Contractor Finance

This course provides delegates with a perspective on both the Financial and Management sides of Contractor Financing. This is introduced through the demonstration on how to apply these techniques to live cases. The programme helps participants to acquire and apply their new skill through a multitude of exercises and case studies. At the end of the program participants will be able to: Understand Contractor Finance and its various forms Create Cash Flow Projections and Manage Expectations Structure appropriate facilities to contractors Apply its principles to cases The objectives of the course are to ensure that participants learn what is needed to run a Contractor Finance Business, covering the following aspects: How to evaluate contractors How to evaluate a Project How to structure a financing and credit package The process presented during the program will help the participants to: Identify and evaluate risks involved with financing projects Understand the different phases of a project, from concept to final completion and commissioning Define a policy to categorize a contractor applying for financing Help focus more on valuable credit issues and develop the participant’s credit skills and techniques Who should attend This course is ideally suited for: Wholesale Banking Relationship Managers Business Banking Relationship Managers SME Relationship Managers Credit officers at all levels Auditors Other officers requiring to understand how to deal with Contractor financing
Day 1 Introduction Various types of contractors Stages involved in a contract - Award of a design project - Approval and payment of designs - Tender assistance and evaluation Construction contract award - Tender negotiation and award - Project award - Bank’s involvement - Timelines and Milestones Accounting Issues Percentage completions vs. full completion methods - Treatment of cost overruns - Contract cash flows - Converting cash flows into a balance sheet and income statement Risks involved in Contracting Stress testing a contractor cash flow Day 2 and 3 Target Market Key success factors Scoring sheet Risk Acceptance Criteria: Structuring Post Performance Financing (PPF) Type of direct and indirect facilities offered to contractors - Bid, performance, retention, advance payment, maintenance bonds - PPF financing - Letters of credit and their financing Pre-financing Phase Financing phase Discount mechanism Conditions precedent Portfolio Management Implications How to manage a portfolio of contractors, their expected losses on the portfolio and pricing them accordingly What is probability of default and how it is measured What is loss given default and how it is measured How to calculate portfolio risk rating and how does that apply to contactors Sample Target Market and Risk Acceptance Criteria Supporting Documentation and Checks Case Studies Given a set of milestones: - Create a full cash flow on a project - Structure the banking facilities for it Course summary and close