6950 Charlotte Pike Warrant to purchase 11.5
Nashville, TN 37209 Common Stock
Golf Video, Inc...................... Interactive Golf Video Warrant to purchase 49.5
6950 Charlotte Pike Common Stock
Nashville, TN 37209
Gulfstream International Airlines, Commuter Airline Warrant to purchase 21.0
Inc................................ Common Stock
P.O. Box 777
Miami Springs, FL 33266
Horizon Medical Products, Inc........ Medical Products Warrant to purchase 8.3
4200 Northside Pkwy., NW Common Stock
Atlanta, GA 30327
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

40
<PAGE> 41

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Hoveround Corporation................ Wheelchairs Warrant to purchase 27.0%
8135 25th Court East Common Stock
Sarasota, FL 34243
HSA International.................... Discount Membership Warrant to purchase 12.0
100 N. Tampa St. Suite 2610
Tampa, FL 33602
Hunt Incorporated.................... Truck Dealer Warrant to purchase 10.0
8211 Adamo Drive Common Stock
Tampa, FL 33619
Hunt Leasing & Rental Corporation.... Truck Leasing Warrant to purchase 10.0
8211 Adamo Drive Common Stock
Tampa, FL 33619
I. Schneid Holdings, L.L.C........... Equipment Cleaning Warrant to purchase 11.0
1429 Fairmont Ave, NW interest in L.L.C.
Atlanta, GA 30318-4153
Innotech, Inc........................ Optical Products Warrant to purchase 0.7
5568 Airport Road Common Stock
Roanoke, VA 24012-1311
In Store Services, Inc............... Retail Services Warrant to purchase 12.5
9332 Forsyth Park Drive Common Stock
Charlotte, NC 28241
International Risk Control, Inc...... Computer Software Preferred Stock -- 0.8
636 Ramona Street Series A
Palo Alto, CA 94301-2546
InterMed Healthcare Systems, Inc..... Information Services Warrant to purchase 9.4
245 Peachtree Center Ave., NE Common Stock
Suite 350
Atlanta, GA 30303
Johnston County Cable L.P............ Entertainment Warrant to purchase 27.5
2444 Solomons Island Rd., Suite 202 L.P. interest 11.1
Annapolis, MD 21401 Class A interest in
L.P.
Juvenile Products, LLC............... Furniture Products Membership interest in 30.0
P.O. Box 2208 L.L.C.
113 Anderson Ct.
Dothan, AL 36302-2208
Kentucky Kingdom, Inc................ Amusement Park Common Stock 5.2
P.O. Box 9016
Louisville, KY 40209-9016
Kryptonics, Inc...................... In-Line Skates Warrant to purchase 9.0
740 South Pierce Ave. Common Stock
Louisville, CO 80027
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

41
<PAGE> 42

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
K.W.C. Management Corp............... Music Retail Warrant to purchase 24.4%
3390 Peachtree Rd., NE Common Stock
Suite 1132
Atlanta, GA 30326
Lovett's Buffet, Inc................. Restaurants Warrants to purchase 3.6
5118 Park Avenue Common Stock
Suite 127
Memphis, TN 38117
MBA Marketing Corporation............ Shoe Stores Warrant to purchase 4.0
6615 Dublin Center Drive Common Stock
Dublin, OH 43017
Medical Associates of America, Pharmacies Preferred Stock -- 8.0
Inc................................ Series A
One Bridge Plaza
Suite 290
Fort Lee, NJ 07024
Midbrook Acquisitions, Inc........... Industrial Warrant to purchase 3.7
2080 Brooklyn Rd. Equip./Cleaning Common Stock
Jackson, MI 49204
Midbrook Products, Inc............... Industrial Warrant to purchase 3.7
2080 Brooklyn Rd. Equip./Cleaning Common Stock
Jackson, MI 49204
Money Transfer Systems, Inc.......... Credit Card Services Warrant to purchase 4.0
600 Lakeview Rd., Suite A Common Stock
Clearwater, FL 34616
Moore Diversified Products, Inc...... Metal Fabrication Warrant to purchase 10.7
1441 Sunshine Lane Common Stock
Lexington, KY 40505
Moovies Inc.......................... Video Stores Common Stock 0.2
201 Brookfield Pkwy., Ste. 200 Warrant to purchase 1.8
Greenville, SC 29607 Common Stock
Multicom Publishing, Inc............. Software Publishing Warrant to purchase 6.0
1100 Olive Way, #125 Common Stock
Seattle, WA 98101
Multimedia Learning, Inc............. Employee Training Warrant to purchase 6.0
5215 North O'Connor Common Stock
Suite 760
Irving, TX 75039
National Recovery Technologies, Environmental Products Preferred Stock -- 6.0
Inc................................ Series A
566 Mainstream Drive
Nashville, TN 37228-1223
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

42
<PAGE> 43

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
National Vision Associates, Ltd...... Optical Stores Common Stock 1.0%
296 South Clayton Street
Lawrenceville, GA 30245
Nationwide Engine Supply, Inc........ Engine Rebuilding Warrant to purchase 16.2
609 N. Houston Common Stock
Fort Worth, TX 76106
NRI Service and Supply, L.P.......... Gas Pump Services Warrant to purchase 27.5
333 Ludlow Street L.P. Interests
Stamford, CT 06902
Novavision, Inc...................... Optical Products Warrant to purchase 6.1
2700-200 Gateway Center Common Stock
Morrisville, NC 27560 Preferred Stock -- 100.0
Series A
Orchid Manufacturing Group, Inc...... Manufacturing Warrant to purchase 4.5
100 Winners Circle Common Stock
Brentwood, TN 37027
P.A. Plymouth, Inc................... Retail Warrant to purchase 15.0
100 Corporate Drive Common Stock
Radford, VA 24141
Palco Telecom Services, Inc.......... Telephone Repair Warrant to purchase 5.0
2914 Green Cove Road Services Common Stock
Huntsville, AL 35803
Patton Management Corporation........ Communications Warrant to purchase 10.0
P.O. Box 491539 Common Stock
Atlanta, GA 30349
Pipeliner Systems, Inc............... Sewer Rehabilitation Warrant to purchase 20.6
4140 Tuller Road Common Stock 100.0
Suite 132 Preferred Stock --
Dublin, OH 43017 Series B
PFIC Corporation..................... Third Party Marketing Warrant to purchase 6.0
1749 Mallory Lane, Suite 120 Common Stock
Brentwood, TN 37027
Pharmaceutical Research Associates, Research Warrant to purchase 6.0
Inc................................ Common Stock
2400 Old Ivy Road Pfd. Stock Class F 38
Charlottesville, VA 22903-4826
The Potomac Group, Inc............... Healthcare Information Common Stock 2.2
P.O. Box 290037 Warrant to purchase 1.9
Nashville, TN 37229 Common Stock 83.2
Preferred Stock --
Series A
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

43
<PAGE> 44

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Precision Fixtures & Graphics, Design/Construction Warrant to purchase 5.0%
Inc................................ Common Stock
4644 Cummings Park Dr.
Antioch, TN 37013
Precision Panel Products, Inc........ Cabinets Warrant to purchase 8.3
12440 73rd Court, North Common Stock
Largo, FL 34643
Premiere Technologies, Inc........... Telecommunications Common Stock 1.8
3399 Peachtree Road, NE
Suite 400
Atlanta, GA 30326
Pritchard Glass, Inc................. Auto Glass Warrant to purchase 25.0
140 Remount Road Common Stock
Charlotte, NC 28203
Quest Group International, Inc....... Telecommunications Warrant to purchase 10.0
242 Falcon Dr. Common Stock
Forest Park, GA 30050
Radio Systems Corporation............ Electrical Machinery Warrant to purchase 5.3
5008 National Drive Common Stock
Knoxville, TN 37914
The Ryland Company................... Clothing Warrant to purchase 20.5
104 New Era Drive Common Stock
S. Plainfield, NJ 07080
Skillsearch Corporation.............. Resume Database Common Stock 6.8
3354 Perimeter Hill Drive Warrant to purchase 7.2
Suite 235 Common Stock
Nashville, TN 37211-4129
Southern Specialty Brands, Inc....... Food Distributor Warrant to purchase 10.0
c/o Price Waterhouse Common Stock
4400 Harding Road
Nashville, TN 37205
The Summit Publishing Group, Inc..... Publishing Warrant to purchase 24.5
1112 E. Copeland Rd., Ste. 510 Common Stock
Arlington, TX 76011
Suncoast Medical Group Inc........... Optical Products Warrant to purchase 23.0
7401 114th Avenue, North Common Stock
Suite 503-A
Largo, FL 34643
Suprex Corporation................... Laboratory Analytical Warrant to purchase 3.9
125 William Pitt Way Instruments Common Stock
Pittsburgh, PA 15238
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon
exercise of the warrant.

44
<PAGE> 45

<TABLE>
<CAPTION>
PERCENTAGE
NATURE OF ITS TITLE OF SECURITIES OF CLASS
NAME AND ADDRESS OF PORTFOLIO COMPANY PRINCIPAL BUSINESS HELD BY THE COMPANY HELD(1)
- ------------------------------------- ---------------------- ---------------------- ----------
<S> <C> <C> <C>
Tower Environmental, Inc............. Environmental Services Warrant to purchase 10.1%
4830 W. Kennedy Blvd. Common Stock
Suite 930
Tampa, FL 33609-2574
Trade Am International, Inc.......... Retail Warrant to purchase 6.0
6580 Jimmy Carter Blvd. Common Stock
Norcross, GA 30071
Treasure Coast Pizza, Co............. Restaurant Warrant to purchase 10.0
19990 Princewood Drive Common Stock
Jupiter, FL 33458
Unique Electronics, Inc.............. Defense Electronics Warrant to purchase 20.0
1320 26th Street Common Stock
Orlando, FL 32805 Preferred Stock -- 100.0
Series A
Universal Marketing Corporation...... Sports Drinks Warrant to purchase 10.0
1409 Highway 45 South Common Stock
Columbus, MS 39701
Urethane Technologies, Inc........... Manufacturing Warrant to purchase 4.7
1202 East Wakeham Ave. Common Stock
Santa Ana, CA 92705
VDI Acquisition Company, L.L.C....... Watches Warrant to purchase 21.0
600 Sylvan Avenue Membership Units
Englewood Cliffs, NJ 07632
Viking Moorings Acquisition, LLC..... Yacht Charter Membership interest in 6.5
19345 U.S. Hwy. 19N, Suite 402 L.L.C.
Clearwater, FL 34624-3193
Virginia Gas Company................. Gas Warrant to purchase 6.0
P.O. Box 2407 Common Stock 100.0
Abingdon, VA 24212 Preferred Stock --
Series A
Voice FX Corporation................. Telecommunications Warrant to purchase 8.0
1100 E. Hector Street, Suite 416 Common Stock
Conshohocken, PA 19428
Zahren Alternative Power Converted Power Warrant to purchase 9.8
Corporation........................ Common Stock 5.9
40 Tower Lane Common Stock 4.9
Avon, CT 06001 Preferred Stock
</TABLE>

- ---------------

(1) Percentages shown for warrants held by the Company represent the percentage
of class of security to be owned upon exercise of the warrant.

45
<PAGE> 46

PRINCIPAL SHAREHOLDERS

Of the 50,000,000 shares of Common Stock, no par value, authorized, there
are 9,130,116 shares of Common Stock outstanding and approximately 2,550 holders
of the Company's Common Stock, including approximately 150 holders of record.
The Company has no other class of securities outstanding. The following table
sets forth certain ownership information as of May 1, 1996, with respect to the
Common Stock for (i) those persons who directly or indirectly own, control or
hold with the power to vote, 5% or more of the outstanding Common Stock and (ii)
all officers and directors, as a group.

<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING
---------------------
TYPE OF AMOUNT BEFORE AFTER
NAME AND ADDRESS OWNERSHIP OWNED OFFERING OFFERING
- ------------------------------------------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C>
John A. Morris, Jr., M.D........................ Beneficial 2,222,490(1) 24.2% 19.9%
243 Medical Center South
2100 Pierce Avenue
Nashville, TN 37212
Sirrom Partners, L.P............................ Record 2,035,148 22.1 18.2
500 Church Street
Suite 200
Nashville, TN 37219
Officers and directors, as a group (18
persons)...................................... Beneficial 2,693,363(2) 29.4 24.1
</TABLE>

- ---------------

(1) Includes 2,035,148 shares owned by Sirrom Partners, L.P., a limited
partnership owned by Dr. Morris and his family, and 187,350 shares owned by
Sirrom, Ltd., a limited partnership whose general partner is All Scarlet,
Inc., a corporation owned 50% by Dr. Morris and 50% by his brother. Dr.
Morris has shared voting power and shared investment power with respect to
all of these shares. Assuming consummation of the Harris Williams
acquisition through the issuance of 950,000 shares, Dr. Morris would
beneficially own 2,402,990 shares, or 23.8%, of the Company's outstanding
Common Stock before the Offering and 19.9% following the Offering.
(2) Includes 149,000 shares owned by officers of the Company, which are subject
to forfeiture, in a declining amount over time, in the event the respective
officer ceases to be employed by the Company.

46
<PAGE> 47

MANAGEMENT

The business and affairs of the Company are managed under the direction of
its Board of Directors. The Board of Directors has two committees, a
Compensation Committee comprised of Messrs. Eberle, Pirtle, and Wilson and an
Audit Committee comprised of Messrs. Duncan, McCabe and Mathias. All of the
Company's directors are subject to re-election at each annual meeting of
shareholders. The directors each receive $1,000 for each separate Board or
committee meeting attended and are reimbursed for expenses relating thereto. The
Board of Directors elects the Company's officers who serve at the pleasure of
the Board of Directors. Any new officer or director is subject to approval by
the SBA.

BOARD OF DIRECTORS

The following table sets forth certain information regarding the directors
of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- -----------------------------------------------------------
<S> <C> <C>
John A. Morris, Jr.
M.D.(1)................... 49 Chairman of the Board and Director
George M. Miller, II(1)..... 36 President, Chief Executive Officer and Director
E. Townes Duncan............ 43 Director
William D. Eberle........... 73 Director
Edward J. Mathias........... 54 Director
Robert A. McCabe, Jr........ 44 Director
Raymond H. Pirtle, Jr.(1)... 55 Director
L. Edward Wilson, P.E....... 52 Director
</TABLE>

- ---------------
(1) "Interested Person" as defined in Section 2(a) (19) of the 1940 Act.

John A. Morris, Jr., M.D., co-founded the Company in August 1991. Dr.
Morris currently holds appointments of Associate Professor of Surgery and
Director of the Division of Trauma and Surgical Critical Care at the Vanderbilt
University School of Medicine, Medical Director of the LifeFlight Air Ambulance
Program at Vanderbilt University Hospital, and Associate in the Department of
Health Policy and Management at the Johns Hopkins University.

George M. Miller, II, co-founded the Company in August 1991. Prior to
August 1991, Mr. Miller worked for two years as a vice president in the
Investment Banking Group of Equitable Securities Corporation ("Equitable"). From
1987 to 1989, Mr. Miller worked as an associate in the Corporate Finance
department of J.C. Bradford & Co. Prior to that time, Mr. Miller spent four and
one-half years on active duty in the United States Marine Corps. Mr. Miller
holds a Masters in Business Administration from the University of North Carolina
at Chapel Hill and a Bachelor of Science degree from the University of
Tennessee.

E. Townes Duncan has been a director of Comptronix Corporation, a provider
of electronics contract manufacturing services, since April 1988, and has served
as its Chairman of the Board and Chief Executive Officer since November 1993.
Mr. Duncan was a Vice-President of Massey Burch Investment Group, Inc., a
Nashville venture capital firm, from 1985 to November 1993. Mr. Duncan is also a
director of Volunteer Capital Corporation, an owner and operator of restaurants
in six states, and is a non-affiliated director of ESC Strategic Funds, a mutual
fund family registered under the 1940 Act for which Equitable acts as investment
advisor and distributor.

William D. Eberle is chairman of Manchester Associates, Ltd., a venture
capital and international consulting firm, and is Of Counsel to the law firm of
Kaye, Scholer, Fierman, Hays & Handler. Mr. Eberle is also Chairman of America
Service Group Inc., a health care services company, and Showscan Entertainment,
Inc., a movie-based software and technology company, and is a director of
Ampco-Pittsburgh Corp., a steel fabrication equipment company, Fiberboard
Corporation, a timber manufacturer, Mitchell Energy and Development, a gas and
oil company, and Mid-States PLC, an autoparts distributor headquartered in
Nashville. Mr. Eberle is also the Vice Chairman of the U.S. Council of the
International Chamber of Commerce.

Edward J. Mathias has been a managing director of The Carlyle Group, a
Washington, D.C. based private merchant bank, since 1994. Mr. Mathias served as
a managing director of T. Rowe Price Associates, Inc., an investment management
firm, from 1971 to 1993. Mr. Mathias is also a director of U.S. Office Products,
a supplier of office products, and PathoGenesis Corporation, a biotechnology
company.

47
<PAGE> 48

Robert A. McCabe, Jr., has been the Vice Chairman of First American
Corporation, a bank holding company headquartered in Nashville, since 1993 and
the President of First American Enterprises, a division of First American
Corporation, since 1994. Prior to that time, Mr. McCabe served as President of
the General Bank and First American National Bank, subsidiaries of First
American Corporation. Mr. McCabe is also a director of First American
Corporation.

Raymond H. Pirtle, Jr., is a managing director and a member of the Board of
Directors of Equitable, having joined the firm in February 1989. Prior to that
date, Mr. Pirtle was a general partner of J.C. Bradford & Co.

L. Edward Wilson, P.E., is president of Sirrom Resource Texas, Inc.
("SRF"), the general partner of Sirrom Resource Funding, L.P., a privately owned
partnership that is not affiliated with the Company and provides capital to
environmental service firms. Prior to joining SRF, Mr. Wilson served as
president and chief executive officer of OSCO, Inc., a Nashville-based
environmental services company. Prior to that, Mr. Wilson served as executive
vice president of ERC Environmental & Energy Services, Inc. ("ERC"), where he
was in charge of all eastern regional operations of this publicly-traded
environmental services company. He joined ERC after it acquired the EDGe Group,
a company he founded in 1982.

OFFICERS

The following table sets forth certain information regarding officers of
the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
President, Chief Executive Officer and
George M. Miller, II....................... 36 Director
David M. Resha............................. 49 Chief Operating Officer
Peter T. Socha............................. 37 Vice President -- Workouts
Jeffrey D. Armstrong....................... 38 Vice President -- Workouts
Kathy Harris............................... 38 Vice President -- Lending
John C. Harrison........................... 39 Vice President -- Lending
John S. Scott.............................. 32 Vice President -- Lending
William A. Williamson, III................. 35 Assistant Vice President -- Lending
Carl W. Stratton........................... 37 Chief Financial Officer
Maria-Lisa Caldwell........................ 32 Secretary
Kimberly M. Stringfield.................... 26 Controller and Treasurer
</TABLE>

David M. Resha joined the Company in July 1995 and is responsible for the
day-to-day operations of the Company. His primary role is the oversight of risk
management associated with the loan portfolio of the Company, including loan
origination, portfolio management and workout activities. Mr. Resha is 25-year
veteran commercial banker. Most recently, he was Senior Vice President at First
Union National Bank of Tennessee where he managed the middle market/corporate
banking group. He held a similar position with Dominion Bank before it was
merged with First Union National Bank of Tennessee. Mr. Resha holds a Bachelor
of Business Administration degree from Loyola University in New Orleans and a
Master of International Management degree from American (Thunderbird) Graduate
School in Glendale, Arizona.

Peter T. Socha joined the Company in February 1994 and is responsible for
all workout activities. Mr. Socha oversees several of the Company's portfolio
companies, particularly those companies on the Credit Watch List. From 1992 to
1994, Mr. Socha served as president and chief operating officer of Stewart
Foods, Inc., a food distributor reorganized under Chapter 11. From 1991 to 1992,
Mr. Socha was an investment banker with Quest Capital Corporation, a private
investment company based in Atlanta, Georgia. From 1989 to 1991, Mr. Socha
served in a sales management position with Alliance America, a manufacturing
company based in Atlanta, Georgia. From 1986 to 1989, Mr. Socha worked as a
credit officer responsible for designing and implementing underwriting standards
and procedures with Veriens-und Westbank AG. Mr. Socha holds Bachelor of Science
and Master of Arts degrees from the University of Alabama.

Jeffrey D. Armstrong joined the Company in April 1996 and is responsible
for the workout activities of portfolio companies that are included on the
Credit Watch List. Mr. Armstrong has 13 years of experience in

48
<PAGE> 49

consulting, finance and operations from Aladdin Industries, Buccino &
Associates, Inc., and the Alpert Investment Corporation. Mr. Armstrong holds a
Master of Business Administration from the University of Texas at Austin and a
Bachelor of Science Degree from Stanford University.

Kathy Harris joined the Company in January 1996 and is responsible for
marketing and loan origination efforts in Georgia and Florida. In addition to
generating new loans, Ms. Harris oversees several of the Company's portfolio
companies. From 1985 to January 1996, Ms. Harris was in the Corporate Finance
Department at J.C. Bradford & Co. From 1980 to 1983, she was with KPMG Peat
Marwick and served as a senior auditor specializing in the firm's thrift
practice. Ms. Harris holds a Masters in Business Administration in Finance and
Human Resources Management from the Owen Graduate School of Management at
Vanderbilt University and a Bachelor of Science degree in Accounting from Murray
State University. Ms. Harris is a Certified Public Accountant.

John C. Harrison joined the Company in January 1994 and is responsible for
marketing and loan origination efforts in North and South Carolina and Virginia.
In addition to generating new loans, Mr. Harrison oversees several of the
Company's portfolio companies. From 1991 to 1993, Mr. Harrison served as a vice
president at First Union National Bank, and from 1987 to 1991, he worked for
First Tennessee Equipment Finance Corporation as a senior credit officer. From
1980 to 1987, Mr. Harrison held several positions with First American National
Bank. Mr. Harrison holds a Bachelor of Science degree from the University of
Tennessee.

John S. Scott joined the Company in November 1994 and is responsible for
marketing and loan origination efforts in Kentucky, Ohio and Indiana. In
addition to generating loans, Mr. Scott oversees several of the Company's
portfolio companies. From 1991 to 1994, Mr. Scott served as a vice president in
the Corporate Banking Group of Bank One. From 1985 to 1991, Mr. Scott was a
commercial lender with Ameritrust Corporation, Citizens Bank and Trust and First
American National Bank. Mr. Scott holds a Bachelor of Science degree from the
University of Kentucky.

William A. Williamson, III, joined the Company in April 1996 and is
responsible for marketing and loan origination efforts in Texas. Prior to
joining the Company, Mr. Williamson was vice president/partner of Bohannon
Brewing Company. From 1992 to 1994, Mr. Williamson was manager of Durr-Fillauer
Corporation's Nashville facility. From 1985 to 1991, Mr. Williamson was
assistant vice president of development for Jim Wilson Associates. From 1982 to
1984, Mr. Williamson was an investment banking analyst with E.F. Hutton in New
York. Mr. Williamson holds a Bachelor of Business Administration from Southern
Methodist University.

Carl W. Stratton joined the Company in October 1995 and has served as Chief
Financial Officer since April 1996. From October 1995 through April 1996, Mr.
Stratton held the position of Vice President - Workouts with the Company. From
1991 to 1995, Mr. Stratton was chief financial officer of International Citrus
Corporation, and from 1986 to 1991, Mr. Stratton was chief financial officer of
Dove Computer Corporation. From 1981 to 1985, Mr. Stratton held a variety of
engineering and manufacturing positions with E.I. du Pont de Nemours & Company,
Incorporated. Mr. Stratton is also a director of International Citrus
Corporation. Mr. Stratton holds a Masters of Business Administration degree from
the University of North Carolina at Chapel Hill and a Bachelor of Science in
Chemical Engineering degree from Lafayette College.

Maria-Lisa Caldwell was appointed as the Secretary of the Company in April
1996. Ms. Caldwell is presently a principal in the law firm of Caldwell &
Caldwell, P.C. From 1991 to January 1996, Ms. Caldwell was an associate with the
law firm of Bass, Berry & Sims PLC. Prior to that time, Ms. Caldwell was an
associate with the law firm of Gibson, Dunn & Crutcher. Ms. Caldwell holds a
Juris Doctorate from Duke University School of Law and a Bachelor of Arts Degree
in Economics from Fairfield University.

Kimberly M. Stringfield joined the Company in December 1994 and serves as
the Company's Controller and Treasurer. From 1992 to 1994, Ms. Stringfield was a
credit analyst and commercial lender at NationsBank of Tennessee, N.A. Ms.
Stringfield holds a Bachelor of Science degree in Accounting from the University
of Alabama.

49
<PAGE> 50

COMPENSATION

The following table sets forth for the fiscal year ended December 31, 1995,
the compensation paid to the three most highly compensated executive officers of
the Company, and all executive officers and directors as a group. No director
received compensation in excess of $60,000 for fiscal 1995. The Company does not
have a pension plan or other retirement benefits. No options were granted to any
directors during the fiscal year ended December 31, 1995.

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDIVIDUAL OR IDENTITY OF CAPACITIES IN WHICH COMPENSATION WAS ------------------
GROUP RECEIVED SALARY BONUS
- ------------------------------------- ------------------------------------ -------- -------
<S> <C> <C> <C>
President and Chief Executive
George M. Miller, II................. Officer $175,000 $50,000
Peter T. Socha....................... Vice President -- Workouts 125,000 50,000
Carolyn W. Perrone................... Chief Financial Officer(1) 79,200 30,000
All officers and directors as a group
(18 persons)....................... 841,901 240,000
</TABLE>

- ---------------

(1) Carl W. Stratton assumed the office of Chief Financial Officer in April
1996. Ms. Perrone continues to serve as a financial advisor to the Company.

EMPLOYEE STOCK OPTIONS

For the purpose of providing employees who have substantial responsibility
for the management of the Company with additional incentives to exert their best
efforts on behalf of the Company, to increase their proprietary interest in the
success of the Company, to reward outstanding performance and to attract and
retain executive personnel of outstanding ability, the Company has adopted the
Amended and Restated 1994 Employee Stock Option Plan (the "1994 Employee Plan"),
and the 1996 Incentive Stock Option Plan (the "1996 Employee Plan"). The
following is a summary of certain provisions of the 1994 Employee Plan and the
1996 Employee Plan.

1994 Employee Plan. The total number of shares for which options may be
granted under the 1994 Employee Plan is 500,000, and options for the purchase of
500,000 shares of Common Stock have been granted. The 1994 Employee Plan is
administered by a committee of the Board of Directors, consisting of at least
two members who are not eligible for grants of options or other equity
securities under the 1994 Employee Plan or any other plan of the Company or any
of its affiliates. The committee determines the executive and other officers of
the Company who are eligible to participate in the 1994 Employee Plan and the
number of shares, if any, for which options may be granted to them. Seventeen
people are potentially eligible to participate in the 1994 Employee Plan.
Options granted under the 1994 Employee Plan are exercisable at a price equal to
the fair market value of the Common Stock on the date the option is granted. No
option may be exercised more than 10 years after the date of grant. Options
granted under the 1994 Employee Plan are not transferable other than by the laws
of descent and distribution and during the grantee's life may be exercised only
by the grantee. Rights to exercise options terminate after a grantee ceases to
be an employee for any reason, other than death, three months following the date
of termination of employment. If a grantee dies before expiration of the option,
his legal successors may exercise the option within one year of the employee's
death. Shares purchased upon exercise of options must be paid for in cash or by
the surrender of unrestricted shares of Common Stock or any combination thereof.
The Company may lend the grantee up to the exercise price of the option to be
exercised. Any such loan would be subject to certain terms set out in the Plan
and limitations imposed by the SBA. The 1994 Employee Plan will terminate when
options have been granted on the total number of shares authorized by it or by
action of the Board of Directors, but in no event later than November 18, 2004.

50
<PAGE> 51

The following table sets forth certain information as of April 30, 1996
with respect to options that have been granted under the 1994 Employee Plan:

<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO EXERCISE PRICE
NAME AND POSITION OPTION PER SHARE
------------------------------------------------------- ---------------- --------------
<S> <C> <C>
George M. Miller, II,.................................. 150,000 $11.00
President and Chief Executive Officer 56,966 18.50
20,000 18.63
Peter T. Socha,........................................ 20,000 18.50
Vice President-Workouts
Carolyn W. Perrone..................................... 20,000 18.50
Executive officers, as a group (4 persons)............. 150,000 11.00
125,000 13.50
96,966 18.50
20,000 18.63
Non-executive officer/employees, as a group............ 50,000 13.50
(13 persons) 25,000 17.88
33,034 18.63
</TABLE>

1996 Employee Plan. The 1996 Employee Plan authorizes the issuance of up
to 390,000 shares of the Company's Common Stock. As of April 30, 1996, options
for the purchase of 153,932 shares of the Common Stock have been granted. Awards
under the 1996 Employee Plan may be made to key employees and officers. The
number of people currently eligible for awards is 17. The 1996 Employee Plan is
administered by a committee of at least two disinterested individuals appointed
by the Board of Directors, which currently is the Compensation Committee (the
"Committee").

Incentive stock options ("ISO")and non-qualified stock options may be
granted as the Committee determines, subject to certain per person limitations
on awards. A stock option is exercisable at the times and subject to the terms
and conditions which the Committee determines. The option price for any ISO will
not be less than 100% (110% in the case of certain 10% shareholders) of the fair
market value of the Common Stock on the date of grant. Shares purchased upon
exercise of options must be paid for in cash or by surrender of unrestricted
shares of Common Stock or any combination thereof. The Board of Directors may
cause the Company to lend to the grantee up to the exercise price of the option
being exercised. Any such loan is subject to terms set out in the Plan,
including as to collateral and interest rate, and to other limitations imposed
by the SBA. Options granted under the 1996 Employee Plan cannot be assigned or
transferred except by will or by the laws of descent and distribution. During
the lifetime of an optionee, an option is exercisable only by the optionee. The
Committee determines the term of the option, which may not exceed 10 years. An
option may be exercised at any time or from time to time or only after a period
of time or in installments, as the Committee determines, except that options
granted to officers of the Company will not be exercisable for at least six
months after the date of grant. Upon termination of an option holder's
employment for Cause (as defined in the 1996 Employee Plan), that employee's
stock options will terminate. If employment is involuntarily terminated without
Cause, options (if exercisable) are exercisable for three months or until the
end of the option period, whichever is shorter. Upon death or disability of an
employee, exercisable stock options are exercisable by the deceased employee's
representative within the lesser of the remainder of the option period or one
year from the employee's death. In the event of certain extraordinary corporate
events, such as a sale of substantially all its assets or a merger or share
exchange in which the Company is not the surviving corporation, all outstanding
options under the 1996 Employee Plan shall immediately become fully exercisable.
The 1996 Employee Plan may be amended by the Board of Directors, except that the
approval of the Company's shareholders is required to increase the total number
of shares reserved for the 1996 Employee Plan or to materially increase the
benefits accruing to participants under the 1996 Employee Plan.

51
<PAGE> 52

The following table sets forth certain information with respect to options
that have been granted under the 1996 Employee Plan:

<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO EXERCISE PRICE
NAME AND POSITION OPTION PER SHARE
- ----------------------------------------------------------------- ---------------- --------------
<S> <C> <C>
George M. Miller, II,
President and Chief Executive Officer.......................... 36,966 $ 18.63
Executive officers, as a group (4 persons)....................... 36,966 18.63
50,000 23.25
Non-executive officer/employees, as a group (13 persons)......... 16,966 18.63
50,000 25.00
</TABLE>

NON-EMPLOYEE DIRECTOR STOCK OPTIONS

In order to retain and attract highly qualified directors, and to ensure
close identification of interests between non-employee directors and the
Company's shareholders, the Company adopted the 1995 Stock Option Plan for
Non-Employee Directors (the "Directors' Stock Option Plan"), which provides for
the automatic grant of options to directors of the Company that are not
employees or officers of the Company (other than John A. Morris, Jr., M.D.). In
accordance with the applicable provisions of the 1940 Act, the automatic grant
of options under the Directors' Stock Option Plan occurred on April 19, 1996,
the date of the approval of the plan by the Company's shareholders (the
"Approval Date").

Under the Directors' Stock Option Plan, eligible non-employee directors who
were directors of the Company before December 1, 1994, received options to
purchase 18,000 shares of Common Stock. Non-employee directors elected after
December 1, 1994, but before April 19, 1996, received options to purchase 12,000
shares of Common Stock. Any person who is initially elected a non-employee
director in the future will automatically receive, on the date of election, an
option to purchase 6,000 shares of Common Stock.

The total number of shares for which options may be granted under the
Directors' Stock Option Plan is 114,000, of which options to purchase 84,000
shares have been granted. The Directors' Stock Option Plan is administered by a
committee of the Board of Directors comprised of directors who are not eligible
to receive options under the Directors' Stock Option Plan. Options granted under
the Directors Stock Option Plan are exercisable at a price equal to the fair
market value of the Common Stock at the date of grant. No option may be
exercised more than 10 years after the date of grant. Shares purchased upon
exercise of options, must be paid for in cash, by surrender of unrestricted
shares of Common Stock or any combination thereof. Options granted under the
Directors' Stock Option Plan are not transferable other than by will or by the
laws of descent and distribution and during the grantee's life may be exercised
only by the grantee. If the grantee dies before expiration of the option, his
legal successors may exercise the option within one year of the grantee's death.
The Directors' Stock Option Plan may be terminated at any time by the Board of
Directors, and will terminate on April 19, 2006. No increase in the number of
shares authorized under the plan or material increase in the benefits to
participants under the plan may be made without shareholders' approval.

CERTAIN TRANSACTIONS

Raymond H. Pirtle, Jr., a director and shareholder of the Company, is a
managing director and a member of the board of directors of Equitable. Equitable
is one of the underwriters of this Offering and in connection therewith is
entitled to the compensation set forth under the heading "Underwriting."

Prior to the Conversion in February 1995, Messrs. Harrison and Socha, Ms.
Perrone, Jennifer K. Waugh and Kristen L. Garrison, employees of the Company,
were granted ownership interests in the Company. In connection therewith, each
such employee executed a promissory note for the purchase price of such interest
that bears interest at 7.25% per annum, payable annually, matures November 1,
2001, and is secured by a pledge of the Common Stock owned by each such
employee. As of the date hereof, the outstanding principal balance of such
promissory notes is as follows: Mr. Harrison, $440,142.16; Mr. Socha,
$513,072.72; Ms. Perrone, $440,142.16; Ms. Waugh, $102,678.51; and Ms. Garrison
$43,822.29.

52
<PAGE> 53

The Robinson-Humphrey Company, Inc. ("Robinson-Humphrey"), one of the
representatives of the underwriters in this offering, has been engaged by the
Company as its exclusive placing agent in connection with the obtaining and
placement of a senior debt facility for the Company. The engagement letter
provides that Robinson-Humphrey will receive a fee equal to 0.5% of the
aggregate debt commitment, of which one-half will be paid at closing and
one-half will be paid upon the earlier of the first initial draw under the debt
facility or June 30, 1997. In the event the Special Purpose Facility is
obtained, Robinson-Humphrey will be compensated under the terms of this
engagement. In addition, Sirrom agreed to indemnify Robinson-Humphrey with
respect to certain matters.

Sirrom, Ltd., a family-owned limited partnership, owns 20% of Harris
Williams that it purchased in 1994 for $500,000. The general partner of Sirrom,
Ltd. is All Scarlet, Inc., a corporation owned equally by John A. Morris, Jr.,
M.D., Chairman of the Company, and Mr. Morris' brother. If the acquisition of
Harris Williams is consummated at the base purchase price of 950,000 Company
shares, Sirrom, Ltd. would receive approximately 180,500 shares of the Company's
stock as part of the acquisition. See "Business -- Pending Acquisition."

DETERMINATION OF NET ASSET VALUE

The net asset value per share of Common Stock will be determined quarterly,
as soon as practicable after and as of the end of each calendar quarter, by
dividing the value of total assets minus liabilities by the total number of
shares outstanding on a fully diluted basis at the date as of which the
determination is made.

In making its valuation determination, the Board of Directors generally
adheres to a valuation policy approved by the SBA and adopted by the Board of
Directors. The Company's investments in stocks of public companies that it is
not permitted to sell in the public market as a result of securities laws
restrictions, lock-up agreements and other similar restrictions are valued at
70% of market value at the balance sheet date. All other publicly traded stocks
are valued at 90% of market value at the balance sheet date. All other
investments are valued at fair value as determined in good faith by the Board of
Directors. In making such determination, the Board of Directors will value loans
and nonconvertible debt securities for which there exists no public trading
market at cost plus amortized original issue discount, if any, unless adverse
factors lead to a determination of a lesser value, at which time unrealized
depreciation would be recognized. Convertible debt securities and warrants are
valued to reflect the value of the underlying equity security less the
conversion or exercise price. In valuing equity securities for which there
exists no public trading market, investment cost is presumed to represent fair
value except in cases where the valuation policy provides that the Board of
Directors may determine fair value on the basis of (i) financings by
unaffiliated investors, (ii) a history of positive cash flow from operations for
two years using a conservative financial measure such as earnings ratios or cash
flow multiples, (iii) the market value of comparable publicly traded companies
(discounted for illiquidity) and (iv) other pertinent factors. The Board of
Directors, at management's request, also has considered recent operating results
of a portfolio company or offers to purchase the portfolio company's securities
when valuing a warrant.

A substantial portion of the Company's assets will consist of securities
carried at fair values determined by its Board of Directors. The Company's
independent public accountants will review and express an opinion on the
reasonableness of the basis used by the Board of Directors in determining the
valuation of investments, the adequacy of the procedures applied by the
directors in valuing such securities and the appropriateness of the underlying
documentation. However, determination of fair values involves subjective
judgment not susceptible to substantiation by auditing procedures. Accordingly,
under current standards, the accountants' opinion on the Company's financial
statements in its annual report refers to the uncertainty with respect to the
possible effect on the financial statements of such valuations.

53
<PAGE> 54

REINVESTMENT PLAN

Pursuant to the Reinvestment Plan a shareholder whose shares are registered
in his own name can have all distributions reinvested in additional shares of
Common Stock by the Reinvestment Plan Administrator if the shareholder enrolls
in the Reinvestment Plan by delivering an Authorization Form to the Reinvestment
Plan Administrator prior to the corresponding dividend declaration date. All
distributions to shareholders who do not participate in the Reinvestment Plan
will be paid by check mailed directly to the record holder by or under the
direction of the Reinvestment Plan Administrator. A shareholder may terminate
participation in the Reinvestment Plan by delivering a written letter to the
Reinvestment Plan Administrator before the record date of the next dividend or
distribution.

When the Company declares a dividend or distribution, shareholders who are
participants in the Reinvestment Plan will receive the equivalent of the amount
of the dividend or distribution in shares of the Company's Common Stock. The
Reinvestment Plan Administrator will buy shares in the open market, on the
Nasdaq National Market or elsewhere. The Reinvestment Plan Administrator will
apply all cash received on account of a dividend or distribution as soon as
practicable, but in no event later than 30 days, after the payment date of the
dividend or distribution except to the extent necessary to comply with
applicable provisions of the federal securities laws. The number of shares to be
received by the Reinvestment Plan participants on account of the dividend or
distribution will be calculated on the basis of the average price of all shares
purchased for that period, including brokerage commissions, and will be credited
to their accounts as of the payment date of the dividend or distribution.

The Reinvestment Plan Administrator will maintain all shareholder accounts
in the Reinvestment Plan and will furnish written confirmations of all
transactions in the account, including information needed by shareholders for
personal and tax records. Shares in the account of each Reinvestment Plan
participant will be held by the Reinvestment Plan Administrator in
non-certificated form in the name of the participant, and each shareholder's
proxy will include shares purchased pursuant to the Reinvestment Plan.

There is no charge to participants for reinvesting dividends and capital
gains distributions. The fees of the Reinvestment Plan Administrator for
handling the reinvestment of dividends and capital gains distributions will be
included in the fee to be paid by the Company to its transfer agent. However,
each participant will bear a pro rata share of brokerage commissions incurred
with respect to the Reinvestment Plan Administrator's open market purchases in
connection with the reinvestment of dividends and distributions.

THE REINVESTMENT OF DISTRIBUTIONS WILL NOT RELIEVE PARTICIPANTS OF ANY
INCOME TAX THAT MAY BE PAYABLE ON DISTRIBUTIONS. SEE "TAX STATUS."

The Company reserves the right to amend or terminate the Reinvestment Plan
as applied to any distribution paid subsequent to written notice of the change
sent to participants in the Reinvestment Plan. The Plan also may be amended or
terminated by the Reinvestment Plan Administrator with the Company's prior
written consent, on at least 90 days' written notice to participants in the
Reinvestment Plan. All correspondence concerning the Reinvestment Plan should be
directed to the Reinvestment Plan Administrator by mail at 230 South Tryon
Street, Charlotte, North Carolina 28288-1153 or by phone at 1-800-829-8432.

54
<PAGE> 55

TAX STATUS

THE FOLLOWING DISCUSSION IS A GENERAL SUMMARY OF THE MATERIAL FEDERAL TAX
CONSIDERATIONS APPLICABLE TO THE COMPANY AND TO AN INVESTMENT IN THE COMMON
STOCK AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE TAX
CONSIDERATIONS APPLICABLE TO SUCH AN INVESTMENT. PROSPECTIVE SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSIDERATIONS WHICH
PERTAIN TO THEIR PURCHASE OF THE COMMON STOCK. THIS SUMMARY DOES NOT DISCUSS ALL
ASPECTS OF FEDERAL INCOME TAXATION RELEVANT TO HOLDERS OF THE COMPANY'S COMMON
STOCK IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES, OR TO CERTAIN TYPES OF HOLDERS
SUBJECT TO SPECIAL TREATMENT UNDER FEDERAL INCOME TAX LAWS, INCLUDING FOREIGN
TAXPAYERS. THIS SUMMARY DOES NOT DISCUSS ANY ASPECTS OF FOREIGN, STATE, OR LOCAL
TAX LAWS.

The Company has qualified for and elected to be treated as a RIC under
Subchapter M of the Code. If the Company continues to qualify as a RIC and
distributes to shareholders each year in a timely manner at least 90% of its
"investment company taxable income," as defined in the Code (in general, taxable
income excluding long-term capital gains), it will not be subject to federal
income tax on the portion of its taxable income and gains it distributes to
shareholders. In addition, if the Company distributes in a timely manner (or
treats as "deemed distributed" as described below) 98% of its capital gain net
income for each one year period ending on October 31 (or December 31, if so
elected by the Company), and distributes 98% of its ordinary income for each
calendar year (as well as any income not distributed in prior years), it will
not be subject to the 4% nondeductible federal excise tax on certain
undistributed income of RICs.

In order to continue to qualify as a RIC for federal income tax purposes,
the Company must, among other things, (a) derive in each taxable year at least
90% of its gross income from dividends, interest, payments with respect to
securities, loans, gains from the sale or other disposition of stock or
securities and other narrowly defined types of other income derived with respect
to its business of investing in such stock or securities; (b) derive in each
taxable year less than 30% of its gross income from the sale of stock or
securities held for less than three months; (c) diversify its holdings so that
at the end of each quarter of the taxable year (i) at least 50% of the value of
the Company's assets consists of cash, cash items, government securities, the
securities of other RICs and other securities if such other securities of any
one issuer do not represent more than 5% of the Company's total assets and 10%
of the outstanding voting securities of the issuer and (ii) no more than 25% of
the value of the Company's total assets are invested in the securities of one
issuer (other than U.S. government securities or the securities of other
regulated investment companies), or of two or more issuers that are controlled
by the Company and are engaged in the same or similar or related trades or
businesses; and (d) distribute at least 90% of its investment company taxable
income each taxable year.

There is no requirement that all of the corporations in a controlled group
that includes a RIC must qualify as RICs. As a general rule in the application
of the tests to qualify as a RIC, the parent corporation and each of its
subsidiaries are tested separately and cannot be consolidated. There is a
significant exception to this rule with regard to the 25% diversification test
described in the preceding paragraph. Solely for that test, the investments of a
subsidiary are deemed to be owned by the parent in proportion to the ratio of
the value of the subsidiary's stock to the value of all investments of the
parent, provided that the subsidiary and parent are in the same controlled group
(defined with reference to a chain of corporations with a 20% ownership
threshold). These rules regarding subsidiaries will be important upon the
creation of new subsidiaries for the acquisition of Harris Williams and the
corporate reorganization of the Company. See "Prospectus Summary." It is
possible that the existence and operation of these subsidiaries will cause the
Company or any of its subsidiaries that are intended to qualify as RICs not to
so qualify.

Certain types of income which are earned by the Company, such as processing
fees, do not qualify for purposes of satisfying the 90% of gross income test
mentioned above. For taxable year 1995, this test was satisfied by a small
margin. A failure to satisfy the 90% test cannot be corrected after the end of
the taxable year. In addition, each of the new subsidiaries that is intended to
qualify as a RIC, as well as the Company, must satisfy this 90% test on a stand
alone basis. Thus, even if the 90% test is satisfied on a consolidated basis, it
is possible that one or more of the subsidiaries, or the Company, may fail to
satisfy this test and lose its status as a RIC.

55
<PAGE> 56

If the Company or any subsidiary were to fail to qualify as a RIC, it would
not be entitled to a deduction for dividends paid. In this event, the corporate
income tax could be substantial and there would be a substantial reduction in
the Company's or subsidiary's net assets. Moreover, future distributions to the
Company's shareholders would be reduced because of the loss of any tax deduction
for payment of such dividends.

For any period during which the Company qualifies as a RIC for tax
purposes, dividends to shareholders of the Company's ordinary income (including
dividends, interest and original issue discount) and any distributions of net
short-term capital gains generally will be taxable as ordinary income to
shareholders to the extent of the Company's current or accumulated earnings and
profits. Corporate shareholders should consult their own tax advisers. In
addition, the Company may elect to relate back a dividend to the prior taxable
year for the purposes of (i) determining whether the 90% distribution
requirement is satisfied, (ii) computing investment company taxable income and
(iii) determining the amount of capital gain dividends paid during the prior
taxable year. Any such election will not alter the general rule that a
shareholder will be treated as receiving a dividend in the taxable year in which
the distribution is made. Any dividend declared by the Company in October,
November or December of any calendar year, payable to shareholders of record on
a specified date in such a month and actually paid during January of the
following year, will be treated as if it were paid by the Company and received
by the shareholders on December 31 of the previous year.

Shareholders should be careful to consider the tax implications of buying
shares just prior to the record date for a distribution. Even if the price of
the shares includes the amount of the forthcoming distribution the shareholder
will be taxed upon receipt of the distribution and will not be entitled to
offset the distribution against tax basis in the shares.

To the extent that the Company retains any net long-term capital gains, it
may designate them as "deemed distributions" and pay a tax thereon for the
benefit of its shareholders. In that event, the shareholders report their share
of retained realized capital gains on their individual tax returns as if it had
been received, and report a credit for the tax paid thereon by the Company. The
amount of the deemed distribution net of such tax is then added to the
shareholder's cost basis for his shares. Since the Company expects to pay tax on
long-term capital gains at the regular corporate tax rate of 34% and the maximum
rate payable by individuals on such gains is 28%, the amount of credit that
individual shareholders may report will exceed the amount of tax that they would
be required to pay on capital gains. Shareholders who are not subject to federal
income tax or tax on capital gains should be able to file a return on the
appropriate form or a claim for refund that allows them to recover the tax paid
on their behalf.

Distributions of the Company's net long-term capital gains (designated by
the Company as capital gain dividends) will be taxable to shareholders as
long-term capital gains regardless of the shareholder's holding period in his
shares.

The Budget Reconciliation Act of 1993 added Section 1202 of the Code, which
permits the exclusion, for federal income tax purposes, of 50% of any gain
(subject to certain limitations) realized upon the sale or exchange of
"qualified small business stock" held for more than five years. Generally,
qualified small business stock is stock of a small business corporation acquired
directly from the issuing corporation which must at the time of issuance and
immediately thereafter have assets of not more than $50.0 million and be
actively engaged in the conduct of a trade or business not excluded by law. The
amount of gain eligible for the 50 percent exclusion limit is limited, on a per
investor and per investment basis, to the greater of (i) ten times the
taxpayer's cost in the stock or (ii) $10.0 million. It is possible that in some
cases investments made by the Company will be in qualified small business stock,
that the Company will hold such stock for more than five years and that the
Company will ultimately dispose of such stock at a profit. If that were to
occur, each shareholder who held his shares at the time the Company purchased
the qualified small business stock and at all times thereafter until the
disposition of such stock by the Company would be entitled to exclude from his
taxable income 50% of such shareholders' share of such gain, whether distributed
or deemed distributed. One half of any amount so excluded would be treated as a
preference item for alternative minimum tax purposes.

A shareholder may recognize taxable gain or loss if the shareholder sells
or exchanges his shares. Any gain arising from (or, in the case of distributions
in excess of earnings and profits, treated as arising from) the

56
<PAGE> 57

sale or exchange of shares generally will be a capital gain or loss except in
the case of a dealer or a financial institution. This capital gain or loss will
be treated as a long-term capital gain or loss if the shareholder has held his
shares for more than one year. However, any capital loss arising from the sale
or exchange of shares sold for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received with
respect to such shares; for this purpose, the special rules of Sections 246(c)
(3) and (4) of the Code generally apply in determining the holding period of
shares. Under current law applicable to individual taxpayers, capital gains are
taxed at the same rate as ordinary income, subject to a 28% cap for long-term
capital gains, but the deduction of capital losses is subject to limitations.

The Company may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable dividends and distributions payable to shareholders who
fail to provide the Company with their correct taxpayer identification number or
to make required certifications or regarding whom the Company has been notified
by the Internal Revenue Service that they are subject to backup withholding.
Backup withholding is not an additional tax and any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.

Federal withholding taxes at a 30% rate (or a lesser treaty rate) may apply
to distributions to shareholders that are nonresident aliens or foreign
partnerships, trusts or corporations. Foreign shareholders should consult their
tax advisors with respect to the possible U.S. federal, state and local and
foreign tax consequences of an investment in the Company.

The Company will mail to each shareholder, as promptly as possible after
the end of each fiscal year, a notice detailing, on a per share and per
distribution basis, the amounts includable in such shareholder's taxable income
for such year as net investment income, as net realized capital gains (if
applicable), as "deemed" distributions of capital gains and as taxes paid by the
Company with respect thereto. In addition, the federal tax status of each year's
distributions will be reported to the Internal Revenue Service. Distributions
may also be subject to additional state, local and foreign taxes depending on
each shareholder's particular situation. Shareholders are advised to consult
their own tax advisers with respect to the particular tax consequences to them
of an investment in the Company.

Following the creation of new subsidiaries in connection with the
acquisition of Harris Williams, the corporate reorganization of the Company and
the Special Purpose Facility, it is possible that the Company and any of its
subsidiaries that intend to elect RIC status may not continue to meet the tests
for qualification as a RIC. Harris Williams will not qualify or be taxed as a
RIC and, therefore, will pay tax at the subsidiary level.

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 50,000,000 shares of Common Stock. Of
the shares of Common Stock authorized for issuance, 9,130,116 are outstanding,
500,000 are reserved for issuance under the 1994 Employee Plan, 114,000 shares
are reserved for issuance under the Directors' Stock Option Plan and 390,000
shares are reserved under the 1996 Employee Plan.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders and are not entitled to cumulative voting
in the election of directors, which means that the holders of a majority of the
shares voting for the election of director can elect all of the directors then
standing for election by the holders of Common Stock. The holders of Common
Stock are entitled to share ratably in such dividends, if any, as may be
declared from time to time by the Board of Directors in its discretion out of
funds legally available therefor. The holders of Common Stock are entitled to
share ratably in any assets remaining after satisfaction of all prior claims
upon liquidation of the Company. The Company's Charter gives holders of Common
Stock no preemptive or other subscription or conversion rights, and there are no
redemption provisions with respect to such shares. All outstanding shares of
Common Stock are, and the shares offered hereby will be, when issued and paid
for, fully paid and nonassessable.

57
<PAGE> 58

REGISTRATION RIGHTS

In connection with the Company's private placement of securities in
November 1994, the holders of 391,805 shares of Common Stock obtained piggy-back
registration rights, subject to certain limitations, in the event the Company
proposes to register the sale of shares of Common Stock for its own account or
for the account of its shareholders. These registration rights expire on
November 1, 1996.

In addition, each shareholder of the Company receiving Common Stock in the
Conversion has piggyback registration rights, subject to certain limitations and
conditions, in the event that the Company proposes to register the sale of
shares of Common Stock for its own account or the account of another. These
registration rights expire February 1, 1997.

ANTI-TAKEOVER LEGISLATION

In addition to the restrictions on changes of control of an SBIC under the
SBIA and the SBA Regulations described under "Regulation," the Company is
subject to the Tennessee Business Combination Act (the "Combination Act"). The
Combination Act provides that any corporation to which it applies, including the
Company, shall not engage in any "business combination" with an "interested
shareholder" for a period of five years following the date that such shareholder
became an interested shareholder unless prior to such date the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the shareholder becoming an interested
shareholder.

The Combination Act defines "business combination," generally, to mean any
(i) merger or consolidation; (ii) share exchange; (iii) sale, lease, exchange,
pledge, mortgage or other transfer (in one transaction or a serial of
transactions) of uses representing 10% or more of (A) the market value of
consolidated assets, (B) the market value of the corporation's outstanding
shares or (C) the corporation's consolidated net income; (iv) issuance or
transfer of shares from the corporation to the interested shareholder, (v) plan
of liquidation; (vi) transaction in which the interested shareholder's
proportionate share of the outstanding shares of any clues of securities is
increased; or (vii) financing arrangements pursuant to which the interested
shareholder, directly or indirectly, receives a benefit except proportionately
as a shareholder.

The Combination Act defines "interested shareholder," generally, to mean
any person who is the beneficial owner, directly or indirectly, of 10% or more
of any class or series of the outstanding voting stock, or any affiliate or
associate of the corporation who has been the beneficial owner, directly or
indirectly, of 10% or more of the voting power of any class or series of the
corporation's stock at any time within the five year period preceding the date
in question. Consummation of a business combination that is subject to the
five-year moratorium is permitted after such period if the transaction (i)
complies with all applicable charter and bylaw requirements and applicable
Tennessee and (ii) is approved by at least two-thirds of the outstanding voting
stock not beneficially owned by the interested shareholder, or when the
transaction meets certain fair price criteria. The fair price criteria include,
among others, the requirement that the per share consideration received in any
such business combination by each of the shareholders is equal to the highest of
(i) the highest per share price paid by the interested shareholder during the
preceding five year period for shares of the same class or series plus interest
thereon from such date at a treasury bill rate less the aggregate amount of any
cash dividends paid and the market value of any dividends paid other than in
cash since such earliest date, up to the amount of such interest, (ii) the
highest preferential amount, if any, such class or series is entitled to receive
on liquidation, or (iii) the market value of the shares on either the date the
business combination is announced or the date when the interested shareholder
reaches the 10% threshold, whichever is higher, plus interest thereon less
dividends as noted above.

The Tennessee Greenmail Act (the "Greenmail Act") prohibits the Company
from purchasing or agreeing to purchase any of its securities, at a price in
excess of fair market value, from a holder of 3% or more of any class of such
securities who has beneficiary owned the securities for less than two years,
unless such purchase has been approved by a majority of the outstanding shares
of each class of voting stock issued by the Company or the Company makes an
offer of at least equal value per share to all holders of shares of such class.

58
<PAGE> 59

The effects of this legislation may be to render more difficult a change of
control of the Company by delaying, deferring or preventing a tender offer or
takeover attempt that a shareholder might consider to be in such shareholder's
best interest, including those attempts that might result in the payment of a
premium over the market price for the shares held by such shareholder, and may
promote the continuity of the Company's management by making it more difficult
for shareholders to remove or change the incumbent members of the Board of
Directors.

REGULATION

The Company is presently an SBIC and a BDC and as such is regulated under
the SBIA, the SBA Regulations and the 1940 Act. In the event the proposed
reorganization of the Company is consummated, the Company will continue to be a
BDC regulated under the 1940 Act, and its wholly-owned subsidiary will be an
SBIC and an investment company regulated under the SBIA, the SBA Regulations and
the 1940 Act.

As an SBIC, the Company may only make loans to or investments in "small
business concerns," as defined by the SBIA and the SBA Regulations. A "small
business concern," as defined in the SBIA and the SBA Regulations is a business
concern that is independently owned and operated and which is not dominant in
its field of operation. A small business concern must either (i) have a net
worth, together with any affiliates, of $18.0 million or less and an average net
income after federal income taxes for the preceding two years of $6.0 million or
less (average net income to be computed without benefit of any carryover loss)
or (ii) satisfy alternative criteria under the SBA Regulations that focus on the
industry in which the business is engaged and the number of persons employed by
the business or its gross revenues. In addition at the end of each fiscal year,
20% of the total amount of investments made since April 8, 1994 must be made to
concerns that (i) have a net worth of not more than $6.0 million and not more
than $2.0 million in average net income after federal income taxes for the
preceding two years, or (ii) satisfy alternative industry-related size criteria.
The SBA Regulations also prohibit an SBIC from providing funds to a small
business concern for certain purposes, such as relending and investment outside
the United States.

The amount of annual interest payments the Company may charge its borrowers
is limited by the SBA Regulations. Under these regulations, the maximum annual
financing costs (including interest) of loans with equity features to small
business concerns may not exceed the greater of 14% or 6 percentage points above
the "Debenture Rate." As defined in the SBA Regulations, the "Debenture Rate" is
the interest rate announced, from time to time, by the SBA on SBA debentures. As
of March 31, 1996, the maximum annual financing costs applicable to the Company
were 14.0%. The SBA Regulations also allow an SBIC to charge a processing fee of
up to 3%, which fee is not included in the financing cost calculation.

The SBA restricts the ability of an SBIC to repurchase its capital stock,
to retire its debentures and to lend money to its officers, directors and
employees or invest in affiliates thereof. The SBA also prohibits, without prior
SBA approval, a "change of control" or transfers which would result in any
person (or group of persons acting in concert) owning 10% or more of any class
of capital stock of an SBIC. A "change of control" is any event which would
result in the transfer of the power, direct or indirect, to direct the
management and policies of an SBIC, whether through ownership, contractual
arrangements or otherwise.

The Company is a closed-end, non-diversified investment company that has
elected to be treated as a BDC company and, as such, is subject to regulation
under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating
to transactions between investment companies and their affiliates, principal
underwriters and affiliates of those affiliate or underwriters and requires that
a majority of the directors be persons other than "interested persons," as
defined in the 1940 Act. In addition, the 1940 Act provides that the Company may
not change the nature of its business so as to cease to be, or to withdraw its
election as, a business development company unless so authorized by the vote of
a majority, as defined in the 1940 Act, of its outstanding voting securities.

The Company is permitted, under specified conditions, to issue multiple
classes of indebtedness and one class of stock senior to the shares offered
hereby if its asset coverage of any Senior Security is at least 200% immediately
after each such issuance. Debt securities issued to the SBA are not subject to
this asset coverage

59
<PAGE> 60

test. In addition, while Senior Securities are outstanding, provisions must be
made to prohibit any distribution to shareholders or the repurchase of such
securities or shares unless the Company meets the applicable asset coverage
ratios at the time of the distribution or repurchase. The Company may also
borrow amounts up to 5.0% of the value of its total assets for temporary or
emergency purposes.

Under the 1940 Act, a business development company may not acquire any
asset other than assets of the type listed in Section 55(a) of the 1940 Act
("Qualifying Assets") unless, at the time the acquisition is made, Qualifying
Assets represent at least 70% of the company's total assets. The principal
categories of Qualifying Assets relevant to the proposed business of the Company
are the following:

(1) Securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer is an eligible
portfolio company. An eligible portfolio company is defined in the 1940
Act as any issuer which:

(a) is organized under the laws of, and has its principal place of
business in, the United States;

(b) is not an investment company other than a small business
investment company wholly-owned by the business development company,
and

(2) Securities of any eligible portfolio company which is controlled by
the business development company.

(3) Securities received in exchange for or distributed on or with
respect to securities described in (1) or (2) above, or pursuant to the
exercise of options, warrants or rights relating to such securities.

(4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.

In addition, a business development company must have been organized (and
have its principal place of business) in the United States for the purpose of
making investments in the types of securities described in (1) or (2) above.
However, in order to count the securities as Qualifying Assets for the purpose
of the 70% test, the business development company must either control the issuer
of the securities or must make available to the issuer of the securities
significant managerial assistance; except that, where the company purchases such
securities in conjunction with one or more other persons acting together, one of
the other persons in the group may make available such managerial assistance. By
the making of loans to small concerns, SBICs are deemed to provide significant
managerial assistance.

SHARES ELIGIBLE FOR FUTURE SALE

No prediction be made as to the effect, if any, that market sales of shares
or the availability of shares for sale will have on the market price of the
Common Stock prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock of the Company in the public market after the
restrictions described below lapse could adversely affect the prevailing market
price and the ability of the Company to raise equity capital in the future.

Upon completion of this Offering, the Company will have outstanding
11,130,116 shares of Common Stock. Of these shares, the 2,000,000 shares of
Common Stock sold in this Offering and the 5,520,000 shares sold in the
Company's prior public offerings will be freely tradeable without restriction or
limitation under the Securities Act, except to the extent such shares are
subject to the agreement with the Representatives of the Underwriters described
below, and except for any shares purchased by "affiliates," as that term is
deemed under the Securities Act, of the Company. The remaining 3,610,116 shares
are "restricted securities" within the meaning of Rule 144 adopted under the
Securities Act (the "Restricted Shares"). The Restricted Shares were issued by
the Company in the Conversion in reliance upon an exemption from registration
under the Securities Act.

60
<PAGE> 61

UNDERWRITING

The Underwriters named below, for whom The Robinson-Humphrey Company, Inc.,
J.C. Bradford & Co., and Equitable Securities Corporation are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement entered into
between the Company and the Underwriters, to purchase from the Company, and the
Company has agreed to sell to the Underwriters, the respective number of shares
of Common Stock set forth opposite their respective names below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
The Robinson-Humphrey Company, Inc................................................ 666,668
J.C. Bradford & Co................................................................ 666,666
Equitable Securities Corporation.................................................. 666,666
---------
Total................................................................... 2,000,000
========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase all shares of the Common
Stock offered hereby if any are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the offering price set forth on the cover page of this Prospectus
and to certain dealers at such price less a concession not in excess of $.85 per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $.10 per share in sales to certain other dealers.

The Company has granted the Underwriters a 30-day option to purchase up to
an additional 300,000 shares of Common Stock at the offering price set forth on
the cover page of the Prospectus less the underwriting discounts and commissions
set forth on the cover page of this Prospectus to cover overallotments, if any.
If the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by each of them as shown in the table above bears to the 2,000,000
shares of Common Stock offered hereby. The Underwriters may exercise such option
only to cover over-allotments in connection with the sale of the shares of
Common Stock offered hereby.

The Underwriters do not intend to confirm sales of shares of Common Stock
to any account over which they exercise discretionary authority.

The Company, its officers and directors have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock of the Company for a period of
90 days from the date of this Prospectus without the prior written consent of
the Representatives.

The Company has agreed to indemnify the Underwriters against, and to
contribute to losses arising out of, certain liabilities, including liabilities
under the Securities Act.

The rules of the Commission generally prohibit the Underwriters from making
a market in the Common Stock during the two business day period prior to
commencement of sales in this Offering (the "Cooling Off Period"). The
Commission has, however, adopted Rule 10b-6A ("Rule 10b-6A") which provides an
exemption from such prohibition for certain passive market making transactions.
Such passive market making transactions must comply with applicable price and
volume limits and must be identified as passive market making transactions. In
general, pursuant to Rule 10b-6A, a passive market maker may display its bid for
a security at a price not in excess of the highest independent bid for the
security. If an independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded. Further, net purchases by a passive market maker on each day are
generally limited to a specified percentage of the passive market maker's
average daily trading volume in a security during a specified prior period and
must be discontinued when such limit is reached. Pursuant to the exemption
provided by Rule 10b-6A, certain of the Underwriters and selling group members
may engage in passive

61
<PAGE> 62

market making in the Common Stock during the Cooling Off Period. Passive market
making may stabilize the market price of the Common Stock at a level above that
which might otherwise prevail and if commenced, may be discontinued at any time.

Raymond H. Pirtle, Jr., a director of the Company, is also a managing
director and member of the Board of Directors of Equitable.

The principal business address of each of the Representatives is as
follows: The Robinson-Humphrey Company, Inc., 3333 Peachtree Road, N.E.,
Atlanta, Georgia 30326; J.C. Bradford & Co., 330 Commerce Street, Nashville,
Tennessee 37201; and Equitable Securities Corporation, 800 Nashville City
Center, 511 Union Street, Nashville, Tennessee 37219-1743.

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Bass, Berry & Sims
PLC, Nashville, Tennessee. Certain legal matters related to the Offering will be
passed upon for the Underwriters by Sherrard & Roe, PLC, Nashville, Tennessee.

CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR

The Company's securities are held under a Custodial Services Agreement with
First American National Bank (Trust Department). The address of the custodian is
First American Center, Nashville, Tennessee 37237. The Company's assets are held
under bank custodianship in compliance with the 1940 Act. The Custodial Services
Agreement with First American Trust Company provides for an annual fee, payable
quarterly, equal to approximately 0.035% of the assets held pursuant to the
Custodial Services Agreement. First Union National Bank will act as the
Company's transfer and dividend paying agent and registrar. The principal
business address of First Union National Bank is 230 South Tryon Street,
Charlotte, North Carolina 28288-1153.

REPORTS TO SHAREHOLDERS

The Company will furnish unaudited quarterly and audited annual reports to
the holders of its securities. The annual report will include a list of
investments held by the Company.

INDEPENDENT PUBLIC ACCOUNTANTS

The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. The principal business address of Arthur
Andersen LLP is 424 Church Street, Nashville, Tennessee 37219.

62
<PAGE> 63

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SIRROM CAPITAL CORPORATION
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996 (unaudited)........ F-3
Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995 and for
the Three Months Ended March 31, 1995 and 1996 (unaudited).......................... F-4
Statements of Changes in Partners' Capital and Shareholders' Equity for the Years
Ended December 31, 1993, 1994 and 1995 and the Three Months Ended March 31, 1996
(unaudited)......................................................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and the
Three Months Ended March 31, 1995 and 1996 (unaudited).............................. F-6
Financial Highlights
Per Share Data for the Year Ended December 31, 1995 and the Three Months Ended March
31, 1996 (unaudited)............................................................. F-7
Ratios/Supplemental Data for the Years Ended December 31, 1993, 1994 and 1995 and
the Three Months Ended March 31, 1996 (unaudited)................................ F-7
Notes to Financial Statements......................................................... F-8
Quarterly Financial Information for the Years 1994 and 1995 (unaudited)............... F-14
Portfolio of Investments
As of December 31, 1994............................................................. F-15
As of December 31, 1995............................................................. F-20
As of March 31, 1996 (unaudited).................................................... F-28
HARRIS WILLIAMS & CO. AND SUBSIDIARY
Report of Independent Public Accountants.............................................. F-36
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996
(unaudited)......................................................................... F-37
Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and 1995
and for the Three Months Ended March 31, 1995 and 1996 (unaudited).................. F-38
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and the Three Months Ended March 31, 1996
(unaudited)......................................................................... F-39
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995 and the Three Months Ended March 31, 1995 and 1996 (unaudited)................. F-40
Notes to Consolidated Financial Statements............................................ F-41
</TABLE>

F-1
<PAGE> 64

SIRROM CAPITAL CORPORATION

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Sirrom Capital Corporation:

We have audited the accompanying balance sheets, including the portfolio of
investments of SIRROM CAPITAL CORPORATION (see Note 1) as of December 31, 1994
and 1995, and the related statements of operations, changes in Partners' capital
and shareholders' equity and cash flows for each of the years in the three year
period ended December 31, 1995 and financial highlights for the periods
indicated thereon. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sirrom Capital Corporation
at December 31, 1994 and 1995 and the results of its operations, the changes in
Partners' capital and shareholders' equity and its cash flows for each of the
three years in the period ended December 31, 1995 and financial highlights for
the periods indicated thereon, in conformity with generally accepted accounting
principles.

As explained in Note 2, the financial statements include investments valued
at $86,383,594 (95% of total assets) and $170,210,719 (96% of total assets) as
of December 31, 1994 and 1995, respectively, whose values have been estimated by
the Board of Directors in the absence of readily ascertainable market values. We
have reviewed the procedures used by the Board of Directors in arriving at its
estimate of value of such investments and have inspected underlying
documentation, and, in the circumstances, we believe the procedures are
reasonable and the documentation appropriate. However, the estimated values may
differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be material.

ARTHUR ANDERSEN LLP

Nashville, Tennessee
January 26, 1996

F-2
<PAGE> 65

SIRROM CAPITAL CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments, at fair value:
Loans.............................................. $ 72,336,480 $144,854,517 $166,936,281
Equity interests................................... 7,576,613 15,912,467 22,548,818
Warrants........................................... 7,548,851 11,513,183 11,198,843
------------ ------------ ------------
Total investments (cost of $82,342,194,
$162,466,881, and $188,430,081,
respectively)............................ 87,461,944 172,280,167 200,683,942
Cash and cash equivalents............................ 137,247 195,069 78,283
Interest receivable.................................. 1,302,662 2,119,567 2,534,774
Debenture costs (less accumulated amortization of
$175,487, $383,279, and $570,175, respectively).... 1,049,408 2,020,030 2,095,634
Restricted investment................................ 1,000,000 -- --
Furniture and equipment (less accumulated
depreciation of $18,565 and $29,273,
respectively)...................................... -- 203,860 214,734
Other assets......................................... 18,000 211,165 598,473
------------ ------------ ------------
Total assets............................... $ 90,969,261 $177,029,858 $206,205,840
=========== =========== ===========
LIABILITIES, PARTNERS' CAPITAL AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures payable to Small Business
Administration.................................. $ 51,000,000 $ 73,260,000 $ 83,260,000
Revolving credit facility.......................... 6,389,251 13,200,000 24,916,000
Interest payable................................... 681,008 936,818 1,281,333
Accrued taxes payable.............................. 487,794 1,073,525 2,310,268
Accounts payable and accrued expenses.............. 28,376 213,901 32,016
------------ ------------ ------------
Total liabilities.......................... 58,586,429 88,684,244 111,799,617
------------ ------------ ------------
Commitments and contingencies
Partners' capital and shareholders' equity (Note 1):
Partners' capital.................................. 24,837,736 -- --
Common stock -- No par value, 50,000,000 shares
authorized, 9,195,116 issued and outstanding.... -- 73,919,184 73,919,184
Notes receivable from employees.................... (1,980,000) (1,980,000) (1,980,000)
Undistributed net realized earnings................ 4,405,354 6,593,144 10,413,193
Unrealized appreciation of investments............. 5,119,742 9,813,286 12,053,846
------------ ------------ ------------
Total partners' capital and shareholders'
equity................................... 32,382,832 88,345,614 94,406,223
------------ ------------ ------------
Total liabilities, partners' capital and
shareholders' equity..................... $ 90,969,261 $177,029,858 $206,205,840
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 66

SIRROM CAPITAL CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING INCOME:
Interest on Investments........... $3,514,564 $7,336,816 $13,451,742 $ 2,424,130 $ 4,862,463
Loan processing fees.............. 699,000 901,340 1,899,692 540,992 921,250
Other income...................... -- -- 223,456 -- --
---------- ---------- ----------- ----------- -----------
Total operating income.... 4,213,564 8,238,156 15,574,890 2,965,122 5,783,713
---------- ---------- ----------- ----------- -----------
OPERATING EXPENSES:
Interest expense.................. 1,427,386 3,123,461 4,771,131 998,871 1,789,982
Salaries and benefits............. -- -- 1,081,478 451,643 739,020
Management fees................... 708,999 1,072,833 -- -- --
Other operating expenses.......... 165,811 122,339 1,412,358 221,620 477,064
State income tax on interest...... 230,743 457,035 109,035 51,661 --
Amortization expense.............. 53,725 117,992 207,792 30,009 188,397
---------- ---------- ----------- ----------- -----------
Total operating
expenses................ 2,586,664 4,893,660 7,581,794 1,753,804 3,194,463
---------- ---------- ----------- ----------- -----------
Net operating income................ 1,626,900 3,344,496 7,993,096 1,211,318 2,589,250
Realized gain (loss) on
investments....................... (799,353) (538,025) 1,759,513 49,795 5,756,489
Change in unrealized appreciation
(depreciation) of investments..... (49,611) 3,356,316 4,693,544 1,602,920 2,240,560
Provision for income taxes.......... -- -- (1,020,321) -- (2,134,960)
---------- ---------- ----------- ----------- -----------
Net increase in partners' capital
and shareholders' equity resulting
from operations................... $ 777,936 $6,162,787 $13,425,832 $ 2,864,033 $ 8,451,339
========= ========= ========== ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 67

SIRROM CAPITAL CORPORATION

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
COMMON STOCK UNDISTRIBUTED (DEPRECIATION)
PARTNERS' ---------------------- NOTES RECEIVABLE NET REALIZED OF
CAPITAL SHARES AMOUNT FROM EMPLOYEES EARNINGS INVESTMENTS TOTAL
---------------- --------- ----------- ---------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SIRROM CAPITAL, L.P.:
BALANCE, DECEMBER 31,
1992...................... $ 12,117,544 -- $ -- $ -- $ 771,336 $ 1,813,037 $14,701,917
Capital contributions..... 3,936,968 -- -- -- -- -- 3,936,968
Capital distributions..... (765,861) -- -- -- -- -- (765,861)
Net increase in partners'
capital resulting from
operations.............. -- -- -- -- 827,547 (49,611) 777,936
---------------- --------- ----------- ---------------- ------------- ------------ -----------
BALANCE, DECEMBER 31,
1993...................... 15,288,651 -- -- -- 1,598,883 1,763,426 18,650,960
Capital contributions..... 8,162,178 -- -- -- -- -- 8,162,178
Purchase of ownership in
partnership............. 1,980,000 -- -- (1,980,000) -- -- --
Capital distributions..... (593,093) -- -- -- -- -- (593,093)
Net increase in partners'
capital resulting from
operations.............. -- -- -- -- 2,806,471 3,356,316 6,162,787
---------------- --------- ----------- ---------------- ------------- ------------ -----------
BALANCE, DECEMBER 31,
1994...................... 24,837,736 -- -- (1,980,000) 4,405,354 5,119,742 32,382,832
SIRROM CAPITAL CORPORATION:
Effect of reorganization
(Note 1)................ (24,837,736) 5,050,116 24,837,736 -- -- -- --
Issuance of common
stock................... -- 4,145,000 47,712,029 -- -- -- 47,712,029
Net increase in
shareholders' equity
resulting from
operations.............. -- -- -- -- 8,732,288 4,693,544 13,425,832
Payment of dividends...... -- -- -- -- (3,974,079) -- (3,974,079)
Distribution of Capital
Gains................... -- -- -- -- (1,201,000) -- (1,201,000)
Designation of
undistributed capital
gains, net of tax (Note
13)..................... -- -- 1,369,419 -- (1,369,419) -- --
---------------- --------- ----------- ---------------- ------------- ------------ -----------
BALANCE, DECEMBER 31,
1995...................... -- 9,195,116 73,919,184 (1,980,000) 6,593,144 9,813,286 88,345,614
Payment of dividends
(unaudited)............. -- -- -- -- (2,390,730) (2,390,730)
Net increase in
shareholders' equity
resulting from
operations
(unaudited)............. -- -- -- 6,210,779 2,240,560 8,451,339
---------------- --------- ----------- ---------------- ------------- ------------ -----------
BALANCE, MARCH 31, 1996
(unaudited)............... $ -- 9,195,116 $73,919,184 $ (1,980,000) $10,413,193 $ 12,053,846 $94,406,223
============= ======== ========== ============= =========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 68

SIRROM CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------- ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net increase in partners' capital and
shareholders' equity resulting from
operations.................................. $ 777,936 $ 6,162,787 $ 13,425,832 $ 2,864,033 $ 8,451,339
Adjustments to reconcile net increase to net
cash provided by operating activities:
Net unrealized (appreciation) depreciation
of investments............................ 49,611 (3,356,316) (4,693,544) (1,602,920) (2,240,560)
Realized loss (gain) on investments......... 799,353 538,025 (1,759,513) (49,795) (5,756,489)
Amortization of debenture costs............. 53,725 117,992 207,792 28,509 186,897
Increase in interest receivable............. (608,947) (508,321) (816,905) (169,440) (415,185)
Decrease in prepaid management fee.......... 33,000 -- -- -- --
(Increase) decrease in accounts
receivable................................ (587,400) --
Increase (decrease) in accounts payable and
accrued expenses.......................... (36,654) 28,376 185,525 119,135 (181,886)
Amortization of organization costs.......... 6,000 6,000 6,000 1,500 1,500
Depreciation of fixed assets................ -- -- 18,565 1,622 10,709
Increase (decrease) in prepaid interest..... 12,350 (12,350) -- -- --
Increase in accrued taxes payable........... 205,515 282,279 585,731 (441,804) 1,236,743
Increase in interest payable................ 308,501 261,158 255,810 121,831 344,515
------------- ------------ ------------ ------------ ------------
Net cash provided by operating
activities............................ 1,600,390 3,519,630 7,415,293 285,271 1,637,583
------------- ------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of investments............. 2,355,147 9,769,378 27,303,888 4,162,187 12,506,905
Investments originated or acquired............ (33,632,035) (44,162,021) (105,669,054) (28,619,362) (32,714,000)
Purchase of fixed assets...................... -- -- (222,425) (45,976) (21,237)
(Increase) decrease in restricted
investments................................. -- (1,000,000) 1,000,000 -- --
Increase in other assets...................... -- -- (199,165) -- (588,808)
------------- ------------ ------------ ------------ ------------
Net cash used in investing activities... (31,276,888) (35,392,643) (77,786,756) (24,503,151) (20,817,140)
------------- ------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from debentures payable to Small
Business Administration..................... 24,000,000 17,000,000 22,260,000 -- 10,000,000
Proceeds from revolving credit facilities..... 8,323,500 42,978,109 62,638,595 8,475,596 29,703,000
Repayment of line of credit borrowings........ (8,323,500) (36,588,858) (55,827,846) (10,820,847) (17,987,000)
Increase in debenture costs................... (462,900) (580,995) (1,178,414) 110,351 (262,500)
Proceeds from capital contributions........... 3,936,968 8,162,178 -- -- --
Distribution of capital....................... (765,861) (593,093) -- -- --
Issuance of common stock...................... -- -- 47,712,029 26,508,058 --
Payment of dividends.......................... -- -- (3,974,079) -- (2,390,730)
Distribution of Capital Gains................. -- -- (1,201,000) -- --
------------- ------------ ------------ ------------ ------------
Net cash provided by financing
activities............................ 26,708,207 30,377,341 70,429,285 24,273,158 19,062,770
------------- ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... (2,968,291) (1,495,672) 57,822 55,278 (116,786)
CASH AND CASH EQUIVALENTS, beginning of year.... 4,601,210 1,632,919 137,247 137,247 195,069
------------- ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year.......... $ 1,632,919 $ 137,247 $ 195,069 $ 192,525 $ 78,283
============ =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid................................. $ 1,131,235 $ 2,707,488 $ 4,525,701 $ 877,041 $ 1,398,134
============ =========== =========== =========== ===========
Taxes paid.................................... $ 25,228 $ 174,756 $ 493,465 $ 591,322 $ 951,116
============ =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 69

SIRROM CAPITAL CORPORATION

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH
PER SHARE DATA(1) DECEMBER 31, 1995 31, 1996
- ---------------------------------------------------------------- ----------------- --------------
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of year.............................. $ 6.41(2) $ 9.61
----------- ----------
Net operating income............................................ 0.87 0.28
Net realized and unrealized gains or losses on investments...... 3.19(3) 0.64
----------- ----------
Total from investment operations................................ 4.06 0.92
----------- ----------
Less: Dividends on net investment income........................ 0.49 0.26
Distributions on realized capital gains................... 0.37(4) 0.00
----------- ----------
Total Distributions................................... 0.86 0.26
----------- ----------
Net asset value, end of period.................................. $ 9.61 $ 10.27
=========== ==========
Per share market value, end of period........................... $ 18.875 $ 22.88
=========== ==========
Shares outstanding, end of period............................... 9,195,116 9,195,116
=========== ==========
</TABLE>

DECEMBER 31,
---------------------------
RATIOS/SUPPLEMENTAL DATA 1993 1994 1995 MARCH 31, 1996
- --------------------------------------------------- ------- ------- ------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net assets, end of period (in thousands)........... $18,651 $32,383 $88,346 $ 94,406
Ratio of operating expenses to average net
assets........................................... 15.5% 19.2% 12.6% 13.9%(5)
Ratio of net operating income to average net
assets........................................... 9.7% 13.1% 13.2% 11.3%(5)
</TABLE>

- ---------------

(1) Prior to 1995 the Company operated as a partnership, therefore no per share
information is available.
(2) Net asset value at beginning of the period is calculated based on partners'
capital of $32,382,832 at December 31, 1994 and 5,050,116 shares of common
stock issued at conversion of the Partnership to the Company at February 1,
1995.
(3) Per share net realized and unrealized gains or losses includes the effect of
stock issuances at per share prices in excess of the Company's per share net
asset value.
(4) The per share amount includes distributions paid and realized capital gains
designated as distributed but retained by the Company. See Note 13.
(5) Represents annualized ratios based on the three months ended March 31, 1996.

The accompanying notes are an integral part of these statements.

F-7
<PAGE> 70

SIRROM CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Sirrom Capital Corporation (the "Company"), a Tennessee Corporation, was
formed in November 1994 and Sirrom Capital, L.P. (the "Partnership") became a
partnership under the laws of the State of Tennessee in November 1991. The
accompanying financial statements have been prepared on a basis appropriate for
investment companies as enumerated in the American Institute of Certified Public
Accountants' Audit and Accounting Guide on Audits of Investment Companies.

The Company is a non-diversified, closed-end investment company, which has
elected to be treated as a business development company under the Investment
Company Act of 1940. The Company is also a small business investment company
("SBIC") licensed under the Small Business Investment Act of 1958 (the "1958
Act"). The Company was licensed by the U.S. Small Business Administration (the
"SBA") on May 14, 1992. Under applicable SBA regulations, the Company is
restricted to investing only in qualified small business concerns in the manner
contemplated by the 1958 Act, as amended. Additionally, beginning in February
1995, the Company elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended.

The Company's objectives are to achieve both a high level of current income
from interest on loans and fees and long-term growth in the value of its net
assets through equity interests primarily in small, privately owned companies.
The Company targets small businesses that the Company believes meet certain
criteria, including the potential for significant growth, adequate collateral
coverage, experienced management teams, sophisticated outside equity investors
and profitable operations.

Effective February 1, 1995, the partners of the Partnership transferred, in
a tax free conversion, their partnership interests to the Company in exchange
for the issuance of 5,050,116 shares of common stock of the Company. The common
stock was received by each partner in proportion to the partner's percentage
interest in the Partnership. As a result of this exchange, the Partnership was
dissolved and liquidated, with all of the assets and liabilities of the
Partnership (including the SBIC license which was obtained by the Partnership in
May 1992) being thereby assigned and transferred to the Company. This
transaction was accounted for as a reorganization of entities under common
control, in a manner similar to a pooling of interests.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Valuation of Investments

Portfolio investments are stated at fair value as determined by the Board
of Directors.

Under the Company's valuation policy, the fair values of loans to small
business concerns are based on the Board of Director's evaluation of the
financial condition of the borrowers and/or the underlying collateral. The
values assigned are considered to be amounts which could be realized in the
normal course of business which anticipates the Company holding the loan to
maturity and realizing the face value of the loan. Fair value normally
corresponds to cost unless the borrower's condition or external factors lead to
a determination of fair value at a higher or a lower amount.

Equity interests and warrants for which there is not a public market are
valued based on factors such as significant equity financing by sophisticated,
unrelated new investors, history of positive cash flow from operations, the
market value of comparable publicly traded companies (discounted for
illiquidity) and other pertinent factors. The Board of Directors also considers
recent offers to purchase a portfolio company's securities when valuing
warrants.

The Company's investments in stocks of public companies that it is not
permitted to sell in the public market as a result of securities laws
restrictions, lock-up agreements and other similar restrictions are valued at
70% of market value at the balance sheet date. All other publicly traded stocks
are valued at 90% of market value at the balance sheet date.

F-8
<PAGE> 71

SIRROM CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1994 and 1995, the investment portfolio included
investments totaling $86,383,594 and $170,210,719, respectively, whose values
had been estimated by the Board of Directors in the absence of readily
ascertainable market values. At March 31, 1996, the investment portfolio
included investments whose values have been estimated by the Board of Directors
totaling $192,409,978 (unaudited). Because of the inherent uncertainty of the
valuations, the estimated fair values may differ significantly from the values
that would have been used had a ready market for the securities existed, and the
differences could be material.

Realized and Unrealized Gain or Loss on Investments

Realized gains or losses are recorded upon disposition of investments and
are calculated based upon the difference between the proceeds and the cost basis
determined using the specific identification method. All other changes in the
valuation of portfolio investments are included as changes in the unrealized
appreciation or depreciation of investments in the statement of operations.

Description of Loans Terms

The loans to small business concerns included in investments bear interest
at rates ranging from 6.50% to 14.00%. Typically, interest is payable in monthly
or quarterly installments over five years with the entire principal amount
typically due at maturity. These loans are generally collateralized by the
assets of the borrower, certain of which are subject to prior liens, and/or
guarantees.

Loan Processing Fees

The Company recognizes loan processing fees as income when received.

Cash and Cash Equivalents

The Company defines cash and cash equivalents as cash on hand, cash in
interest bearing and non-interest bearing operating bank accounts and highly
liquid investments such as time deposits with an original maturity of three
months or less.

Debenture Costs

Debenture costs are amortized over ten years which represents the term of
the ten (11 at March 31, 1996, unaudited) SBA debentures, as discussed in Note
5.

Income Taxes

The financial statements for 1993 and 1994 do not include a provision for
federal income taxes because the partners are taxed based on their respective
share of partnership earnings. During these years, the Company was subject to
state income taxes on interest.

Beginning in February 1995, the Company elected to be taxed as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). If the Company, as a RIC, satisfies certain requirements relating to
the source of its income, the diversification of its assets and the distribution
of its net income, the Company is generally taxed as a pass through entity which
acts as a partial conduit of income to its shareholders.

In order to maintain its RIC status, the Company must in general: a) derive
at least 90% of its gross income from dividends, interest and gains from the
sale or disposition of securities b) derive less than 30% of its gross income
from the sale or disposition of securities held for less than three months, c)
meet investment diversification requirements defined by the Code and d)
distribute to shareholders 90% of its net income (other than long-term capital
gains).

F-9
<PAGE> 72

SIRROM CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company currently intends to meet the RIC qualifications in future
years. Therefore, the Company has not provided for federal income taxes on the
unrealized appreciation of investments.

Partners' Capital/Shareholders' Equity

During 1993 and 1994, net operating income (loss), realized gains (losses)
and unrealized gains (losses) were allocated one percent (1%) and ninety-nine
percent (99%) to the General Partner and Limited Partners, respectively.

During November 1994, six employees were granted ownership interests in the
partnership at a purchase price equal to the approximate fair value of each
ownership interest. In connection therewith, each employee executed a promissory
note for the purchase price of such interest. The promissory notes bear interest
at 7.25% per annum with interest payable annually. All notes mature on November
1, 2001. As discussed in Note 1, the interests in the partnership were
subsequently exchanged for the Company's common stock. The stock must be resold
to the Company if the employee is no longer employed by the Company for a period
of not less than three years from the date of purchase. The notes receivable
from employees were shown as a reduction in partners' capital and a reduction to
common stock in the amount of $1,980,000 at December 31, 1994 and 1995 and March
31, 1996 (unaudited).

3. 1995 WARRANT VALUATIONS

During 1995, the Company's Board of Directors approved warrant and stock
valuations totaling approximately $6,000,000 (the investments in Premiere
Technologies, Inc. attributed to 84% of this amount) that did not conform to the
valuation guidelines of the SBA. SBA guidelines state that increases to
investment valuations can be made after a significant equity financing occurs by
an unrelated, new investor, but not prior to such a transaction. The valuations
in question were based on impending public offerings, purchase offers and
private placements.

4. RESTRICTED INVESTMENT

The restricted investment of $1,000,000 at December 31, 1994 represented a
certificate of deposit that the Company pledged to a bank as collateral on
behalf of one of the Company's portfolio investments. The Company sold this
investment during 1995 and no longer pledges the collateral.

5. DEBENTURES PAYABLE TO SMALL BUSINESS ADMINISTRATION

As of December 31, 1995, the Company had ten debentures totaling
$73,260,000 payable to the SBA with semiannual interest only payments based upon
rates ranging from 6.12% to 8.20% per annum, with scheduled maturity dates as
follows:

<TABLE>
<CAPTION>
DATE AMOUNT
------------------------------------------------------------------------ -----------
<S> <C>
2002.................................................................... $10,000,000
2003.................................................................... 24,000,000
2004.................................................................... 17,000,000
2005.................................................................... 22,260,000
-----------
$73,260,000
==========
</TABLE>

As of March 31, 1996, the Company had 11 debentures payable to the SBA
totaling $83,260,000 (unaudited).

The debentures are subject to a prepayment penalty if paid prior to five
years from maturity. Interest expense related to these debentures for the
periods ended December 31, 1993, 1994 and 1995 totaled

F-10
<PAGE> 73

SIRROM CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

$1,385,896, $2,857,398 and $4,243,851, respectively. Interest expense on the
debentures for the three months ended March 31, 1996 totaled $1,317,446
(unaudited).

6. REVOLVING CREDIT FACILITY

During 1994 and 1995, the Company maintained a line of credit agreement
with a bank, whereby it could borrow up to $15,000,000 at the annual rate of
one-half percent per annum in excess of the bank's prime rate. As of December
31, 1994, $6,389,251 was outstanding. During December 1995, the Company entered
into a new revolving credit facility with a bank, whereby it may borrow up to
$50,000,000 at LIBOR plus 1.75% (7.5% at December 31, 1995). As of December 31,
1995, $13,200,000 were outstanding. This agreement expires on December 27, 1998.
As of March 31, 1996, $24,916,000 (unaudited) was outstanding.

Interest expense related to lines of credit for the period ended December
31, 1993, 1994 and 1995 was $41,490, $266,063 and $527,280, respectively.
Interest expense related to the Revolving Credit Facility for the period ended
March 31, 1996 was $472,536 (unaudited).

The Company entered into an interest rate swap agreement that effectively
converts the variable rate on $30,000,000 of borrowings on the revolving credit
facility to a fixed rate of 8.15%. Under the agreement, the Company will
exchange the interest rate difference between the fixed and variable rates on
incremental amounts of $3,000,000 a month beginning in April 1996.

7. INCOME TAXES

For the years ended December 31, 1993, 1994 and 1995, the statements of
operations include a provision for state income taxes on interest totaling
$230,743 and $457,035 and $109,035, respectively. There is no provision for
state income taxes on interest for the three months ended March 31, 1996
(unaudited).

For the year ended December 31, 1995 the Company provided for federal
income tax at a 35% rate and excise taxes at a 4% rate on taxable net investment
income as defined by the Code and realized gains not distributed to
shareholders. The provision for income taxes includes $737,380 of tax provided
on the retained deemed distribution as discussed in Note 13. For the three
months ended March 31, 1996, the Company provided for taxes totaling $2,134,960
(unaudited).

8. MANAGEMENT FEES AND OPERATING EXPENSES

During 1993 and 1994, the Company agreed to pay an annual management fee to
the General Partner of the partnership equal to the actual expenses incurred by
the General Partner of the partnership not to exceed two percent of the gross
value of the partnership's assets. The amount of the fee for the periods ended
December 31, 1993 and 1994 totaled $708,999 and $1,072,833, respectively. In
connection with the reorganization discussed in Note 1, the agreement with the
General Partner was terminated effective February 1, 1995 at which time the
Company began incurring expense for salaries and benefits and direct operating
expenses.

9. EMPLOYEE STOCK OPTION PLAN

During 1994, the Company adopted the Amended and Restated 1994 Employee
Stock Option Plan which permits the issuance of options to purchase the
Company's common stock to selected employees. The Plan reserves 500,000 shares
of common stock for grant and provides that the terms of each award be
determined by a committee of the Board of Directors. Under the terms of the
Plan, the options' exercise price may not be less than the fair market value of
a share of common stock on the date of the grant. During 1994, no stock options
were granted.

During February 1995, the Company granted George M. Miller, II, President
and Chief Executive Officer, an option to purchase 150,000 shares at $11 per
share. This option becomes exercisable 25% in August 1997, 25% in August 1998
and 50% in August 1999. In addition, in July 1995, the Company granted to David
M. Resha, the Company's Chief Operating Officer, an option to purchase 125,000
shares at $13.50 per share, and granted John S. Scott, a Vice President of the
Company, an option to purchase 50,000 shares at

F-11
<PAGE> 74

SIRROM CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

$13.50 per share. The options granted to Resha and Scott each vest as to 20% of
the shares each year commencing upon their respective dates of employment by the
Company.

In October 1995, the Company granted to Kimberly M. Stringfield, the
Company's Controller, an option to purchase 25,000 shares at $17.88 per share.
Additionally, in December 1995, the Company granted the following options: an
option to purchase 56,966 shares to George M. Miller, II; an option to purchase
20,000 shares to Carolyn W. Perrone, the Company's Chief Financial Officer; an
option to purchase 20,000 shares to Robert G. Shuler, a Vice President of the
Company; and an option to purchase 20,000 shares to Peter T. Socha, a Vice
President of the Company. All of the options granted in December 1995 are to
purchase shares at $18.50 per share. The options granted to Stringfield, Miller,
Perrone, Shuler and Socha each vest as to 20% of the shares each year from the
date granted.

In February 1996, the Company adopted the 1996 Employee Stock Incentive
Plan (the "1996 Plan") that permits the issuance of options to purchase shares
of the Company's Common Stock to selected employees. The 1996 Plan reserves
390,000 shares of Common Stock for grant and provides that the terms of each
award be determined by a committee of the Board of Directors. Under the terms of
the 1996 Plan, the option exercise price may not be less than the fair market
value of a share of Common Stock on the date of grant. In February 1996, the
Company granted to Mr. Miller and to Kathy Harris, a Vice President of the
Company, options to purchase 56,966 and 50,000 shares, respectively, at $18.625
a share (unaudited). The options vest 20% each year from the date granted
(unaudited).

All of the above options are expressly conditioned upon shareholder
approval and the exercise price approximates the fair market value of a share of
common stock on the date of grant.

10. DIRECTORS STOCK OPTION PLAN

During 1995, the Company adopted a 1995 Stock Option Plan for Non Employee
Directors which permits the issuance of options to purchase the Company's common
stock to non employee directors. The Plan reserves 114,000 shares of common
stock for automatic grant. Upon shareholder approval of the plan, directors
elected prior to December 1, 1994 will receive options to purchase 18,000 shares
and directors elected after December 1, 1994 will receive options to purchase
12,000 shares. Upon the initial election of a future non employee director, an
option to acquire 6,000 shares of common stock will be issued to the director.
Under the terms of the Plan, the options' exercise price may not be less than
the fair market value of a share of common stock on date of grant.

11. PRIVATE PLACEMENT

During November 1994, the Company completed a private placement that
resulted in proceeds of approximately $3.6 million. In connection with the
conversion of partnership interests to common stock as discussed in Note 1, the
Company exchanged 441,921 shares of common stock for the partnership interests
of the private placement investors.

12. PUBLIC OFFERINGS

Initial Public Offering

In February 1995, the Company completed an initial public offering of
2,645,000 shares of common stock at a price of $11.00 per share. The net
proceeds of the offering, after underwriting commissions and expenses, were
approximately $26,498,029.

F-12
<PAGE> 75

SIRROM CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Secondary Offering

In August 1995, the Company completed a public offering of 2,500,000 shares
of common stock at a price of $15.25 per share of which 1,500,000 shares were
sold by the Company. The net proceeds to the Company of the offering, after
underwriting commissions and expenses, were approximately $21,214,000.

13. DIVIDENDS AND DISTRIBUTIONS

During 1995, the Company paid dividends of $5,175,079 of which $3,974,079
and $1,201,000 were derived from net operating income and realized capital
gains, respectively. The Company also elected to designate $2,106,799 of the
undistributed realized capital gains as a "deemed" distribution to shareholders
on record as of the end of the year. Accordingly, $1,369,419, net of taxes of
$737,380, of this designated distribution has been retained and reclassified
from undistributed net realized earnings to common stock.

During the three months ending March 31, 1996, the Company paid dividends
of $2,390,730 (unaudited).

14. COMMITMENTS AND CONTINGENCIES

The Company leases office space under a five year operating lease that
commenced August 1, 1995. Annual rent for 1996 totals $151,000, decreasing to
$132,000 for the years 1997 through 1999.

15. RECLASSIFICATIONS

Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform to the 1995 presentation.

F-13
<PAGE> 76

SIRROM CAPITAL CORPORATION

QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)

<TABLE>
<CAPTION>
1994
-------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total operating income........................................ $ 1,701 $ 1,935 $ 2,096 $ 2,506
Pre-tax operating income...................................... 744 970 954 1,132
Net increase in partners' capital resulting from operations... 383 3,564 (392) 2,608
Per share:
Pretax operating income..................................... $ 0.19 $ 0.24 $ 0.22 $ 0.24
Net increase in partners' capital resulting from
operations............................................... 0.10 0.87 (0.09) 0.55
Dividends................................................... -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
1995 1996
------------------------------------- -------
FIRST SECOND THIRD FOURTH FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total operating income................................ $ 2,965 $ 3,544 $ 4,081 $ 4,984 5,784
Pretax operating income............................... 1,263 1,900 2,224 2,715 2,589
Net increase in partners' capital and shareholders'
equity resulting from operations.................... 2,864 2,492 4,243 3,826 8,451
Per share:
Pre-tax operating income............................ $ 0.19 $ 0.24 $ 0.26 $ 0.28 $ 0.27
Net increase in partners' capital and shareholders'
equity resulting from operations................. 0.43 0.32 0.49 0.40 0.87
Dividends........................................... 0.14 0.255 0.23 0.26 0.24
Market price of common stock:*
High................................................ $12 $13 3/4 $18 3/4 $20 $23 3/4
Low................................................. 10 3/4 10 3/4 13 1/4 16 3/4 18 5/8
</TABLE>

- ---------------

* No public market for the stock prior to February 6, 1995.

F-14
<PAGE> 77

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1994

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- -------------------------------------------------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Affinity Fund, Inc................................ 06/29/98 12.50% $ 1,485,000 $ 1,490,930
Affinity Fund, Inc................................ 12/28/98 12.50 495,000 495,085
Alpha West Partners I, L.P........................ 12/31/97 12.50 771,308 774,558
Ashe Industries, Inc.............................. 12/28/97 12.50 990,000 994,174
Ashe Industries, Inc.............................. 03/25/99 12.50 445,500 446,250
Ashe Industries, Inc.............................. 05/18/99 12.50 544,500 545,236
Associated Response Services, Inc................. 06/20/99 12.50 1,386,000 1,387,631
Auto Rental Systems, Inc.......................... 10/31/97 12.50 742,500 745,875
Auto Rental Systems, Inc.......................... 06/30/98 13.50 200,000 200,000
BankCard Services Corporation..................... 01/21/98 13.00 297,000 298,200
Behavioral Healthcare Corporation................. 06/30/00 10.50 1,270,000 1,270,000
BiTec Southeast, Inc.............................. 11/03/97 12.50 445,500 447,450
BiTec Southeast, Inc.............................. 11/30/98 12.50 1,188,000 1,190,600
BiTec Southeast, Inc.............................. 11/03/97 12.50 445,500 446,400
BiTec Southeast, Inc.............................. 08/01/99 13.50 800,000 800,000
BiTec Southeast, Inc.............................. 08/01/99 13.50 171,321 171,321
C.J. Spirits, Inc................................. 05/01/97 13.50 742,500 446,375
Capital Network System, Inc....................... 11/30/98 12.50 990,000 992,338
Capital Network System, Inc....................... 01/31/99 12.50 990,000 992,004
CCS Technology Group, Inc......................... 05/01/97 13.00 990,000 995,284
CellCall, Inc..................................... 11/04/97 12.75 990,000 994,341
Central Tennessee Broadcasting, Inc............... 06/27/98 13.00 1,485,000 1,488,950
Central Tennessee Broadcasting, Inc............... 04/30/99 13.00 792,000 793,198
Central Tennessee Broadcasting, Inc............... 08/24/99 13.00 1,089,000 1,089,915
Clearidge, Inc.................................... 09/29/99 13.00 2,000,000 2,000,000
Continental Diamond Cutting Co.................... 10/28/99 13.00 1,500,000 1,500,000
Continental Diamond Cutting Co.................... 12/28/99 13.00 200,000 200,000
Corporate Flight Mgmt., Inc....................... 12/04/97 12.50 346,500 347,949
Cougar Power Products, Inc........................ 11/30/99 13.00 495,000 495,083
Dalcon International, Inc......................... 12/31/94 13.00 25,000 25,000
Dalcon International, Inc......................... 12/31/94 13.00 115,000 115,000
DentureCare, Inc.................................. 07/31/99 11.50 990,000 991,002
Earth Friendly Company............................ 07/29/99 13.00 990,000 990,834
Emerald Pointe Waterpark L.P...................... 05/03/99 12.50 594,000 594,800
Freshnut Food, Inc................................ 02/20/99 12.00 495,000 495,913
Freshnut Food, Inc................................ 11/20/99 13.00 199,000 199,034
Front Royal, Inc.................................. 10/01/99 13.00 1,550,000 1,550,000
Front Royal, Inc.................................. 12/27/99 13.00 675,000 675,000
Fycon Technologies, Inc........................... 03/14/98 13.00 1,010,000 815,500
Fycon Technologies, Inc........................... 09/30/94 13.00 17,500 17,500
Gates Communications, L.P......................... 12/31/98 12.50 990,000 992,171
Golf Corporation of America, Inc.................. 09/16/99 11.00 300,000 300,000
Gulfstream International Airlines Inc............. 07/29/99 13.00 1,490,000 1,492,505
Hoveround Corporation............................. 06/11/98 13.00 495,000 496,372
Hoveround Corporation............................. 11/08/99 13.50 250,000 250,000
Innotech, Inc..................................... 03/23/99 13.00 1,980,000 1,983,330
</TABLE>

F-15
<PAGE> 78

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1994

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- -------------------------------------------------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Innotech, Inc..................................... 08/30/99 13.00% $ 660,330 $ 660,885
Intermed Healthcare Systems, Inc.................. 06/29/99 12.00 742,500 743,375
International Manufacturing and Trade, Inc........ 04/27/99 13.00 495,000 495,747
International Manufacturing and Trade, Inc........ 12/01/99 13.00 400,000 400,000
Kentucky Kingdom, Inc............................. 04/05/99 8.50 250,000 250,000
Kentucky Kingdom, Inc............................. 01/05/98 12.50 1,980,000 1,987,993
Kentucky Kingdom, Inc. (Convertible Debt)......... 09/23/99 10.50 1,200,000 1,200,000
Kentucky Kingdom, Inc............................. 02/11/95 10.00 720,000 720,000
MBA Marketing Corporation......................... 02/04/99 12.50 1,782,000 1,785,300
Medical Associates of America, Inc................ 11/01/97 12.50 1,485,000 891,000
Nationwide Engine Supply, Inc..................... 01/12/99 12.00 2,475,000 2,480,004
OcuTec Corporation................................ 12/31/97 13.50 990,000 794,197
OcuTec Corporation (Convertible Debt)............. 05/19/98 13.00 250,000 250,000
OcuTec Corporation................................ 01/14/99 13.00 354,816 355,536
OcuTec Corporation................................ 09/30/94 13.00 142,000 142,000
OcuTec Corporation................................ 01/31/95 13.00 306,580 306,580
One Stop Acquisitions, Inc........................ 04/01/99 13.00 1,584,000 1,586,403
One Stop Acquisitions, Inc........................ 05/18/99 13.00 198,000 198,264
Palco Telecom Service, Inc........................ 11/22/99 12.00 1,800,000 1,800,000
Pipeliner Systems, Inc............................ 09/30/98 13.00 980,000 985,328
Potomac Group, Inc................................ 02/11/98 12.00 1,500,000 1,500,000
Premiere Technologies, Inc........................ 05/01/97 12.50 990,000 995,341
Premiere Technologies, Inc........................ 12/23/98 12.00 990,000 992,171
Quality Care Networks............................. 05/19/98 13.00 1,485,000 889,958
Radio Systems Corporation......................... 12/27/99 13.00 905,725 907,296
Retail Marketing Concepts, Inc.................... 08/01/98 12.50 990,000 993,173
SkillSearch Corporation........................... 02/05/98 13.00 496,000 497,741
Stewart Foods, Inc................................ 05/01/97 12.50 22,665 25,000
Summit Publishing Group, Inc...................... 03/17/99 12.00 1,485,000 1,487,500
Suncoast Medical Group, Inc....................... 09/14/99 13.50 485,000 486,000
TCOM Systems, Inc................................. 02/05/98 13.00 673,136 673,761
TermNet MerchantServices, Inc..................... 04/01/99 13.00 1,237,500 1,239,372
Tower Environmental, Inc.......................... 11/30/98 10.00 2,440,000 2,448,993
Treasure Coast Pizza Company...................... 07/29/98 12.00 841,500 844,056
Truckload ManagementServices, Inc................. 03/14/98 13.00 495,000 496,826
Unique Electronics, Inc........................... 11/29/99 10.70 600,000 600,000
WWR Technology, Inc............................... 11/01/97 13.00 524,700 527,072
Zahren Alternative Power Corp..................... 11/27/99 13.00 1,980,000 1,980,666
Zortec Holdings, Inc.............................. 05/01/97 8.00 495,000 397,659
Zortec Holdings, Inc.............................. 12/31/97 8.00 148,500 149,125
Zortec Holdings, Inc.............................. 03/31/98 8.00 148,500 149,050
----------- -----------
Total loans..................................... $74,181,081 $72,336,480
========== ==========
</TABLE>

The accompanying notes are an integral part of this schedule.

F-16
<PAGE> 79

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1994

<TABLE>
<CAPTION>
NUMBER OF
SHARES/PERCENTAGE COST OR
EQUITY INTERESTS OWNERSHIP CONTRIBUTED VALUE FAIR VALUE
- ---------------------------------------------------- ---------------- ----------------- ----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd.
Common Stock -- restricted........................ 208,698 $ 1,771,149 $ 547,832
Republic Automotive Parts, Inc.
Common Stock -- restricted........................ 25,500 -- 239,859
Concept Technologies Group, Inc.
Common Stock -- restricted........................ 20,808 5,300 49,159
PMT Services, Inc.
Common Stock -- restricted........................ 40,000 186,200 241,500
----------------- ----------
Subtotal.................................. 1,962,649 1,078,350
----------------- ----------
EQUITY INVESTMENTS IN PRIVATE COMPANIES
National Recovery Technologies, Inc.
Preferred Stock -- Series A....................... 20,000 -- --
Premiere Technologies, Inc.
Common Stock...................................... 8,000 100,400 168,000
American Retirement Corporation
Common Stock...................................... 35,076 77,000 128,923
Medical Associates of America, Inc.
Preferred Stock -- Series A....................... 67,667 500,000 250,000
Skillsearch Corporation
Common Stock...................................... 2,241 250,035 250,035
Potomac Group, Inc.
Preferred Stock -- Series A....................... 800,000 1,000,000 1,000,000
Kentucky Kingdom, Inc.
Common Stock...................................... 11,288 220,000 1,501,305
Behavioral Healthcare Corporation
Preferred Stock -- Series B....................... 25,000 175,000 175,000
Zortec Technologies, Inc.
Preferred Stock -- Series B....................... 5,000,000 -- --
Golf Corporation of America, Inc.
Common Stock...................................... 100,000 100,000 100,000
International Risk Control, Inc.
Preferred Stock -- Series A....................... 200,000 50,000 50,000
DentureCare, Inc.
Preferred Stock -- Series D....................... 49,342 300,000 300,000
Tower Environmental, Inc.
Common Stock...................................... 9,858 20,000 300,000
Unique Electronics, Inc.
Preferred Stock -- Series A....................... 1,000,000 1,000,000 1,000,000
Pipeliner Systems, Inc.
Preferred Stock -- Series D....................... 5,000 1,000,000 1,000,000
Front Royal, Inc.
Common Stock...................................... 110,000 275,000 275,000
----------------- ----------
Subtotal.................................. 5,067,435 6,498,263
----------------- ----------
Total Equity Interests.................... $ 7,030,084 $7,576,613
============= =========
</TABLE>

The accompanying notes are an integral part of this schedule.

F-17
<PAGE> 80

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1994

<TABLE>
<CAPTION>
NUMBER OF
SHARES/ COST OR
OWNERSHIP CONTRIBUTED
WARRANTS PERCENTAGE VALUE FAIR VALUE
- ------------------------------------------------------ ------------ ----------- -----------
<S> <C> <C> <C>
Affinity Fund, Inc.................................... 1,106 $ 20,000 $ 375,000
Alpha West Partners I, LP............................. 4 LP units 7,500 7,500
Ashe Industries, Inc.................................. 178 20,000 20,000
Associated Response Services, Inc..................... 316 14,000 400,000
Auto Rental Systems, Inc.............................. 128,772 7,500 285,000
BankCard Services Corporation......................... 115,000 3,000 3,000
Behavioral Healthcare Corporation..................... 67,730 -- --
BiTec Southeast, Inc.................................. 3,752 21,000 500,000
C.J. Spirits, Inc..................................... 180,000 7,500 --
Capital Network System, Inc........................... 168,874 20,000 20,000
CCS Technology Group.................................. 30,000 10,000 10,000
CellCall, Inc......................................... 26,500 10,000 500,000
Central Tennessee Broadcasting, Inc................... 272,433 34,000 400,000
CLS Corporation....................................... 126,997 -- 350,000
Clearidge, Inc........................................ 207,620 -- --
Continental Diamond Cutting Co........................ 112 -- --
Corporate Flight Management, Inc...................... 66,315 3,500 100,000
Cougar Power Products, Inc............................ 216 5,000 5,000
DentureCare, Inc...................................... 114,646 10,000 400,000
Earth Friendly Company................................ 19 10,000 10,000
Emerald Pointe Waterpark L.P.......................... 6% of LP 6,000 6,000
Freshnut Food, Inc.................................... 148,555 6,000 6,000
Front Royal, Inc...................................... 240,458 -- --
Fycon Technologies, Inc............................... 251,813 15,000 15,000
Gates Communication, L.P.............................. 47% of LP 10,000 10,000
Golf Corporation of America, Inc...................... 300,000 -- --
Gulfstream International Airlines, Inc................ 200 10,000 200,000
Healthfield, Inc...................................... 29,000 125,000 --
Hoveround Corporation................................. 1,512 5,000 200,000
Innotech, Inc......................................... 521,220 26,670 26,670
Intermed Healthcare Systems, Inc...................... 7,823 7,500 7,500
International Manufacturing and Trade, Inc............ 263 5,000 450,000
MBA Marketing Corporation............................. 25 18,000 300,000
Medical Associates of America, Inc.................... 40,000 15,000 --
Nationwide Engine Supply, Inc......................... 882,353 25,000 400,000
OCuTec Corp........................................... 3,881,711 13,584 13,584
One Stop Acquisitions, Inc............................ 742 18,000 500,000
Palco Telcom Service, Inc............................. 157,895 -- --
Pipeliner Systems, Inc................................ 1,920,000 20,000 20,000
Potomac Group, Inc.................................... 479,115 125,000 500,000
Premiere Technologies, Inc............................ 23,863 20,000 501,123
Quality Care Networks................................. 672,000 15,000 15,000
Radio Systems, Inc.................................... 48,650 94,275 94,275
Retail Marketing Concepts, Inc........................ 83 10,000 10,000
SkillSearch Corporation............................... 2,381 254,000 316,699
</TABLE>

F-18
<PAGE> 81

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1994

The accompanying notes are an integral part of this schedule.

F-19
<PAGE> 82

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc.............................. 06/29/98 12.50% $ 1,485,000 $ 1,494,932
Affinity Fund, Inc.............................. 03/10/00 14.00 1,000,000 1,000,000
Affinity Fund, Inc.............................. 12/28/98 12.50 495,000 495,083
Alpha West Partners I, L.P...................... 12/31/97 12.50 771,308 675,058
American Remedial Tech., Inc.................... 03/26/00 13.50 1,485,000 1,487,500
American Remedial Tech., Inc.................... 07/11/00 14.00 495,000 495,498
Amscot Holdings, Inc............................ 05/26/00 14.00 800,000 800,000
Amscot Holdings, Inc............................ 09/20/00 14.00 200,000 200,000
Ashe Industries, Inc............................ 12/28/97 12.50 990,000 646,178
Ashe Industries, Inc............................ 03/25/99 12.50 445,500 447,150
Ashe Industries, Inc............................ 05/18/99 12.50 544,500 546,340
Ashe Industries, Inc............................ 06/12/96 14.00 750,000 750,000
Ashe Industries, Inc............................ 06/12/96 14.00 285,546 285,546
Associated Response Services, Inc............... 06/20/99 12.50 1,386,000 1,390,427
Associated Response Services, Inc............... 02/15/00 12.50 335,000 335,000
Associated Response Services, Inc............... 01/06/00 12.50 300,000 300,000
Assured Power, Inc.............................. 10/01/00 13.50 700,000 700,000
B & N Company, Inc.............................. 08/08/00 12.50 2,970,000 2,972,500
BankCard Services Corporation................... 01/21/98 13.00 297,000 298,800
BiTec Southeast, Inc............................ 11/03/97 12.50 445,500 448,350
BiTec Southeast, Inc............................ 11/30/98 12.50 1,188,000 1,193,000
BiTec Southeast, Inc............................ 11/03/97 12.50 445,500 447,300
BiTec Southeast, Inc............................ 08/01/99 13.50 521,321 521,321
C.J. Spirits, Inc............................... 05/01/97 13.50 750,171 455,546
Capital Network System, Inc..................... 11/30/98 12.50 990,000 994,342
Capital Network System, Inc..................... 01/18/99 12.50 990,000 994,008
Cardiac Control Systems, Inc.................... 03/31/00 13.50 1,500,000 1,500,000
Carter Kaplan Holdings, L.L.C................... 06/22/00 14.00 594,000 594,300
CCS Technology Group, Inc....................... 05/01/97 13.00 990,000 997,288
CellCall, Inc................................... 11/04/97 12.75 990,000 996,345
CF Data Corp.................................... 03/16/00 13.75 1,732,500 1,735,420
Champion Glove Mfg. Co., Inc.................... 07/27/00 13.50 1,250,000 1,250,000
Clearidge, Inc.................................. 09/29/99 13.00 2,000,000 2,000,000
Clearidge, Inc.................................. 12/28/00 13.50 500,000 500,000
Colonial Investments, Inc....................... 10/16/00 13.75 800,000 800,000
Consumat Systems, Inc........................... 11/01/00 14.00 500,000 500,000
Consumer Credit Associates, Inc................. 12/06/00 13.50 2,000,000 2,000,000
Continental Diamond Cutting Co.................. 10/28/99 13.00 1,500,000 1,500,000
Continental Diamond Cutting Co.................. 12/28/99 13.00 200,000 200,000
Continental Diamond Cutting Co.................. 05/31/96 14.00 300,000 300,000
Corporate Flight Mgmt., Inc..................... 12/04/97 12.50 346,500 348,645
Cougar Power Products, Inc...................... 10/05/96 13.00 495,000 495,083
Cougar Power Products, Inc...................... 10/05/96 13.00 495,000 497,003
Cougar Power Products, Inc...................... 10/05/96 14.00 325,000 325,000
Dalcon International, Inc....................... 01/31/02 13.00 150,000 150,000
Dalcon International, Inc....................... 01/31/00 13.00 200,000 200,000
</TABLE>

F-20
<PAGE> 83

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dalt's, Inc..................................... 04/28/01 13.50% $ 2,000,000 $ 2,000,000
DentureCare, Inc................................ 07/29/99 11.50 990,000 993,006
DentureCare, Inc................................ 11/03/00 14.00 111,150 111,150
DentureCare, Inc................................ 08/31/00 14.00 800,000 800,000
Eastern Food Group LLC.......................... 08/30/00 8.00 500,000 500,000
Eastern Food Group LLC.......................... 12/20/00 8.00 200,000 200,000
Educational Medical, Inc........................ 03/31/00 14.00 2,200,000 2,200,000
Electronic Merchant Services.................... 02/27/00 13.50 1,237,500 1,239,788
Electronic Merchant Services.................... 12/31/95 14.00 242,450 242,450
Emerald Pointe Waterpark L.P.................... 04/29/99 12.50 594,000 596,000
Emerald Pointe Waterpark L.P.................... 03/09/00 13.50 400,000 400,000
Encore Orthopedics, Inc......................... 07/31/00 13.50 2,620,985 2,658,887
Express Shipping Centers, Inc................... 09/25/00 13.25 1,697,619 1,734,426
Factory Card Outlet of America Ltd.............. 11/15/00 12.50 3,670,917 3,682,317
Front Royal, Inc................................ 10/01/99 13.00 1,550,000 1,550,000
Front Royal, Inc................................ 12/27/99 13.00 675,000 675,000
Fycon Technologies, Inc......................... 05/16/00 10.00 350,000 350,000
Fycon Technologies, Inc......................... 08/30/00 14.00 1,000,000 1,000,000
Fycon Technologies, Inc......................... 12/17/00 14.00 100,000 100,000
Gates Communications, L.P....................... 12/31/98 12.50 990,000 994,175
Gitman and Company.............................. 12/31/00 14.00 1,700,000 1,700,000
Global Finance and Leasing, Inc................. 01/03/00 13.00 1,500,000 1,500,000
Gold Medal Products, Inc........................ 11/19/00 13.50 1,250,000 1,250,000
Golf Corporation of America, Inc................ 09/16/99 11.00 300,000 300,000
Golf Corporation of America, Inc................ 12/28/00 14.00 200,000 200,000
Golf Corporation of America, Inc................ 12/29/00 10.00 455,589 455,589
Gulfstream International Airlines Inc........... 07/29/99 13.00 1,490,000 1,494,509
Gulfstream International Airlines Inc........... 09/25/00 14.00 1,000,000 1,000,000
Horizon Medical Products, Inc................... 09/22/00 13.75 1,500,000 1,500,000
Hoveround Corporation........................... 06/11/98 13.00 495,000 497,368
Hoveround Corporation........................... 11/08/99 13.50 250,000 250,000
Hoveround Corporation........................... 03/08/00 14.00 250,000 250,000
Hunt Incorporated............................... 03/31/00 14.00 3,300,000 3,300,000
In-Store Services, Inc.......................... 04/19/00 14.00 1,188,000 1,189,800
Innotech, Inc................................... 03/22/99 13.00 1,980,000 1,987,326
Intermed Healthcare Systems, Inc................ 06/29/99 12.00 742,500 744,875
Intermed Healthcare Systems, Inc................ 02/10/00 14.00 375,000 375,000
International Manufacturing and Trade, Inc...... 04/27/99 13.00 495,000 496,743
International Manufacturing and Trade, Inc...... 12/01/99 13.00 400,000 400,000
International Manufacturing and Trade, Inc...... 06/09/00 14.00 500,000 500,000
International Manufacturing and Trade, Inc...... 07/25/00 14.00 250,000 250,000
International Manufacturing and Trade, Inc...... 11/10/00 14.00 100,000 100,000
Johnston County Cable L.P....................... 08/31/00 14.00 1,990,000 1,990,668
Kentucky Kingdom, Inc........................... 04/04/99 8.50 250,000 250,000
Kentucky Kingdom, Inc........................... 01/05/98 12.50 1,980,000 1,991,989
Kentucky Kingdom, Inc........................... 09/26/99 10.50 1,200,000 1,200,000
</TABLE>

F-21
<PAGE> 84

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kentucky Kingdom, Inc........................... 03/01/00 14.00% $ 835,000 $ 835,000
Kentucky Kingdom, Inc........................... 11/06/00 12.50 1,500,000 1,500,000
Kryptonics, Inc................................. 12/14/00 12.90 2,500,000 2,500,000
Lovett's Buffet, Inc............................ 04/01/00 13.00 2,250,000 2,250,000
MBA Marketing Corporation....................... 02/04/99 12.50 1,782,000 1,788,900
Medical Associates of America, Inc.............. 11/01/97 12.50 1,485,000 392,000
Money Transfer Systems, Inc..................... 07/24/00 14.00 247,500 247,752
Money Transfer Systems, Inc..................... 12/20/00 14.00 148,500 148,525
Moore Diversified Products, Inc................. 06/16/00 13.50 800,000 800,000
Moovies, Inc.................................... 04/18/00 13.50 1,485,000 1,487,250
Multimedia Learning, Inc........................ 05/08/00 14.00 1,500,000 1,500,000
Nationwide Engine Supply, Inc................... 01/12/99 12.00 2,475,000 2,485,008
Nelson Juvenile Products L.L.C.................. 10/31/00 14.00 2,000,000 2,000,000
NRI Service and Supply L.P...................... 02/13/00 14.00 2,475,000 2,479,587
OcuTec Corporation.............................. 06/21/99 10.00 1,000,000 1,000,000
OcuTec Corporation.............................. 06/21/00 10.00 350,000 350,000
OcuTec Corporation.............................. 10/16/00 10.00 100,000 100,000
OcuTec Corporation.............................. 12/04/01 10.00 351,500 351,500
Orchid Manufacturing Group, Inc................. 09/14/00 13.00 2,960,000 2,960,667
Orchid Manufacturing Group, Inc................. 12/28/00 13.50 1,000,000 1,000,000
Palco Telecom Service, Inc...................... 11/22/99 12.00 1,800,000 1,800,000
Patton Management Corporation................... 05/26/00 13.50 1,900,000 1,900,000
Pharmaceutical Research Assoc., Inc............. 08/10/00 13.50 1,980,000 1,981,665
Pipeliner Systems, Inc.......................... 09/30/98 13.00 980,000 989,324
Plymouth, Inc................................... 09/28/00 13.00 1,000,000 1,000,000
Precision Fixtures & Graphics, Inc.............. 07/31/10 6.50 1,100,000 889,976
Precision Fixtures & Graphics, Inc.............. 05/26/00 6.50 250,000 202,267
Precision Fixtures & Graphics, Inc.............. 11/07/00 6.50 200,000 161,814
Precision Fixtures & Graphics, Inc.............. 12/27/00 6.50 100,000 80,907
Precision Fixtures & Graphics, Inc.............. 07/10/00 6.50 135,000 109,224
Precision Fixtures & Graphics, Inc.............. 08/28/00 6.50 110,000 88,998
Precision Fixtures & Graphics, Inc.............. 12/12/00 6.50 200,000 161,814
Precision Panel Products, Inc................... 01/11/00 12.75 1,485,000 1,488,000
Premiere Technologies, Inc...................... 05/01/97 12.50 990,000 997,345
Premiere Technologies, Inc...................... 12/23/98 12.00 990,000 994,175
Pritchard Paint & Glass Co...................... 03/21/00 14.00 250,000 250,000
Quest Group International, Inc.................. 11/15/00 13.25 1,125,000 1,129,166
Radio Systems Corporation....................... 12/27/99 13.00 905,725 926,148
SkillSearch Corporation......................... 02/05/98 13.00 496,000 498,545
Summit Publishing Group, Inc.................... 03/17/99 12.00 1,485,000 1,490,500
Suncoast Medical Group, Inc..................... 09/14/99 13.50 485,000 489,498
Suncoast Medical Group, Inc..................... 06/07/00 14.00 495,000 495,083
TCOM Systems, Inc............................... 02/05/98 13.00 571,969 571,969
Tower Environmental, Inc........................ 11/30/98 10.00 2,440,000 2,201,990
</TABLE>

F-22
<PAGE> 85

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

The accompanying notes are an integral part of this schedule.

F-23
<PAGE> 86

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
NUMBER OF COST OR
SHARES/PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- ----------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd.
Common Stock....................................... 208,698 $ 1,771,149 $ 563,485
Concept Technologies Group, Inc. Common Stock --
restricted......................................... 23,408 5,300 30,723
Moovies Inc.
Common Stock....................................... 156,110 16,561 1,475,240
----------- -----------
Subtotal................................... 1,793,010 2,069,448
----------- -----------
EQUITY INVESTMENTS IN PRIVATE COMPANIES
National Recovery Technologies, Inc.
Preferred Stock -- Series A........................ 20,000 -- --
Premiere Technologies, Inc.
Common Stock....................................... 8,000 100,400 1,280,000
Medical Associates of America, Inc.
Preferred Stock -- Series A........................ 66,667 -- --
Viking Moorings Acquisition, L.L.C.
Membership interest in L.L.C....................... 6.50% 344,500 344,500
Nelson Juvenile Products, L.L.C.
Membership interest in L.L.C....................... 30.00% -- --
Skillsearch Corporation
Common Stock....................................... 2,241 250,035 250,035
Potomac Group, Inc.
Preferred Stock -- Series A........................ 800,000 1,000,000 1,232,966
Potomac Group, Inc.
Common Stock....................................... 240,000 60,000 370,504
Kentucky Kingdom, Inc.
Common Stock....................................... 11,671 258,300 1,539,603
Golf Corporation of America, Inc.
Common Stock....................................... 100,000 100,000 100,000
International Risk Control, Inc.
Preferred Stock -- Series A........................ 200,000 50,000 50,000
DentureCare, Inc.
Preferred Stock -- Series D........................ 49,342 300,000 300,000
Unique Electronics, Inc.
Preferred Stock -- Series A........................ 1,000,000 1,000,000 1,000,000
Pipeliner Systems, Inc.
Preferred Stock -- Series D........................ 5,000 1,000,000 1,000,000
Front Royal, Inc.
Common Stock....................................... 110,000 275,000 275,000
Ocutec Acquisition Corporation
Preferred Stock -- Series A........................ 1,539,867 1,539,867 1,539,867
Fycon Technologies, Inc.
Preferred Stock -- Series A........................ 800,000 800,000 800,000
Carter Kaplan Holdings, L.L.C.
Membership interest in LLC......................... 24.00% 6,100 6,100
</TABLE>

F-24
<PAGE> 87

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
NUMBER OF COST OR
SHARES/PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- ----------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Virginia Gas Company
Preferred Stock -- Series A........................ 2,000 $ 2,000,000 $ 2,000,000
Johnston County Cable, L.P.
Class A Interest in L.P............................ 11.11 100,000 100,000
Eastern Food Group, L.L.C.
Class B Preferred Stock............................ 7,500 754,444 754,444
Dalcon International, Inc.
Series B Preferred Stock........................... 850,000 850,000 490,000
Zahren Alternative Power Corporation
Common Stock....................................... 700 210,000 210,000
Zahren Alternative Power Corporation
Preferred Stock.................................... 200 200,000 200,000
----------- -----------
Subtotal................................... 11,198,646 13,843,020
----------- -----------
Total Equity Interests..................... $12,991,656 $15,912,467
========== ==========
</TABLE>

The accompanying notes are an integral part of this schedule.

F-25
<PAGE> 88

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES/UNITS OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc........................ 1,725 8.62% $ 20,000 $ 600,000
Alpha West Partners I, L.P................ 2 units 20.00 7,500 --
American Remedial Tech., Inc.............. 244,168 17.05 20,000 230,000
Amscot Holdings, Inc...................... 1,121 18.10 -- --
Ashe Industries, Inc...................... 216 16.52 20,000 --
Associated Responses Services, Inc........ 343 24.27 14,000 400,000
Assured Power, Inc........................ 234 11.94 -- --
Auto Rental Systems, Inc.................. 144,869 8.00 -- 285,000
B & N Company, Inc........................ 18 2.14 30,000 30,000
BankCard Services Corporation............. 138,000 24.00 3,000 --
BiTec Southeast, Inc...................... 938 10.00 21,000 100,000
C.J. Spirits, Inc......................... 180,000 10.00 7,500 --
CF Data Corp.............................. 257 20.45 17,500 17,500
Capital Network System, Inc............... 173,409 3.50 20,000 --
Cardiac Control Systems, Inc.............. 100,000 3.51 -- 153,127
CCS Technology Group, Inc................. 30,000 2.68 10,000 10,000
CellCall, Inc............................. 31,836 1.25 10,000 125,000
Champion Glove Mfg. Co., Inc.............. 538,614 5.87 -- --
CLS Corporation........................... 126,997 4.22 -- --
Clearidge, Inc............................ 367,026 7.91 -- --
Colonial Investments, Inc................. 194 18.00 -- --
Consumer Credit Associates, Inc........... 3,669 15.78 -- --
Continental Diamond Cutting Co............ 112 10.00 -- --
Corporate Flight Mgmt., Inc............... 66,315 10.00 3,500 100,000
Cougar Power Products, Inc................ 336 16.29 10,000 --
Dalcon International, Inc................. 250,000 20.00 -- --
Dalt's, Inc............................... 125 25.00 -- --
DentureCare, Inc.......................... 396,724 11.30 10,000 375,000
Electronic Merchant Services.............. 430 12.50 12,500 12,500
Eastern Food Group LLC.................... 17,647 15.00 -- --
Educational Medical, Inc.................. 85,000 8.00 -- --
Emerald Pointe Waterpark L.P.............. 10 units 10.00 6,000 250,000
Encore Orthopedics, Inc................... 291,550 4.92 379,015 379,015
Express Shipping Centers, Inc............. 73,752 5.10 552,402 552,402
Factory Card Outlet of America Ltd........ 23,658 2.50 329,083 329,083
Front Royal, Inc.......................... 240,458 3.58 -- 420,000
Fycon Technologies, Inc................... 58,677 15.00 -- --
Gates Communication, L.P.................. 47% of LP 47.00 10,000 10,000
Gitman Bros............................... 1,518 20.50 -- --
Global Finance and Leasing, Inc........... 5,000 25.00 -- --
Gold Medal Products, Inc.................. 90,000 30.00 -- --
Golf Corporation of America, Inc.......... 390,000 11.48 -- --
Gulfstream International Airlines Inc..... 260 21.00 10,000 --
Horizon Medical Products, Inc............. 9,486 8.25 -- --
Hoveround Corporation..................... 1,963 27.00 5,000 325,000
Hunt Incorporated......................... 309 11.09 -- 200,000
</TABLE>

F-26
<PAGE> 89

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995

<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES/UNITS OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Innotech, Inc............................. 521,220 4.00% $ 20,000 $ 300,000
In-Store Service, Inc..................... 429 12.50 12,000 12,000
Intermed Healthcare Systems, Inc.......... 11,884 10.50 7,500 --
International Manufacturing and Trade,
Inc..................................... 482 29.94 5,000 --
Johnston County Cable, L.P................ 27.5% of LP 27.50 10,000 10,000
Kryptonics, Inc........................... 1,255 9.00 -- --
Lovett's Buffet, Inc...................... 204,219 5.00 -- --
MBA Marketing Corporation................. 26 4.00 18,000 --
Money Transfer Systems, Inc............... 45 4.31 4,000 4,000
Moore Diversified Products, Inc........... 12 10.68 -- --
Multimedia Learning, Inc.................. 202 6.09 -- --
Nationwide Engine Supply, Inc............. 882,353 15.00 25,000 25,000
NRI Service and Supply, L.P............... 27.5% of LP 27.50 25,000 25,000
OcuTec Corp............................... 222,222 6.13 -- --
One Stop Acquisitions, Inc................ 794 24.40 -- 500,000
Orchid Manufacturing Group, Inc........... 1,719,047 4.50 40,000 540,000
Palco Telecom Services, Inc............... 157,895 5.00 -- --
Patton Management Corporation............. 12 10.00 -- 300,000
Pharmaceutical Research Assoc., Inc....... 150,114 7.82 20,000 20,000
Pipeliner Systems, Inc.................... 2,080,000 20.38 20,000 20,000
Plymouth, Inc............................. 92,647 15.00 -- --
Potomac Group, Inc........................ 239,115 1.85 125,000 368,530
Precision Fixtures & Graphics, Inc........ 132 5.00 -- --
Precision Panel Products, Inc............. 122 8.25 15,000 15,000
Premiere Technologies, Inc................ 23,863 2.08 20,000 3,820,000
Quest Group International, Inc............ 44,444 10.00 125,000 125,000
Radio Systems Corporation................. 129,734 7.27 94,275 330,000
SkillSearch Corporation................... 2,381 7.59 254,000 119,000
Summit Publishing Group, Inc.............. 6,296 24.50 15,000 15,000
Suncoast Medical Group, Inc............... 330,245 13.82 20,000 20,000
Suprex Corporation........................ 1,058,179 3.45 -- 7,500
Tower Environmental, Inc.................. 82 10.07 20,000 --
Trade Am International, Inc............... 335,106 6.00 -- --
Treasure Coast Pizza Company.............. 51 10.00 8,500 8,500
Valdawn, L.L.C............................ 2,658 21.00 26 26
Unique Electronics, Inc................... 55,732 20.00 -- --
Universal Marketing Corporation........... 111 10.00 -- --
Virginia Gas Company...................... 525 6.00 -- --
Zahren Alternative Power Corp............. 1,108 5.00 25,000 25,000
------------ ------------
Total Warrants.................. 2,456,301 11,513,183
------------ ------------
Total Investments............... $162,466,881 $172,280,167
=========== ===========
</TABLE>

The accompanying notes are an integral part of this schedule.

F-27
<PAGE> 90

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc......................... 06/29/98 12.50% $ 1,485,000 $ 1,495,682
Affinity Fund, Inc......................... 03/10/00 14.00 1,000,000 1,000,000
Affinity Fund, Inc......................... 12/28/98 12.50 495,000 495,332
Amscot Holdings, Inc....................... 05/26/00 14.00 800,000 800,000
Amscot Holdings, Inc....................... 09/20/00 14.00 200,000 200,000
Ashe Industries, Inc....................... 12/28/97 12.50 990,000 146,512
Ashe Industries, Inc....................... 03/25/99 12.50 445,500 197,300
Ashe Industries, Inc....................... 05/18/99 12.50 544,500 196,524
Ashe Industries, Inc....................... 06/12/96 14.00 750,000 100,000
Ashe Industries, Inc....................... 06/12/96 14.00 285,546 285,546
Associated Response Services, Inc.......... 06/20/99 12.50 1,386,000 1,391,126
Associated Response Services, Inc.......... 02/15/00 12.50 335,000 335,000
Associated Response Services, Inc.......... 01/06/00 12.50 300,000 300,000
Assured Power, Inc......................... 10/01/00 13.50 700,000 700,000
B & N Company, Inc......................... 08/08/00 12.50 2,970,000 2,974,000
B & N Company, Inc......................... 03/28/01 13.00 990,000 990,167
BankCard Services Corporation.............. 01/21/98 13.00 297,000 298,950
BiTec Southeast, Inc....................... 10/31/97 12.50 445,500 448,575
BiTec Southeast, Inc....................... 11/30/98 12.50 1,188,000 1,193,600
BiTec Southeast, Inc....................... 10/31/97 12.50 445,500 447,525
BiTec Southeast, Inc....................... 08/01/99 13.50 521,321 521,321
C.J. Spirits, Inc.......................... 05/01/97 13.50 750,171 455,796
Caldwell/VSR Inc........................... 02/28/01 4.00 1,500,000 1,500,000
Capital Network System, Inc................ 11/30/98 12.50 990,000 994,843
Capital Network System, Inc................ 01/18/99 12.50 990,000 994,509
Cardiac Control Systems, Inc............... 03/31/00 13.50 1,500,000 1,500,000
Carter Kaplan Holdings, L.L.C.............. 06/22/00 14.00 594,000 594,600
CCS Technology Group, Inc.................. 05/01/97 13.00 990,000 997,789
Cell Call, Inc............................. 11/04/97 12.75 990,000 996,846
CF Data Corp............................... 03/16/00 13.75 1,732,500 1,736,296
Champion Glove Manufacturing Co., Inc...... 07/27/00 13.50 1,250,000 1,250,000
Clearidge, Inc............................. 09/29/99 13.00 2,000,000 2,000,000
Clearidge, Inc............................. 12/28/00 13.50 500,000 500,000
Colonial Investments, Inc.................. 10/16/00 13.75 800,000 800,000
Consumat Systems, Inc...................... 11/01/00 14.00 500,000 500,000
Consumat Systems, Inc...................... 01/01/01 14.00 500,000 500,000
Consumat Systems, Inc...................... 03/11/01 14.00 500,000 500,000
Consumer Credit Associates, Inc............ 12/06/00 13.50 2,000,000 2,000,000
Consumer Credit Associates, Inc............ 03/28/01 13.50 1,000,000 1,000,000
Continental Diamond Cutting Co............. 10/28/99 13.00 1,500,000 1,500,000
Continental Diamond Cutting Co............. 12/28/99 13.00 200,000 200,000
Continental Diamond Cutting Co............. 05/31/96 14.00 200,000 200,000
Corporate Flight Mgmt, Inc................. 12/04/97 12.50 346,500 348,819
Cougar Power Products, Inc................. 10/05/96 13.00 495,000 372,169
Cougar Power Products, Inc................. 10/05/96 13.00 495,000 370,249
Cougar Power Products, Inc................. 10/05/96 14.00 325,000 325,000
Dalcon International, Inc.................. 01/31/02 13.00 150,000 150,000
Dalcon International, Inc.................. 01/31/00 13.00 200,000 200,000
Dalcon International, Inc.................. 05/15/96 13.00 45,000 45,000
</TABLE>

F-28
<PAGE> 91

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dalt's, Inc................................ 04/28/01 13.50% $ 2,000,000 $ 2,000,000
DentureCare, Inc........................... 07/29/99 11.50 990,000 993,507
DentureCare, Inc........................... 11/03/00 14.00 111,150 111,150
DentureCare, Inc........................... 08/31/00 14.00 800,000 800,000
DentureCare, Inc........................... 01/11/01 12.50 550,000 550,000
Eastern Food Group L.L.C................... 08/30/00 8.00 500,000 500,000
Eastern Food Group L.L.C................... 12/20/00 8.00 200,000 200,000
Eastern Food Group L.L.C................... 01/21/01 8.00 200,000 200,000
Eastern Food Group L.L.C................... 02/14/01 8.00 265,000 265,000
Educational Medical Inc.................... 03/31/00 14.00 2,200,000 2,200,000
Electronic Merchant Services............... 02/27/00 13.50 1,237,500 1,040,204
Electronic Merchant Services............... 02/29/96 14.00 272,450 272,450
Electronic Merchant Services............... 02/29/96 14.00 134,000 134,000
Emerald Pointe Waterpark, L.P.............. 04/29/99 12.50 594,000 596,300
Emerald Pointe Waterpark, L.P.............. 03/09/00 13.50 400,000 400,000
Encore Orthopedics, Inc.................... 07/31/00 13.50 2,620,985 2,677,838
Encore Orthopedics, Inc.................... 02/28/01 13.00 1,667,680 1,678,758
Express Shipping Centers, Inc.............. 09/22/00 13.25 1,697,598 1,762,047
Factory Card Outlet of America Ltd......... 11/15/00 12.50 3,670,917 3,698,772
Front Royal, Inc........................... 10/01/99 13.00 1,550,000 1,550,000
Front Royal, Inc........................... 12/27/99 13.00 675,000 675,000
Fycon Technologies, Inc.................... 05/16/00 10.00 450,000 450,000
Fycon Technologies, Inc.................... 08/30/00 14.00 1,000,000 800,000
Fycon Technologies, Inc.................... 12/17/00 14.00 100,000 100,000
Gardner Wallcovering, Inc.................. 03/28/01 13.50 1,485,000 1,485,250
Gates Communications, L.P.................. 12/31/98 12.50 990,000 994,676
Gitman and Company......................... 12/31/00 14.00 1,700,000 1,700,000
Global Finance and Leasing, Inc............ 01/03/00 13.00 1,500,000 1,500,000
Gold Medal Products, Inc................... 11/19/00 13.50 1,250,000 1,250,000
Gold Medal Products, Inc................... 02/15/01 13.00 25,000 25,000
Golf Corporation of America, Inc........... 09/16/99 11.00 300,000 300,000
Golf Corporation of America, Inc........... 12/28/00 14.00 200,000 200,000
Golf Corporation of America, Inc........... 12/29/00 10.00 455,589 455,589
Golf Video, Inc............................ 03/27/01 14.00 250,000 250,000
Gulfstream International Airlines, Inc..... 07/29/99 13.00 1,490,000 1,495,010
Gulfstream International Airlines, Inc..... 09/25/00 14.00 1,000,000 1,000,000
Horizon Medical Products, Inc.............. 09/22/00 13.75 1,500,000 1,500,000
Hoveround Corporation...................... 06/11/98 13.00 495,000 497,617
Hoveround Corporation...................... 11/08/99 13.50 250,000 250,000
Hoveround Corporation...................... 03/08/00 14.00 250,000 250,000
HSA International.......................... 01/04/01 14.00 1,485,000 1,485,750
Hunt Incorporated.......................... 03/31/00 14.00 3,300,000 3,300,000
I.S. Acquisition, LLC...................... 04/01/01 14.00 2,000,000 2,000,000
In Store Services, Inc..................... 04/19/00 14.00 1,188,000 1,190,400
Innotech, Inc.............................. 03/22/99 13.00 1,980,000 1,988,325
Intermed Healthcare Systems, Inc........... 06/29/99 12.00 742,500 745,250
Intermed Healthcare Systems, Inc........... 02/10/00 14.00 375,000 375,000
Johnston County Cable L.P.................. 08/31/00 14.00 1,990,000 1,991,169
Kentucky Kingdom, Inc...................... 04/04/99 8.75 250,000 250,000
</TABLE>

F-29
<PAGE> 92

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kentucky Kingdom, Inc...................... 01/05/98 12.50% $ 1,980,000 $ 1,992,988
Kentucky Kingdom, Inc...................... 09/26/99 10.50 1,200,000 1,200,000
Kentucky Kingdom, Inc...................... 03/01/00 14.00 835,000 835,000
Kentucky Kingdom, Inc...................... 11/06/00 12.50 1,500,000 1,500,000
Kentucky Kingdom, Inc...................... 09/15/96 14.00 2,000,000 2,000,000
Kryptonics, Inc............................ 12/14/00 12.90 2,500,000 2,500,000
Lovett's Buffet, Inc....................... 04/01/00 13.00 2,250,000 2,250,000
MBA Marketing Corporation.................. 02/04/99 12.50 1,782,000 1,789,800
Medical Associates of America, Inc......... 11/01/97 12.50 385,000 392,000
Midbrook Group, Inc........................ 02/28/01 13.50 3,600,000 3,613,334
Money Transfer Systems, Inc................ 07/24/00 14.00 247,500 247,878
Money Transfer Systems, Inc................ 12/20/00 14.00 148,500 148,600
Money Transfer Systems, Inc................ 03/01/01 14.00 148,500 148,525
Moore Diversified Products, Inc............ 06/16/00 13.50 800,000 800,000
Moovies Inc................................ 04/18/00 13.50 1,485,000 1,488,000
Moovies Inc................................ 01/04/01 13.00 1,980,000 1,980,999
Multicom Publishing, Inc................... 03/29/01 13.00 2,200,000 2,213,333
Multimedia Learning, Inc................... 05/08/00 14.00 1,500,000 1,500,000
Nationwide Engine Supply L.P............... 01/12/99 12.00 2,475,000 2,486,259
Nelson Juvenile Products L.L.C............. 10/31/00 14.00 2,000,000 2,000,000
Novavision Inc............................. 06/21/99 10.00 1,000,000 1,000,000
Novavision Inc............................. 06/21/00 10.00 350,000 350,000
Novavision Inc............................. 10/16/00 10.00 100,000 100,000
Novavision Inc............................. 12/04/01 10.00 386,500 386,500
NRI Service and Supply L.P................. 02/13/00 14.00 2,475,000 2,480,838
Orchid Manufacturing Group, Inc............ 09/14/00 13.00 2,960,000 2,962,668
Orchid Manufacturing Group, Inc............ 12/28/00 13.50 1,000,000 1,000,000
PFIC Corporation........................... 02/28/01 13.00 1,000,000 1,000,000
Palco Telecom Service, Inc................. 11/22/99 12.00 1,300,000 1,300,000
Patton Management Corporation.............. 05/26/00 13.50 1,900,000 1,900,000
Pharmaceutical Research Assoc., Inc........ 08/10/00 13.50 1,980,000 1,982,664
Pipeliner Systems, Inc..................... 09/30/98 13.00 980,000 990,323
P. A. Plymouth Inc......................... 09/28/00 13.00 1,000,000 1,000,000
Precision Fixtures & Graphics, Inc......... 07/31/10 7.76 1,100,000 700,000
Precision Fixtures & Graphics, Inc......... 05/26/00 7.76 250,000 250,000
Precision Fixtures & Graphics, Inc......... 11/07/00 7.76 200,000 200,000
Precision Fixtures & Graphics, Inc......... 12/27/00 7.76 100,000 100,000
Precision Fixtures & Graphics, Inc......... 07/10/00 7.76 135,000 135,000
Precision Fixtures & Graphics, Inc......... 08/28/00 7.76 110,000 110,000
Precision Fixtures & Graphics, Inc......... 12/12/00 7.76 200,000 200,000
Precision Fixtures & Graphics, Inc......... 01/28/01 7.76 200,000 200,000
Precision Fixtures & Graphics, Inc......... 02/15/01 7.76 100,000 100,000
Precision Fixtures & Graphics, Inc......... 02/19/01 7.76 100,000 100,000
Precision Fixtures & Graphics, Inc......... 03/07/01 7.76 100,000 100,000
Precision Panel Products, Inc.............. 01/11/00 12.75 1,485,000 1,488,750
Pritchard Paint & Glass Co................. 02/14/01 14.00 1,100,000 1,100,000
Quest Group International, Inc............. 11/15/00 13.25 1,125,000 1,135,415
Radio Systems Corporation.................. 12/27/99 13.00 905,725 930,861
SkillSearch Corporation.................... 02/05/98 13.00 496,000 498,746
</TABLE>

F-30
<PAGE> 93

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Southern Specialty Group................... 06/30/01 14.00% $ 1,732,500 $ 1,733,376
Summit Publishing Group, Inc............... 03/17/99 12.00 1,485,000 1,491,250
Suncoast Medical Group, Inc................ 09/14/99 13.50 485,000 490,248
Suncoast Medical Group, Inc................ 06/07/00 14.00 495,000 495,332
Suncoast Medical Group, Inc................ 02/23/01 14.00 495,000 495,166
TCOM Systems, Inc.......................... 02/05/98 13.00 546,853 546,853
Tower Environmental, Inc................... 11/30/98 10.00 2,440,000 2,451,990
Tower Environmental, Inc................... 05/30/95 12.50 150,000 150,000
Trade Am International, Inc................ 09/30/00 12.75 4,000,000 4,000,000
Treasury Coast Pizza Company............... 07/29/98 12.00 841,500 846,186
Urethane Technologies, Inc................. 03/16/01 13.50 1,636,520 1,642,578
Unique Electronics, Inc.................... 11/30/99 10.70 600,000 600,000
Universal Marketing Corporation............ 01/31/00 13.50 500,000 500,000
Valdawn L.L.C.............................. 04/13/00 13.50 2,399,974 2,400,000
Viking Moorings Acquisition, LLC........... 12/15/00 13.00 1,655,500 1,678,468
Voice FX................................... 01/23/01 13.50 2,324,000 2,332,799
WWR Technology, Inc........................ 11/01/97 13.50 524,700 528,392
Zahren Alternative Power Corp.............. 01/30/00 13.00 495,000 495,328
Zahren Alternative Power Corp.............. 11/27/99 13.00 1,980,000 1,986,696
------------ ------------
Total Loans.............................. $169,895,679 $166,936,281
=========== ===========
</TABLE>

F-31
<PAGE> 94

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
NUMBER OF
SHARES/ COST OR
PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------------------ --------------- ----------- -----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd.
Common Stock........................................ 208,698 $ 1,771,149 $ 563,485
Concept Technologies Group, Inc.
Common Stock -- restricted.......................... 23,408 5,300 22,792
Moovies Inc.
Common Stock........................................ 156,110 16,561 1,529,878
Premiere Technologies, Inc.
Common Stock........................................ 378,360 0 6,157,809
----------- -----------
Subtotal............................................ 1,793,010 8,273,964
----------- -----------
EQUITY INVESTMENTS IN PRIVATE COMPANIES
National Recovery Technologies, Inc.
Preferred Stock -- Series A......................... 20,000 0 0
Medical Associates of America Preferred
Stock -- Series A................................... 66,667 0 0
Skillsearch Corporation Common Stock.................. 2,241 250,035 250,035
Potomac Group Preferred Stock -- Series A............. 800,000 1,000,000 2,000,000
Potomac Group Common Stock............................ 254,115 63,529 635,288
Kentucky Kingdom Inc. Common Stock.................... 13,260 258,316 1,539,620
Golf Corporation of America Common Stock.............. 100,000 100,000 100,000
International Risk Control, Inc. Preferred
Stock -- Series A................................... 200,000 50,000 50,000
DentureCare Inc. Preferred Stock -- Series D.......... 49,342 300,000 300,000
Unique Electronics, Inc. Preferred Stock -- Series
A................................................... 1,000,000 1,000,000 1,000,000
Pipeliners Systems, Inc. Preferred Stock -- Series
D................................................... 5,000 1,000,000 1,000,000
Front Royal Inc. Common Stock......................... 110,000 275,000 275,000
Ocutec Aquisition Corporation Preferred
Stock -- Series A................................... 1,539,867 1,539,867 1,539,867
Fycon Technologies Inc. Preferred Stock -- Series A... 800,000 800,000 500,000
Carter Kaplan Holdings L.L.C. Membership interest in
LLC................................................. 24.00% 6,100 6,100
Virginia Gas Company Preferred Stock- Series A........ 2,000 2,000,000 2,000,000
Johnston County Cable L.P. Class A Interest in L.P.... 11.11% of L.P. 100,000 100,000
Eastern Food Group L.L.C. Class B Preferred Units..... 7,500 754,444 654,444
Dalcon International Inc. Series B Preferred Stock.... 850,000 850,000 490,000
Zahren Alternative Power Corporation Common Stock..... 700 210,000 210,000
Zahren Alternative Power Corporation Preferred
Stock............................................... 200 200,000 200,000
Viking Moorings Acquisition, L.L.C. Membership
interest in LLC..................................... 6.50% 344,500 344,500
Electronic Merchant Services Series B Preferred
Stock............................................... 163 0 0
Nelson Juvenile Products L.L.C. Membership interest in
LP.................................................. 30.00% 0 0
Pharmaceutical Research Associates Inc. Class F
Preferred Stock..................................... 29,195 190,000 190,000
Caldwell/VSR Inc. Preferred Stock..................... 890 890,000 890,000
----------- -----------
Subtotal............................................ 12,181,791 14,274,854
----------- -----------
Total Equity Interests.............................. $13,974,801 $22,548,818
========== ==========
</TABLE>

F-32
<PAGE> 95

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES/UNITS OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc........................ 1,725 8.62% $ 20,000 $ 600,000
Amscot Holdings, Inc...................... 1,121 17.50 0 0
Ashe Industries, Inc...................... 216 16.52 20,000 0
Associated Response Services, Inc......... 343 34.30 14,000 1,000,000
Assured Power, Inc........................ 374 16.00 0 0
Auto Rental Systems, Inc.................. 144,869 8.00 0 285,000
B & N Company, Inc........................ 33 4.00 40,000 40,000
BankCard Services Corporation............. 149,261 28.00 3,000 0
BiTec Southeast, Inc...................... 938 10.00 21,000 100,000
C.J. Spirits, Inc......................... 180,000 10.00 7,500 0
CF Data Corp.............................. 257 20.50 17,500 17,500
Caldwell/VSR Inc.......................... 159 15.93 0 0
Capital Network System Inc................ 173,409 3.50 20,000 250,000
Cardiac Control Systems, Inc.............. 100,000 2.90 0 150,000
CCS Technology Group, Inc................. 30,000 2.00 10,000 10,000
CellCall, Inc............................. 332 1.23 10,000 125,000
Champion Glove Mfg. Co., Inc.............. 538,614 6.88 0 0
CLS Corporation........................... 126,997 4.90 0 0
Clearidge, Inc............................ 449,039 7.90 0 0
Colonial Investments...................... 194 18.00 0 0
Consumat Systems, Inc..................... 250,000 20.00 0 0
Consumer Credit Associates, Inc........... 3,669 15.50 0 0
Continental Diamond Cutting Co............ 112 12.22 0 0
Corporate Flight Mgmt., Inc............... 66,315 10.00 3,500 100,000
Cougar Power Products, Inc................ 336 22.61 10,000 0
Dalcon International, Inc................. 250,000 20.00 0 0
Dalt's, Inc............................... 125 25.00 0 0
DentureCare, Inc.......................... 546,545 12.65 10,000 375,000
Electronic Merchant Services.............. 430 12.50 12,500 12,500
Eastern Food Group L.L.C.................. 17,647 15.00 0 0
Educational Medical, Inc.................. 85,000 8.00 0 400,000
Emerald Pointe Waterpark L.P.............. 10% of LP 10.00 6,000 250,000
Encore Orthopedics, Inc................... 466,455 7.36 711,335 711,335
Express Shipping Centers, Inc............. 73,752 3.00 552,402 552,402
Factory Card Outlet of America Ltd........ 23,658 2.50 329,083 500,000
Front Royal, Inc.......................... 240,458 3.59 0 420,000
Fycon Technologies, Inc................... 58,677 15.00 0 0
FX Direct................................. 233,112 8.00 176,000 176,000
Gardner Wallcovering, Inc................. 2 2.00 15,000 15,000
Gates Communication, L.P.................. 47% of LP 47.00 10,000 10,000
Global Finance and Leasing, Inc........... 5,000 25.00 0 0
Gold Medal Products, Inc.................. 90,000 30.00 0 0
Golf Corporation of America, Inc.......... 300,000 31.50 0 0
Golf Video, Inc........................... 98 49.50 0 0
Gulfstream International Airlines, Inc.... 271 21.00 10,000 0
</TABLE>

F-33
<PAGE> 96

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES/UNITS OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Horizon Medical Products, Inc............. 9,486 8.25% $ 0 $ 0
Hoveround Corporation..................... 1,963 27.00 5,000 325,000
HSA International......................... 100,999 12.00 15,000 15,000
Hunt Incorporated......................... 309 10.00 0 200,000
I. Schneid Holdings LLC................... 11% of LLC 11.00 0 0
Innotech, Inc............................. 65,995 3.79 20,000 268,100
In Store Services, Inc.................... 429 12.50 12,000 12,000
Intermed Healthcare Systems, Inc.......... 11,884 10.25 7,500 0
Johnston County Cable, L.P................ 27.5% of LP 27.50 10,000 10,000
Kryptonics, Inc........................... 1,255 9.00 0 0
Lovett's Buffet, Inc...................... 204,219 5.00 0 0
MBA Marketing Corporation................. 28 4.29 18,000 0
Midbrook Group Inc........................ 7.40% 7.40 400,000 400,000
Money Transfer Systems, Inc............... 45 4.00 5,500 5,500
Moore Diversified Products, Inc........... 12 11.00 0 0
Moovies, Inc.............................. 20,000 0.20 20,000 20,000
Multicom Publishing, Inc.................. 335,423 6.00 800,000 800,000
Multimedia Learning, Inc.................. 202 6.00 0 0
Nationwide Engine Supply, Inc............. 952,381 16.19 25,000 25,000
NRI Service and Supply L.P................ 27.5% of LP 27.50 25,000 25,000
Novavision, Inc........................... 222,222 10.00 0 0
One Stop Acquisitions, Inc................ 794 24.40 0 500,000
Orchid Manufacturing Group, Inc........... 1,719,047 4.50 40,000 540,000
PFIC Corporation.......................... 5,917 6.00 0 0
Palco Telecom Services, Inc............... 157,895 5.00 0 0
Patton Management Corporation............. 426 10.00 0 300,000
Pharmaceutical Research Associates,
Inc..................................... 259,848 6.00 20,000 20,000
Pipeliner Systems, Inc.................... 2,080,000 20.55 20,000 20,000
Plymouth.................................. 92,647 15.00 0 0
Potomac Group, Inc........................ 225,000 1.90 125,000 562,500
Precision Fixtures & Graphics Inc......... 132 5.00 0 0
Precision Panel Products, Inc............. 122 8.25 15,000 15,000
Pritchard Paint & Glass................... 12,500 25.00 0 0
Quest Group International, Inc............ 44,444 10.00 125,000 125,000
Radio Systems Corporation................. 129,734 7.27 94,275 330,000
SkillSearch Corporation................... 2,381 7.20 254,000 119,000
Southern Specialty Brands, Inc............ 10,000 10.00 17,500 17,500
Summit Publishing Group, Inc.............. 6,296 24.50 15,000 15,000
Suncoast Medical Group, Inc............... 580,159 23.00 25,000 25,000
Suprex Corporation........................ 1,058,179 3.45 0 7,500
The Ryland Co............................. 1,518 20.50 0 0
Tower Environmental, Inc.................. 82 10.07 20,000 0
Trade Am International, Inc............... 335,106 6.00 0 0
Treasure Coast Pizza Company.............. 51 10.00 8,500 8,500
Valdawn L.L.C............................. 2,658 21.00 26 26
</TABLE>

F-34
<PAGE> 97

SIRROM CAPITAL CORPORATION

PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)

F-35
<PAGE> 98

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Harris Williams & Co. and Subsidiary:

We have audited the accompanying consolidated balance sheets of HARRIS
WILLIAMS & CO. AND SUBSIDIARY (a Virginia "S" corporation) as of December 31,
1994 and 1995, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31, 1993, 1994
and 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Harris Williams & Co. and
subsidiary as of December 31, 1994 and 1995, and the results of their operations
and cash flows for the years ended December 31, 1993, 1994 and 1995 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Nashville, Tennessee
May 10, 1996

F-36
<PAGE> 99

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1994 1995 1996
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $738,851 $737,682 $1,782,594
Accounts receivable......................................... 20,352 61,023 137,423
Prepaid expenses............................................ 7,735 11,287 10,347
-------- -------- ----------
Total current assets................................ 766,938 809,992 1,930,364
-------- -------- ----------
FURNITURE AND EQUIPMENT, at cost.............................. 88,742 108,637 109,611
Less accumulated depreciation............................... (16,283) (36,216) (41,697)
-------- -------- ----------
Net furniture and equipment......................... 72,459 72,421 67,914
-------- -------- ----------
OTHER ASSETS.................................................. 6,025 2,115 2,115
-------- -------- ----------
$845,422 $884,528 $2,000,393
======== ======== =========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities.................... $ 10,920 $ 44,418 $ 364,859
-------- -------- ----------
Total current liabilities........................... 10,920 44,418 364,859
-------- -------- ----------
MINORITY INTEREST............................................. 488,801 451,161 610,262
-------- -------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 5,000 shares authorized, 100 shares
issued and outstanding................................... 60,783 60,783 60,783
Retained earnings........................................... 284,918 328,166 964,489
-------- -------- ----------
345,701 388,949 1,025,272
-------- -------- ----------
$845,422 $884,528 $2,000,393
======== ======== =========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-37
<PAGE> 100

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------- -------------------------
1993 1994 1995 1995 1996
-------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Fee income........................... $498,543 $1,553,862 $2,257,496 $ 523,315 $ 1,277,597
Expense reimbursements............... 70,683 128,089 320,345 121,923 113,903
-------- ---------- ---------- ----------- -----------
569,226 1,681,951 2,577,841 645,238 1,391,500
-------- ---------- ---------- ----------- -----------
EXPENSES:
Salaries and benefits................ 206,607 884,396 1,314,723 318,526 498,402
Operating expenses................... 156,383 255,597 530,052 137,262 114,822
-------- ---------- ---------- ----------- -----------
362,990 1,139,993 1,844,775 455,788 613,224
-------- ---------- ---------- ----------- -----------
Operating income............. 206,236 541,958 733,066 189,450 778,276
-------- ---------- ---------- ----------- -----------
INTEREST INCOME AND OTHER.............. 931 10,909 78,544 4,385 17,142
-------- ---------- ---------- ----------- -----------
INCOME BEFORE MINORITY INTEREST........ 207,167 552,867 811,610 193,835 795,418
MINORITY INTEREST...................... -- (25,468) (162,361) (38,767) (159,095)
-------- ---------- ---------- ----------- -----------
NET INCOME............................. $207,167 $ 527,399 $ 649,249 $ 155,068 $ 636,323
======== ========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-38
<PAGE> 101

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
---------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------- --------- ----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993............................... 100 $60,783 $ 43,102 $ 103,885
Net income........................................... -- -- 207,167 207,167
Distributions to stockholders........................ -- -- (175,350) (175,350)
------ ------- --------- ----------
BALANCE, DECEMBER 31, 1993............................. 100 60,783 74,919 135,702
Net income........................................... -- -- 527,399 527,399
Distributions to stockholders........................ -- -- (317,400) (317,400)
------ ------- --------- ----------
BALANCE, DECEMBER 31, 1994............................. 100 60,783 284,918 345,701
Net income........................................... -- -- 649,249 649,249
Distributions to stockholders........................ -- -- (606,001) (606,001)
------ ------- --------- ----------
BALANCE, DECEMBER 31, 1995............................. 100 60,783 328,166 388,949
Net income, (unaudited).............................. -- -- 636,323 636,323
------ ------- --------- ----------
BALANCE, MARCH 31, 1996, (unaudited)................... 100 $60,783 $ 964,489 $1,025,272
===== ======= ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-39
<PAGE> 102

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income....................... $ 207,167 $ 527,399 $ 649,249 $ 155,068 $ 636,323
Adjustments to reconcile consolidated net
income to net cash provided (used) by
operating activities:
Depreciation................................ 3,194 9,671 20,613 4,983 5,440
Minority interest in net income of
consolidated
subsidiary................................ -- 25,468 162,361 38,767 159,095
Increase in accounts receivable............. -- (4,989) (40,671) (508,124) (76,400)
(Increase) decrease in prepaid expenses..... (6,653) (5,785) (3,552) 567 940
(Increase) decrease in other assets......... (501) (5,287) 3,230 -- --
Increase (decrease) in accounts payable and
accrued liabilities....................... (760) 9,162 33,499 265,050 320,489
--------- --------- --------- ----------- -----------
Net cash provided (used) by operating
activities........................... 202,447 555,639 824,729 (43,689) 1,045,887
--------- --------- --------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment........... (8,452) (67,255) (19,898) (1,326) (975)
--------- --------- --------- ----------- -----------
Net cash used by investing
activities........................... (8,452) (67,255) (19,898) (1,326) (975)
--------- --------- --------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from minority interest........... -- 500,000 -- -- --
Distributions to stockholders and minority
interest.................................... (175,350) (354,087) (806,000) -- --
--------- --------- --------- ----------- -----------
Net cash provided (used) by financing
activities........................... (175,350) 145,913 (806,000) -- --
--------- --------- --------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 18,645 634,297 (1,169) (45,015) 1,044,912
CASH AND CASH EQUIVALENTS, at beginning of
year.......................................... 85,909 104,554 738,851 738,851 737,682
--------- --------- --------- ----------- -----------
CASH AND CASH EQUIVALENTS, at end of year....... $ 104,554 $ 738,851 $ 737,682 $ 693,836 $1,782,594
========== ========== ========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-40
<PAGE> 103

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Harris Williams & Co. (the "Company") was incorporated in 1991 under the
laws of Virginia as a Subchapter S corporation and has a majority-owned
subsidiary, Harris Williams & Co., L.P. (a Virginia limited partnership), (the
"Partnership"), which was formed in August 1994. The Partnership was formed in
August 1994 at which time the Company began conducting all operations through
the Partnership and its activity was limited to the investment in the
Partnership. (See Note 3).

The Company provides merger and acquisition advisory services primarily to
small businesses. Engagement contracts provide for a monthly retainer,
reimbursement of direct expenses and a success fee upon closing of a
transaction.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The Partnership's assets, liabilities and earnings are consolidated with
those of the Company and the limited partner's interest in the Partnership is
included in the Company's financial statements as minority interest. Income from
the Partnership has been allocated to the partners in proportion to their
ownership interests.

Cash and Cash Equivalents

All highly liquid investments with a maturity of three months or less are
classified as cash equivalents.

Fair Value of Financial Instruments

In accordance with the requirements of Statement of Financial Accounting
Standards No. 107 "Disclosures About Fair Value of Financial Instruments," the
Partnership calculates the fair value of financial instruments using quoted or
estimated market prices. At December 31, 1995, there were no material
differences in the book values of the Partnership's financial instruments and
their related fair values.

Furniture and Equipment

Furniture and equipment are carried at cost. Depreciation is provided using
a straight line method over the estimated useful lives of the related assets
which approximate five years.

Revenue Recognition

Advisory services are typically provided by the Company in accordance with
engagement contracts that stipulate a monthly retainer, reimbursement of direct
expenses and transaction closing fees. Retainer fees are recognized ratably over
the retainer period, expense reimbursements are billed and recognized monthly
and success fees are recognized at the time of transaction closing.

Income Taxes

The Company has elected, under Subchapter S of the Internal Revenue Code,
to have its income taxed directly to the stockholders. Under this election, each
stockholder is responsible for including their share of the taxable income of
the Company in their individual federal income tax returns.

Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-41
<PAGE> 104

HARRIS WILLIAMS & CO.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENT IN PARTNERSHIP

In August 1994, the Company contributed approximately $285,000 in cash and
assets to the Partnership in exchange for an 80% general partner interest in the
Partnership. A third party investor contributed $500,000 in cash to the
Partnership in exchange for a 20% limited partnership interest. The Company
began conducting all business activity through the Partnership immediately upon
receiving its general partnership interest. Income for tax purposes and
distributions are made to each partner at amounts defined in the Partnership
agreements.

4. CONCENTRATION OF CREDIT

The Company's financial instruments subject to credit risk are primarily
cash and cash equivalents and accounts receivable. As of December 31, 1995, the
Partnership had $300,741 invested in one money market mutual fund and $300,000
in commercial paper. Generally, the Company does not require collateral or other
security to support customer receivables. As of December 31, 1995, the Company
had no significant concentrations of credit risk with respect to accounts
receivable.

5. COMMITMENTS AND CONTINGENCIES

Lease Agreement

The Company has a lease agreement for office space. Rental commitments
payable by the Company for this noncancelable operating lease are as follows:
1996 -- $51,183; 1997 -- $53,854; and 1998 -- $18,185. Total rental expense
approximated $11,000, $17,000 and $42,000 for the years ended December 31, 1993,
1994 and 1995, respectively.

Engagement Contracts

Under the terms of most client contracts, there are both fixed and
contingent fees. The fees include a retainer and reimbursement for certain
out-of-pocket expenses; however, success fees are usually contingent upon
completing a transaction.

6. STOCK OPTION PLAN

During 1993, the Company adopted a stock option plan which permits the
issuance of options to purchase the Company's common stock to selected
employees. The Plan reserves 11 shares of common stock for grant. Under the
terms of the Plan, the options' exercise price may not be less than the fair
market value of a share of common stock on the date of the grant. During
December 1993 and 1994, the Company granted options to two, non-owner employees
which become exercisable at various times specified in the option agreements or
upon a change in control of the Company. The options allow the holders to
purchase shares totaling 5.434 and 3.261 of common stock at exercise prices of
$971 per share and $2,676 per share, respectively.

As options are exercised, the Company's ownership interest in the
Partnership increases, as defined in the Partnership agreement, up to 81%.

7. SUBSEQUENT EVENT

In April 1996, the Company entered into a letter of intent with Sirrom
Capital Corporation ("Sirrom"), a Nashville based specialty finance company,
whereby 100% of its common stock would be exchanged for common stock of Sirrom.
Simultaneous with this transaction, Sirrom will also acquire the limited
partnership interest in the Partnership not owned by the Company. Consummation
of this transaction is subject to a number of conditions including, approval by
Sirrom shareholders, receipt of various regulatory approvals and the
availability of pooling of interests accounting treatment.

F-42
<PAGE> 105

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER AT ANY TIME IMPLIES THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 9
Additional Information................ 9
Risk Factors.......................... 10
Use of Proceeds....................... 14
Distributions and Price Range of
Common Stock........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 21
Investment Objectives and Policies.... 35
Portfolio Companies................... 37
Principal Shareholders................ 46
Management............................ 47
Certain Transactions.................. 52
Determination of Net Asset Value...... 53
Reinvestment Plan..................... 54
Tax Status............................ 55
Description of Capital Stock.......... 57
Regulation............................ 59
Shares Eligible for Future Sale....... 60
Underwriting.......................... 61
Legal Matters......................... 62
Custodian, Transfer and Dividend
Paying Agent and Registrar.......... 62
Reports to Shareholders............... 62
Independent Public Accountants........ 62
Index to Financial Statements......... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,000,000 SHARES

SIRROM CAPITAL
CORPORATION

COMMON STOCK
-------------------------

PROSPECTUS
-------------------------
THE ROBINSON-HUMPHREY
COMPANY, INC.

J.C. BRADFORD & CO.

EQUITABLE SECURITIES
CORPORATION
June 17, 1996
- ------------------------------------------------------
- ------------------------------------------------------