This article covers Wunder's policy and procedures regarding the disbursement of funds under the cost-based construction financing framework including the amount of capital that is available, how Wunder defines and substantiates eligibility, and the types of invoices needed to support a disbursement request.
Eligibility
The eligibility of a construction loan for cost-based funding is dependent on the specifics of each project so it is critical to check Section 5 of your Loan and Security Agreement (LSA) or your Construction Financing Agreement to determine if your loan will qualify. Alternatively, you can consult with your Wunder point of contact.
Overall Framework
Under the cost-based construction financing framework, Wunder will disburse up to 90% of loan proceeds for Eligible Costs and the Borrower must demonstrate a Minimum Equity Contribution of 10% at all times. See more detail in the below sections.
Note this is different from Wunder’s previous equipment-backed construction financing framework which limited the disbursement based on the value of panels, inverters, and storage.
Funding Thresholds
The majority of loans under the cost-based construction financing framework can be disbursed according to the following thresholds:
|
Project Stage |
Available Funds |
|
Eligible Costs |
90% |
|
Permission to Operate |
100%. |
*Please refer to the “Eligible Costs” section below for more detail
Eligible Costs
Eligible Costs are defined as all costs spent for the purposes of advancing the project. These must be third-party costs that are substantiated with invoices or other documentation (see the Invoice section below for more detail). These costs may include, but are not limited to:
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Equipment procurement (i.e. modules, inverters, racking);
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Legal costs
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Labor Costs;
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Construction-related costs, including EPC Milestone Payments;
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Project Acquisition Costs (MIPA or APA);
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3rd Party Developer Fees;
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Other costs determined by Lender in its sole discretion to be in the advancement of the Project.
Minimum Equity Contribution:
The Borrower must maintain a Minimum Equity Contribution of 10% percent through the construction period. The Minimum Equity Contribution is calculated as by dividing total paid costs by total incurred costs. This is demonstrated by Example A below.
Example A - Minimum Equity Contribution
|
Project 1 |
|
|
Total Incurred Substantiated Costs To-Date [A] |
$1,000,000 |
|
Total Paid Costs To-Date [B] |
$100,000 |
|
Minimum Equity Contribution [C] |
10% |
Paid costs being used towards the Minimum Equity Threshold must be substantiated by proof of payment which can be provided through a wire confirmation, screenshot of bank statement, or lien waivers.
Example Scenarios
As described above, under the cost-based construction financing framework, Wunder will disburse up to 90% of loan proceeds for Eligible Costs and the Borrower must demonstrate a Minimum Equity Contribution of 10% at all times.
Example B - Equity Shortage
If the borrower hasn’t contributed to 10% in equity of project costs, Wunder will reduce the disbursement accordingly and require that the borrower provide evidence that the invoice balance has been paid to fulfill the 10% equity contribution requirement. This evidence must be provided prior to funding.
Example B - Disbursement Reduction for Equity Shortage
|
Project 1 |
|
|
Total Incurred Substantiated Costs To-Date [A] |
$1,000,000 |
|
Total Paid Costs To-Date [B] |
$50,000 |
|
Initial Minimum Equity Contribution [C=B÷A] |
5% |
|
Minimum Equity Requirement [D=A*10%] |
$100,000 |
|
Additional Equity Contribution Required [E=D-B] |
$50,000 |
|
Disbursement(s) to Supplier(s) [F=A-D] |
$900,000 |
|
Final Minimum Equity Contribution [G=(A-F)÷A] |
10% |
Example C - Excess Equity
If the borrower demonstrates that more than 10% of equity has been contributed, Wunder can reimburse the borrower for any equity excess provided that the costs are substantiated and sufficient evidence of payment has been provided.
Example C - Reimbursement for Excess Equity Contribution
|
Project 1 |
|
|
Total Incurred Substantiated Costs To-Date [A] |
$1,000,000 |
|
Total Paid Costs To-Date [B] |
$200,000 |
|
Initial Minimum Equity Contribution [C=B÷A] |
20% |
|
Disbursement(s) to Supplier(s) [D=A-B] |
$800,000 |
|
Minimum Equity Requirement [E=A*10%] |
$100,000 |
|
Reimbursement To Borrower of Excess Equity Contribution [F=B-E] |
$100,000 |
|
Final Minimum Equity Contribution [G=(B-F)÷A] |
10% |
Invoices
All project costs must be substantiated with a 3rd party invoice. While the nature of these transactions can vary, generally Wunder expects to see the following reflected on the invoices:
- The Payee (organization being paid) should be a supplier of goods and services (e.g., engineering, procurement, construction). The Payee should not be the borrowing entity.
- Wunder requires invoices that show the flow of goods and services from the supplier/manufacturer to the borrowing entity. Note that EPC invoices must tie out to the associated payment schedule contemplated in the EPC contract.
- Description of transacting parties including:
- Payee company name and address
- Payor company name and address
- Project specific details should be listed to clearly associate the costs incurred to the solar system, which serve as the collateral for the loan. Details include project name, size, and address.
- Transactional details such as invoice number, invoice date, and due date.
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