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

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

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

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

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

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

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:

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

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

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

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.)

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

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

RMS Process Flow

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

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

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

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

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

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

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: 1.3% per month of advance/pro rated daily (fluctuates with prime rate) RMS fee: 1% of contract amount Approximate total cost: 3.0% to 3.5% or less of project for which working capital is provided Fee & interest overview

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!

Contact K-WAM Online: www.k-wamfs.com Florida 13245 Atlantic Blvd., Suite 4174 Jacksonville, FL 32225-7118 Phone: (904) 220-2567 Fax: (510) 751-0202 Cell: (510) 773-8326   California 4061 East Castro Valley Blvd., Suite 159 Castro Valley, CA 94552 Phone: (510) 537-1669 Online: www.k-wamfs.com  Email: info@k-wamfs.com

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