1. P. Leon King | Managing Partner
Contractor Financing
P. Leon King | Managing Partner

2. Typical Client Scenario
Need working capital
New contracts
Difficulty obtaining traditional funding
Need equipment
Payroll and expense management, construction
Experiencing rapid growth
Short operating history
Typical Client Scenario

3. Qualities We Look For
Contractors who run well-managed, profitable enterprises, keep promises, deal fairly with others and perform obligations in a timely manner will qualify for financing

4. The Road to Funding Pre-qualification Application Underwriting
Setting up resource monitoring services
Initial funding
Revolving credit cycle

5. Pre-Qualification Industry Types Contract Types Bankable invoices
Construction
Service contractor
Contract Types
Government (city, state, federal)
Large, financially stable corporations
Bankable invoices
Pass preliminary review of character, capacity, credit and collateral
Pre-Qualification

6. The 4 “C’s” of Contractor Finance Underwriting
Character What one does when no one is looking
Capacity The ability to perform the work
Credit Evidence that previous debts have been repaid on-time
Collateral Property, invoices or other assets that will guarantee repayment to the lender
The 4 “C’s” of Contractor Finance Underwriting

7. Preliminary Underwriting
Review application part 1
Review summary business plan
Run personal credit checks on all principals and guarantors
Proposed line of credit
Terms
Conditions
Request for application fee and additional information and documents
Preliminary Underwriting
If underwriting requirements are met, a proposal will be issued:

8. Application Part 1 Application Company information
Name, address, type of business, date of incorporation, federal tax ID, specialty, accounting history, history of tax filings, credit history questions
Line of credit requested
Principal officer and shareholder information
Current borrowing relationships
Assets assigned or pledged as collateral for present loans
Signatures authorizing corporate and personal credit checks
Brief executive summary of business plan
Current corporate financials
Organizational documents (certificate of incorporation, etc.)
Application Part 1

9. Application Part 2 Corporate financial information explanation
Bonding relationships, if appropriate
Brief explanation of largest contracts to date
Subcontractor references
Key personnel
Insurance summary
Subsidiaries and affiliates
Professional advisers
Application Part 2

10. Requirements Submit with Application Part 2
Current corporate financial statements, including balance sheet & income statements (3 months)
Current A/R and A/P aging
Current work in progress report
Corporate tax returns for the past 3 years (full copies)
Certificate of incorporation
Personal tax returns (each guarantor) for the past 3 years (full copies)
Current personal financial statements (each guarantor) – dated less than 3 months prior
Certificate of insurance showing general liability and workers’ compensation coverage
Requirements

11. Copy of contract(s) to be financed, with bid, complete estimate and project schedule
Business plan including:
Company description, current status, goals and objectives
Resumes of principals and key employees
Trade letters of reference (owners, GCs, suppliers, A&Es, etc.)
Letters of reference from banks or other lending institutions, with current documents of any outstanding loans
Copies of all MBE, DBE, HUB and 8a certifications
Payment and performance bonds, if applicable
Requirements (cont.)

12. Final Underwriting Review credit checks for principals and guarantors
Perform corporation credit check
Contact references
Verify financial and tax information
Perform initial plan review for the project to be financed
Prepare credit memorandum
Final Underwriting

13. How the RMS Program Works
Maintain financial stability of a project
Review pay applications; compare to site reports
Review invoices
Compare invoices to schedule of values and change orders
Issue and collect lien releases from subcontractors, vendors and suppliers
Issue checks in name of contractor
Provide detailed status reports
How the RMS Program Works

14. RMS Process Flow

15. Approval and Establishing Line of Credit
Credit memorandum evaluated by lender
Loan documents prepared and signed by all parties (lender, administrator, contractor)
Resource monitoring services agreement prepared

16. Setting Up the RMS Program
Required set-up items
Signed RMS agreement
Signed contractor’s letter of agreement
Fully executed “Directive of Draw” or “Assignment of Claims”
Detailed schedule of values
Cost account code breakdown
Copy of contract(s)
Copy of original bid
Copy of production schedule(s)
Copy of contract to subcontractors
Complete list of subcontractors and suppliers
Required RMS actions
Establish disbursement account at bank
Set up contractor and project(s) in RMS contractor accounting system
Setting Up the RMS Program

17. Initial Funding Credit line approved for applied for amount
Loan approved and RMS program in place and all documents signed
Loan documents are signed
A/R invoices and/or pay applications have been submitted and are approved, establishing availability of loan funds against the line of credit
A/P invoices are submitted to RMS for approval against budget and prepared for payment
Funds disbursed to RMS for payment of approved A/P invoices and credit line is reduced accordingly
RMS pays A/P invoices
Initial Funding

18. Revolving Credit Cycle
Credit line established
Funds become available based on eligible invoices and/or pay applications
Funds are disbursed through RMS program, reducing credit line
Funds are received by lender in payment of eligible invoices and/or pay application, replenishing credit line
Fees and interest are paid as funds are received and disbursed
As project requirements dictate and cycles are completed successfully, the credit line may be increased
The revolving credit cycle continues
Revolving Credit Cycle

19. Revolving Credit Cycle
Over the past several years, we have been quietly adding a number of value-added services to offer our contractors.

20. How Much Does It Cost? How is It Paid?
Would you be able to perform the project without the financing?
If not, there is no cost for financing, only profit gained from completing the project
If you are able to negotiate discounts from subcontractors and suppliers as a result of paying them in a more timely fashion, financing and administration fees are an investment that delivers returns

21. Fee & interest overview
Approximate Fees and Interest
Part 1 app/preliminary underwriting fee: No charge
Part 2 app/due diligence/application fee: $500
Commitment/loan origination fee: 1% of approved line of credit
(For $100,000 line: $1,000)
Finance charges: 1.5% of each advance
Interest: % per month of advance/pro rated daily (fluctuates with prime rate)
RMS fee: 1% of contract amount
Approximate total cost: % to 3.5% or less of project for which working capital is provided
Fee & interest overview

22. The K-WAM Solution
K-WAM Financial Solutions help overcome financial challenges that occur when you win a contract. Now you can do what you do best… Execute your contract!

23. Contact K-WAM Online: www.k-wamfs.com
Florida
13245 Atlantic Blvd., Suite 4174
Jacksonville, FL
Phone: (904)
Fax: (510)
Cell: (510)
California
4061 East Castro Valley Blvd., Suite 159
Castro Valley, CA 94552
Phone: (510)
Online:  

24. Questions?