UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant  ☒                            Filed by a Party Other Than the Registrant  ☐

Check the appropriate box:

Velocity Financial, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

VELOCITY FINANCIAL, INC.

30699 Russell Ranch Road, Suite 295

Westlake Village, California 91362

Dear Fellow Stockholders:

On behalf

Proxy Statement

2021 Annual Meeting of the Board of Directors of Velocity Financial, Inc., a Delaware corporation (“Velocity,” the “Company,” “we,” “us” or “our”), we invite you to join us at a special meeting of stockholders of the Company, which will be held on [•], 2020, at [•]:00 a.m., Pacific Time (the “Special Meeting”). In light of public health concerns regarding the coronavirus(“COVID-19”) outbreak, the Special Meeting will be held in a virtual meeting format only. You will be able to attend the Special Meeting, vote your shares electronically and submit your questions during the meeting via live webcast by visiting [address]. Stockholders will be able to listen, vote, and submit questions from their home or any location with internet connectivity. To participate in the meeting, you must have the16-digit number that is shown on your Notice of Internet Availability of Proxy Materials or on your proxy card if you elected to receive proxy materials by mail. The notice of meeting and proxy statement that follow describe the business that we will consider at the meeting.Shareholders

On April 7, 2020, the Company completed the issuance and sale in a private placement (the “Private Placement”) of (i) an aggregate of 45,000 newly issued shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and (ii) warrants (the “Warrants”) to purchase an aggregate of 3,013,125 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) to investment funds managed by Snow Phipps Group, LLC (“Snow Phipps”) and to TOBI III SPE I LLC (“TOBI” and, together with Snow Phipps, the “Purchasers”) in exchange for cash consideration in an aggregate amount of $45.0 million. The Company used $20.0 million of the net proceeds from the Private Placement to reduce obligations under its warehouse repurchase facilities and intends to use the remainder for general corporate purposes.

Because the Company’s Common Stock is listed on New York Stock Exchange (the “NYSE”), the Company is subject to the NYSE’s rules and regulations. At the Special Meeting, you will be asked to consider and vote on a proposal (the “Issuance Proposal”) to approve, in accordance with Section 312.03 of the NYSE Listed Company Manual, the issuance of shares of the Common Stock to the Purchasers upon conversion of the Series A Preferred Stock and upon exercise of the Warrants. If the Company obtains stockholder approval of the Issuance Proposal, the Series A Preferred Stock will be convertible, subject to certain limitations, at any time at the holder’s option into shares of Common Stock and the Warrants will be exercisable, subject to certain limitations, at any time at the holder’s option.

Each Purchaser agreed with the Company, among other things, to vote all shares of Common Stock (but excluding any shares of Series A Preferred Stock) of the Company beneficially owned by such Purchaser to approve the Issuance Proposal. As of [•], 2020, the Purchasers and their respective affiliates collectively beneficially owned greater than 50% of the Company’s outstanding Common Stock (without giving effect to the issuance of the Series A Preferred Stock and the Warrants). As a result of these agreements, the Issuance Proposal is expected to be approved by the holders of the Common Stock at the Special Meeting, regardless of the votes of holders of shares of the Common Shares who have not entered into such agreements.

Our Board of Directors, upon the recommendation of a transaction committee of directors made up solely of disinterested and independent directors, believes that the Issuance Proposal is in the best interests of the Company and its stockholders and, therefore, recommends that you vote “FOR” the Issuance Proposal.

We have elected to deliver our proxy materials to the majority of our stockholders over the Internet. This delivery process allows us to provide stockholders with the information they need while conserving natural resources and lowering the cost of delivery. On or about [•], 2020, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “notice”) containing instructions on how to access our proxy statement for the Special Meeting. The notice also provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail. The proxy statement attached to this letter provides you with information about the Issuance Proposal and the Special Meeting of the Company’s stockholders. We encourage you to read the entire proxy statement carefully. You may also obtain more information about the Company from documents we have filed with the U.S. Securities and Exchange Commission. See “Where You Can Find Additional Information” in the accompanying proxy statement.

Regardless of the number of shares of Common Stock you own, your vote is important. Whether or not you plan to attend the Special Meeting, please take the time to submit a proxy by following the instructions on your proxy card as soon as possible. You may do so by completing, signing, dating, and returning the enclosed proxy card by mail, or you may submit your proxy by telephone or electronically through the Internet, as further described on the proxy card. We encourage you to vote by Internet or telephone. It is convenient and saves the Company postage and other costs. If your shares of Common Stock are held in an account at a broker, dealer, commercial bank, trust company, or other nominee, you should instruct such broker or other nominee how to vote in accordance with the voting instruction form furnished by such broker or other nominee.

Thank you for your cooperation and continued support.March 30, 2021

[•], 2020

THE ACCOMPANYING PROXY STATEMENT IS DATED [•], 2020 AND IS FIRST BEING MADE AVAILABLE TO STOCKHOLDERS ON OR ABOUT [•], 2020.

Velocity Financial, Inc.

Notice of Annual Meeting of Shareholders

		Date and Time May 19, 2021 at 1:00 p.m.						Virtual Only     Connect by Internet or     phone

This Proxy Statement is being furnished to our shareholders in connection with the solicitation of proxies by our Board of Directors for use at our 2021 Annual Meeting of Shareholders.

Purpose of Meeting

We will also consider other matters that properly come before the meeting.

Shareholders should read Other Important Information for Our Shareholders beginning on page 31 for additional information, including ways for you to vote prior to or during the meeting.

Whether you hold shares directly as a shareholder of record or beneficially in street name, you may vote your shares without virtually attending our Annual Meeting. Voting instructions are outlined in the Notice of Internet Availability of Proxy Materials and on your proxy card.

Vote

If you are a shareholder of record

If you hold your shares in your street name

By Internet (24 hours a day):

proxyvote.com

proxyvote.com

By Telephone (24 hours a day):

1-800-690-6903

1-800-454-8683

By Mail:

Return a properly executed and dated proxy card voterin the provided pre-paid envelope

Return a properly executed and dated voting instruction form by mail, depending upon the method(s) your bank, brokerage firm, broker-dealer or notice.

Call [number] or the number on your voter instruction form. You will need the16-digit number included in your proxy card, voter instruction form or notice.

Send your completed and signed proxy card or voter instruction form to the address on your proxy card or voter instruction form.

Visit [address]. You will need the16-digit number included in your proxy card, voter instruction form or notice.other similar organization makes available

Table of Contents

Only stockholders who held shares of our Common Stock as of the close of business on [•], 2020, the “Record Date,” are entitled to receive notice of, and to vote at, the Special Meeting and at any adjournment or postponement of the Special Meeting.

If your shares are registered directly in your name with the Company’s transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you are considered a stockholder of record with respect to those shares. You will receive one notice or proxy card for all the shares you hold through book-entry form with AST and in any Company benefit plan.

If your shares are held in a bank or brokerage account or through another nominee (that is, in “street name”), you are considered the “beneficial owner” of those shares. As the beneficial owner of those shares, you have the right to direct your broker, bank or other nominee how to vote your shares. You will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of Common Stock voted.

If you sign, date, and return your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” the Issuance Proposal and, if necessary and appropriate, the Adjournment Proposal.

For additional questions regarding the Issuance Proposal, assistance in submitting proxies or voting shares of our Common Stock, or to request additional copies of the proxy statement or the proxy card, please contact Investor Relations, Velocity Financial, Inc., 30699 Russell Ranch Road, Suite 295, Westlake Village, California 91362, telephone: (818)532-3700 or [Solicitation Agent Name], telephone: [•] [(toll free)].

PROXY STATEMENT

This proxy statement sets forth information relating to the solicitation of proxies by Board of Velocity Financial, Inc. in connection with a special meeting of stockholders (the “Special Meeting”) or any adjournment or postponement of the Special Meeting. This proxy statement is being furnished by our Board for use at the Special Meeting of stockholders to be held at on [•], 2020 at [•]:00 a.m., Pacific Time. This proxy statement and form of proxy are first being made available to stockholders on or about [•], 2020, to our stockholders of record as of the close of business on [•], 2020 (the “Record Date”).

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE PROPOSALS

The following questions and answers address briefly some questions you may have regarding the Special Meeting and the Proposals (as defined below). These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement and the documents referred to or incorporated by reference in this proxy statement.Corporate Governance Matters

A:    We are providing these proxy materials in connectionOur Director Nominees

Biographies of Our Directors

As illustrated below, each of our directors was chosen because his or her background provides each director with the solicitation byexperience and skillset geared toward helping us succeed. Our directors bring to us strong executive operating experience, expertise in the real estate and financial services sectors, accounting and audit expertise and broad experience in other diverse sectors such as investment management and private equity, among others, and meaningful commitment to community and public service – knowledge and experiences that are ideally suited to oversee our management and act as fiduciaries for our shareholders.

Daniel J. Ballen has served as a member of our Board of proxiesDirectors since December 2016. He has led numerous private equity investments in both the U.S. and Europe and currently serves as a board member on a wide range of both private and public companies in the financial services and technology sectors. Mr. Ballen brings significant private equity and investment experience to be votedour Board of Directors. Since June 2014, Mr. Ballen has served as a Portfolio Manager and Executive Vice President at the Special Meeting in connection with the issuance of Common Stock upon the conversionPacific Investment Management Company LLC (one of our Series A Preferred Stock and upon exerciselargest shareholders), where he helps lead the corporate private equity investment strategy for the firm’s alternative investment complex. Prior to joining Pacific Investment Management Company, Mr. Ballen was a member of the Warrants (each,private equity investment teams at Pine Brook Partners from 2011 to April 2014 and at Bain Capital from 2007 to 2010, where he executed and managed private equity investments in the U.S. across a variety of sectors. Mr. Ballen started his career in the investment banking division of Bear, Stearns & Co., where he was a member of the U.S. financial institutions advisory team. Mr. Ballen is currently a director of Cardholder Management Services, Inc., Finance Ireland Ltd, Great Rock Capital Partners, LLC and Amur Equipment Finance, Inc. and was a director of FlexShopper, Inc. (NASDAQ: FPAY) from November 2016 to April 2019. Mr. Ballen received a bachelor’s degree from Emory University.

Dorika M. Beckett has served as defined below).

On April 7, 2020, the Company completed the issuancea member of our Board of Directors since July 2020. Ms. Beckett brings to our board executive, entrepreneurial, investment, private equity, operational and salephilanthropic experience. For over a decade, Ms. Beckett has been Chief Executive Officer of both LW Staffing, a franchise of healthcare professional staffing company ATC Healthcare Services, and Livewell Home Care Inc., an elder care focused service provider with operations in California and North Carolina. Previously, Ms. Beckett served as partner of a private placement (the “Private Placement”)equity firm, director of (i) an aggregate of 45,000 newly issued shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”),operations and (ii) warrants (the “Warrants”) to purchase an aggregate of 3,013,125 sharesmanagement consultant in various industries. She is also Chair of the Company’s common stock, par value $0.01 per share (“Common Stock”), to investment funds managed by Snow Phipps Group, LLC (“Snow Phipps”) and to TOBI III SPE I LLC (“TOBI” and, together with Snow Phipps, the “Purchasers”Imani Baraka Foundation, a family non-profit foundation. Ms. Beckett received a Bachelor of Arts (A.B.) in exchange for cash consideration in an aggregate amountEconomics from Harvard College and a Master of $45.0 million. The Company used $20.0 million of the net proceedsBusiness Administration from the Private Placement to reduce obligations under its warehouse repurchase facilitiesHarvard Business School.

Christopher D. Farrar has served as our Chief Executive Officer and intends to use the remainder for general corporate purposes.

Because the Company’s Common Stock is listed on New York Stock Exchange (the “NYSE”), the Company is subject to the NYSE’s rules and regulations. At the Special Meeting, you will be asked to consider and vote onas a proposal (the “Issuance Proposal”) to approve, in accordance with Section 312.03 of the NYSE Listed Company Manual, the issuance of shares of the Common Stock to the Purchasers upon conversion of the Series A Preferred Stock and upon exercise of the Warrants. If the Company obtains stockholder approval of the Issuance Proposal, the Series A Preferred Stock will be convertible, subject to certain limitations, at any time at the holder’s option into shares of Common Stock and the Warrants will be exercisable, subject to certain limitations, at any time at the holder’s option.

The Purchasers may each be deemed to be related parties to us under the rules of the New York Stock Exchange. The shares of Common Stock issuable upon conversion of all of the outstanding Series A Preferred Stock into Common Stock at the initial conversion price and the exercise of all of the outstanding Warrants would represent an aggregate of approximately 42.3%member of our Common Stock outstanding onBoard of Directors since 2004. Mr. Farrar brings extensive operating experience and management skills to our Board of Directors. Mr. Farrar has an extensive background in finance, lending, raising capital and business operations – having as-convertedco-founded us in June 2004. Prior to that time, Mr. Farrar served as a Vice President for Namco Capital Group, Inc., originating commercial real estate loans, and as Senior Vice President of United States Production at Weyerhaeuser Mortgage Company. Prior to his tenure at Weyerhaeuser, Mr. Farrar formed and served as Chief Credit Officer for Worth Funding, a mortgage banking firm. Mr. Farrar is a director of Generosity.org, a as-exercisednon-profit basis. Asworking to bring global communities access to clean water, and Agoura Aquatic Foundation, non-profit providing opportunities for youth to participate in aquatic sports and adults and disabled to engage in aquatic training. Mr. Farrar received a Bachelor of [•], 2020, assuming full conversion of the Series A Preferred Stock at the initial conversion priceScience in Business Administration from Pepperdine University and the exercise of all Warrants, funds managed by Snow Phipps would beneficially own approximately 39.1% of our Common Stock and TOBI would beneficially own an aggregate of approximately 36.3% of our Common Stock outstanding, in each case, onis a fullyas-converted andas-exercised basis. The holders of shares of Series A Preferred Stock will be unable to convert shares of Series A Preferred Stock into shares of Common Stock and the holders of the Warrants will be unable to exercise Warrants unless and until the Issuance Proposal is approved by our stockholders.licensed (inactive) California Real Estate Broker.

At

Alan H. Mantel has served as a member of our Board of Directors since 2007 and as Chair of our Board of Directors since 2020. With over 30 years on Wall Street, Mr. Mantel has experience across a wide array of investment banking disciplines, including corporate finance, financial advisory and structured finance. Mr. Mantel brings to our Board of Directors extensive experience in the Special Meeting,financial services sector, including leveraged and structured finance, and background with and knowledge of accounting principles. Mr. Mantel is a Partner of Snow Phipps (one of our largest shareholders) and has served in accordancesuch capacity since its inception in 2005. He is also a Managing Partner of TruArc Partners, LP, a successor business to Snow Phipps. Before joining Snow Phipps, Mr. Mantel was a Partner at Guggenheim Merchant Banking. Mr. Mantel served as Managing Director in the Leveraged Finance department at Credit Suisse from 2000 to 2004 and served as Managing Director at Donaldson, Lufkin & Jenrette Inc. prior to its merger with Section 312.03Credit Suisse. Mr. Mantel was a Senior Accountant and Certified Public Accountant (inactive) at Ernst & Young LLP from 1985 to 1988. Mr. Mantel currently serves on the boards of Amarok, LLC, DecoPac, Inc., ECRM, LLC, EnviroFinance Group, LLC and HCTec, Inc. He is also Board Chair of Congregation B’nai Jeshurun, a nearly 200-year-oldnon-affiliated synagogue. Mr. Mantel received a Bachelor of Science in accounting from the State University of New York at Albany and a Master of Business Administration in Finance from the University of Chicago.

John P. Pitstick has served as a member of our Board of Directors since January 2020. Mr. Pitstick has experience in accounting, taxes, capital markets, financial operations, internal controls and SEC reporting/compliance matters. Mr. Pitstick brings over 20 years of combined experience as an executive of publicly traded and privately held companies along with experience at a major accounting firm to our Board of Directors. Since September 2015, Mr. Pitstick has served as the Chief Financial Officer of privately held software company Seven Lakes Enterprises, Inc. Mr. Pitstick served as Executive Vice President from 2005 to 2007 and then as Chief Financial Officer from 2007 to 2015 of publicly traded Conversant, Inc. From 1995 to 2004, Mr. Pitstick worked for Ernst & Young LLP serving a broad range of clients in the technology, biotech and financial services industries, ultimately as a Senior Manager. Mr. Pitstick is a Certified Public Accountant (inactive) and received a Bachelor of Science in Accounting from the University of San Francisco.

John A. Pless has served as a member of our Board of Directors since 2007. Mr. Pless brings broad finance and corporate governance experience to our Board of Directors. Mr. Pless joined Snow Phipps at the inception of the NYSE Listed Company Manual, you will be askedfirm in 2005 and became a Partner in 2012. He is also a Managing Partner of TruArc Partners, LP, a successor business to considerSnow Phipps. Prior to his tenure with Snow Phipps, Mr. Pless worked as a Vice President at Guggenheim Merchant Banking and voteserved as Associate Director in the Financial Institutions Group at UBS Investment Bank, the investment banking arm of UBS AG, where he worked on a proposalwide range of mergers and acquisitions and capital raising transactions for banks and specialty finance companies. Mr. Pless currently serves on the boards of Brook + Whittle LTD, BlackHawk Industrial Distribution, Inc., Cascade Corp, EnviroFinance Group, LLC, HCTec, Inc., Ideal-Tridon Holdings, Inc. and Prototek Holdings LLC. He is also a board member of Little Wings Foundation, a family foundation financially assisting other non-profits working on issues like education, children’s health, international outreach and terminal diseases. Mr. Pless received a Bachelor of Arts in Economics from Middlebury College.

Joy L. Schaefer has served as a member of our Board of Directors since January 2020. Ms. Schaefer brings to approveour Board of Directors a broad range of experience in a variety of asset classes including auto finance, residential mortgages, multi-family mortgages and home equity lending. Since August 2005, Ms. Schaefer has served as President of Golden Eagle Advisors, LLC, a consulting firm focused on organizational development and growth through strategic, operational and financial improvements. From 2005 until August 2018, Ms. Schaefer served as an operating partner of Snow Phipps. From 2002 until 2005, Ms. Schaefer served as President of JL Schaefer Consulting, a strategic, financial and operational consulting practice, advising privately held and family-owned businesses. In 2002, Ms. Schaefer served as President and Chief Operating Officer of Ameriquest Mortgage, a privately held mortgage banking company. From 1990 until 2002, Ms. Schaefer served in various senior management positions within the Issuance Proposal.

Our Board, uponWestcorp family of companies, including as President and Chief Operating Officer of Westcorp, Inc., a publicly traded financial services holding company, Vice Chairman, Chief Executive Officer, President and Chief Operating Officer of WFS Financial, Inc., a publicly traded national automobile finance company and Chief Operating Officer, Senior Executive Vice President, Chief Financial Officer and Treasurer of Western Financial Bank, Inc. Earlier in her career, Ms. Schaefer was an audit manager for Ernst & Young. Ms. Schaefer currently serves on the recommendation of a transaction committeeboard of directors made up solely of disinterestedAmerican Assets Trust, Inc. (NYSE: AAT). She is currently a director and independent directors, believes that the Issuance Proposal isTreasurer of Young Presidents’ Organization—California Coast, a non-profit global leadership community of chief executives. Ms. Schaefer received a Bachelor of Science degree in the best interests of the Company and its stockholders and, therefore, recommends that you vote “FOR” the Issuance Proposal.Accounting from Illinois Wesleyan University.

A:    The business expected to be voted on at the Special Meeting is considering approval of the following proposals:

To be properly brought before the Special Meeting, any additional items of business must be presented in accordance with applicable law and the Company’s bylaws. If business is not properly brought before the Special Meeting, there will not be an opportunity to discuss any such matters at the Special Meeting.

A:    The Special Meeting will be held on [•], 2020 at [•]:00 a.m., Pacific Time via live webcast at [address]. In light of public health concerns regarding the coronavirus(“COVID-19”) outbreak, the Special Meeting will be held in a virtual meeting format only. You will not be able to attend the Special Meeting in person, but you will have the same opportunities to participate in the virtual meeting format as you would at anin-person meeting.

A:    You are entitled to receive notice of and to attend and vote at the Special Meeting, or any postponement or adjournment thereof, if, as of the close of business on [•], 2020, the Record Date, you were a holder of record of our Common Stock.

As of the Record Date, there were 20,087,494 outstanding shares of our Common Stock, each of which is entitled to one vote on each matter to come before the Special Meeting. As of the Record Date, the Purchasers and their respective affiliates collectively owned 11,548,261 shares of our Common Stock, each of which is entitled to one vote on each matter to come before the Special Meeting.

A:    If you were a stockholder of record as of the Record Date, to be admitted to the Special Meeting at [address], and to vote your shares during the Special Meeting or submit questions during the Special Meeting, you must enter the control number found on your proxy card, voting instruction form or notice you previously received. Stockholders of record may vote during the Special Meeting by following the instructions available on the meeting website during the Special Meeting. If you were a beneficial owner as of the Record Date of shares held in “street name” through a broker, bank or other nominee and you wish to attend the Special Meeting and/or vote your shares during the Special Meeting or submit questions during the Special Meeting, you will need to provide proof of your authority to vote (legal proxy), which you must obtain from such nominee reflecting your holdings. You may forward ane-mail from your nominee or attach an image of your legal proxy and transmit it viae-mail to [•] at [address] and you should label thee-mail “Legal Proxy” in the subject line. Requests for

registration must be received by [•], 2020 no later than 12:00 a.m., Eastern Daylight Time, on [•], 2020. You will then receive confirmation of your registration, with a control number bye-mail from Issuer Direct. At the time of the Special Meeting, go to [address]Board Skills, Experience and enter the 16 digits of your control number. We encourage you to log on 15 minutes prior to the start of the Special Meeting.Demographic Information

A:    A quorum is necessary to hold a valid meeting of stockholders. For each of the Proposals to be presented at the Special Meeting, the holders of a majority of shares of our Common Stock outstanding on the Record Date, must be present at the Special Meeting, in person or by proxy. If you vote—including by Internet, telephone or proxy card—your shares voted will be counted towards the quorum for the Special Meeting. Abstentions are counted as present for the purpose of determining a quorum; brokernon-votes are not counted for the purpose of determining the presence of a quorum at the Special Meeting as the Proposals to be considered would not be evaluated as routine by the NYSE.

A:    You may vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting on any Proposal to be voted on at the Special Meeting. Your shares will be voted as you specifically instruct. If you sign your proxy or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board and in the discretion of the proxy holders on any other matters that properly come before the meeting. If you return your proxy card and “ABSTAIN” from voting, it will have the same effect as a vote against the Issuance Proposal and the Adjournment Proposal.

A:    The Issuance Proposal requires the affirmative vote of a majority of the shares of our Common Stock voting thereon at a meeting at which a quorum is present. Under applicable NYSE rules, abstentions are counted as present for purposes of determining a quorum and are also counted as shares voted with respect to such proposal, and therefore, if you return your proxy card and “ABSTAIN” from voting, it will have the same effect as a vote against the Issuance Proposal. The Adjournment Proposal requires the affirmative vote of a majority of the shares of our Common Stock present and entitled to vote at the Special Meeting, whether or not a quorum is present. As of the Record Date, the Purchasers and their respective affiliates beneficially owned a majority of the outstanding shares of our Common Stock and have separately agreed with the Company to vote such shares in favor of the Issuance Proposal.

A:    Upon conversion of all of the shares of Series A Preferred Stock, the Company would issue approximately 11,688,299 shares of Common Stock, representing approximately 36.8% of the total outstanding shares of Common Stock as of the Record Date, assuming (i) such conversions occur at the initial conversion rate of 259.74 shares of Common Stock per share of Series A Preferred Stock (ii) and no exercise of the Warrants. Upon exercise of the Warrants, the Company would issue approximately 3,013,125 shares of Common Stock, representing approximately 13.0% of the total outstanding shares of Common Stock as of the Record Date, assuming (i) the exercise price is paid in cash and (ii) no conversion of Series A Preferred Stock.

A:    If the Issuance Proposal is not approved the holders of shares of Series A Preferred Stock will not be able to convert shares of Series A Preferred Stock into shares of Common Stock and the holders of the Warrants will not be able to exercise Warrants.

materials providedThe Board’s Role and Responsibilities

Risk Oversight

Our Board of Directors has extensive involvement in the oversight of risk management related to youus and our business and accomplishes financial risk oversight through the regular reporting by the brokerage firm, bank, or other nomineeAudit Committee. The Audit Committee represents the Board of Directors by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and legal matters that holds your shares. To vote “in person” atcould have a significant impact on our financial statements. Through its meetings with and receipt of reports from management, including the Special Meeting, you must obtain afinance, legal proxy fromand internal audit functions, the brokerage firm, bank, or other nominee that holds your shares.

A:    Yes. Whether you attend the Special Meeting or not, any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. If you are a holderAudit Committee reviews and discusses significant areas of record, your proxy may be revoked in writing to the Company’s Corporate Secretary, at or before taking of the vote at the Special Meeting. A written notice of revocation or a duly executed proxy, in either case later dated than the prior proxy relating to the same shares, will be treated as the final vote.

Holders of record may also revoke their proxies by attending the Special Meetingour business and voting during the live webcast at [address], although attendance at the Special Meeting will not itself revoke a proxy. Any written notice of revocation or subsequent proxy should be sent so as to be delivered to Mark Szczepaniak, Chief Financial Officer and Corporate Secretary, Velocity Financial, Inc., 30699 Russell Ranch Road, Suite 295, Westlake Village, California 91362. Any written notice of revocation must be received at such address by 11:59 p.m. (Pacific Time) on [•], 2020.

If you hold your shares in “street name” through a broker, dealer, commercial bank, trust company, or other nominee, you should follow the instructions of such broker or other nominee regarding revocation of proxies.

A:    We intend to announce preliminary voting results at the Special Meeting and will publish final results through a Current Report on Form8-K to be filed with the U.S. Securities and Exchange Commission (“SEC”) within four business days after the Special Meeting. The Current Report on Form8-K will be available on the Internet at our website,https://www.velfinance.com/financial-reports/sec-filings.

A.    Yes. A list of these stockholders will be open for examination by any stockholder for any purpose germane to the Special Meeting for a period of 10 days prior to the Special Meeting at our principal executive offices at 30699 Russell Ranch Road, Suite 295, Westlake Village, California 91362, and electronically during the Special Meeting at [address].

A:    The Company is paying the costs of the solicitation of proxies. The Company has retained [Solicitation Agent] to assist in obtaining proxies by mail, facsimile, telephone or email from brokerage firms, banks, broker-dealers or other similar organizations representing beneficial owners of sharessummarizes for the Special Meeting. The Company has agreed to pay such firm a feeBoard of approximately $[•] plusout-of-pocket expenses. [SolicitationAgent] may be contacted [toll-free] at [•]. The Company may also reimburse brokerage firms, banks, broker-dealers or other similar organizations for the cost of forwarding proxy materials to beneficial owners. In addition, certain of the Company’s directors, officersDirectors financial risks and regular employees, without additional compensation, may solicit proxies on the Company’s behalf in person, by telephone, by fax or by electronic mail. See “Proxy Solicitation and Costs” in this proxy statement for further information.

A:    The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by

Executive Sessions

Our Board has determined that our independent directors will have the ability to meet at any time in executive session outside the presence of management. No formal Board action may be taken at any such executive sessions. Our Board Chair presides over each executive session and each non-management member of our Board has the authority to call such executive sessions.

Directors and Board Committees

Our Board has standing Audit, Compensation and Nominating/Corporate Governance Committees, each of which has adopted a written charter that is available on our website, www.velfinance.com.

Board of Directors

Key Responsibilities

Audit Committee

Key Responsibilities

Compensation Committee

Key Responsibilities

Nominating/Corporate Governance Committee

Key Responsibilities

Board Practices, Processes and Policies

Corporate Governance Initiatives

When we granted affiliateswent public in January 2020, we implemented multiple corporate governance enhancements to strengthen our Board’s independence, ensure robust risk oversight and bolster alignment, communication and transparency with our shareholders. We intend to continuously review and improve upon our corporate governance policies.

Anti-Hedging Policy

Our Insider Trading and Anti-Tipping Policy expressly prohibits hedging transactions involving our securities and those of Snow Phippsour subsidiaries by our directors, executive officers and TOBIall other employees. We believe that hedging against losses in our securities breaks the right, subjectalignment between our shareholders and our executives that equity grants are intended to certain limitations, to requirebuild. Our anti-hedging policy also prohibits direct and indirect short selling and derivative transactions involving our securities, other than the exercise of any options or warrants issued by us to register underour employees or directors.

Related Person Policy and Transactions

Our Board has adopted a written policy for the Securities Actreview, approval and ratification of 1933, as amended,transactions that involve related persons and potential conflicts of interest. Our Related Person Transaction Policy applies to the following Related Persons: each of our directors and executive officers, any security holder who is known to own more than five percent of our shares, any immediate family member of Common Stock held by them for resale and to execute piggyback rights to sell shares held by them in certain registered offerings initiated by us.

In connection the execution of Purchase Agreement and the consummationany of the transactions contemplated thereby, the Company agreed to reimburse eachforegoing persons, any entity of Snow Phipps and TOBI up to $250,000 in transaction costs.

Corporate Opportunities

Our certificatewhich one of incorporation provides that our directors who are also employeesis a director or affiliatesofficer and any entity of Snow Phipps or TOBI may engage in similar activities or lineswhich one of business as us. Our certificate of incorporation provides that no Snow Phipps or TOBI employees or affiliates, including those persons who are also our directors havehas a substantial financial interest.

Under our Related Person Transaction Policy, a covered transaction includes a transaction or arrangement involving us and a Related Person that would require disclosure in our filings with the SEC as a transaction with a Related Person.

Under our Related Person Transaction Policy, Related Persons must disclose to the Audit Committee any obligationpotential covered transaction and must disclose all material facts with respect to refrain from (1) engaging directlysuch interest. All covered transactions will be reviewed by the Audit Committee for approval or indirectly inratification. In determining whether to approve or ratify such a transaction, the same or similar business activities or linesAudit Committee will consider the relevant facts and circumstances which may include factors such as the relationship of business as us or developing or marketing any products or services that compete, directly or indirectly,the Related Person with us, (2) investingthe materiality or owning any interest in, or developing a business relationship with, any person or entity engaged insignificance of the same or similar business activities or lines of business as, or otherwise in competition with, us or (3) doing business with any of our clients or customers. In addition, our certificate of incorporation provides that we have waived any interest or expectancy in any business or other opportunity that becomes known to a director of ours who is also a Snow Phipps or TOBI employee or affiliate unless the opportunity becomes known to that individual solely in his or her capacity as our director.

Indemnification of Directors and Officers

We have entered into indemnification agreements with each of Messrs. Ballen, Mantel and Pless substantially similar to those we have entered into with our other directors and our executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under the DGCL against expenses, losses and liabilities that may arise in connection with actual or threatened proceedings in which they are involved by reason of their servicetransaction to us and the Related Person, the business purpose and reasonableness of the transaction, whether the transaction is comparable to advance expenses incurred as a result of any proceeding against them as to which theytransaction that could be indemnified.available to us on an arms-length basis, the impact of the transaction on our business and operations – and ultimately, whether the proposed transaction is or is not in our bests interests.

Our bylaws provide that we will indemnifyThe following transactions have all been approved or ratified in accordance with our directors and officers to the fullest extent permitted by the DGCL. In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL.

Other TransactionsRelated Person Transaction Policy.

In the ordinary course of business, we sell held for sale loans to various financial institutions. From time to time, an affiliate of TOBIPIMCO has purchased such loans from us through an arm’s length bidding process. In December 2020, an affiliate of PIMCO purchased 156 held for sale loans from us for $50,690,313.

In April 2020, we entered into a securities purchase agreement with investment funds affiliated with Snow Phipps and an investment fund affiliated with PIMCO (each, a “Purchaser”) and sold (i) 20,000 shares of Series A Preferred Stock to the Snow Phipps Purchasers, (ii) 25,000 newly issued shares of Preferred Stock to the PIMCO Purchaser, (iii) warrants to purchase 1,339,116 shares of common stock to the Snow Phipps Purchasers and (iv) warrants to purchase 1,673,954 shares of common stock to the PIMCO Purchaser. In consideration, the Snow Phipps Purchasers paid $20.0 million and the PIMCO Purchaser paid us $25.0 million. Additionally, we agreed to reimburse each of Snow Phipps and PIMCO up to $250,000 in transaction costs. These transactions were approved by a special transaction committee of our Board of Directors consisting solely of independent, disinterested directors.

Director Compensation

2020 Director Compensation Table

At the recommendation of Mercer and our Compensation Committee, and following Board approval, our 2021 director compensation will consist of the following:

Executive Compensation Matters

Our shareholders are given the opportunity to indicate their preference, on a non-binding, advisory basis, as to how frequently we should seek advisory votes on the compensation of our executive officers. This frequency vote is required to be held at least once every six years. By voting on this proposal, shareholders may indicate whether they would prefer that we seek future advisory votes approving the compensation of our executive officers once every one, two or three years. Shareholders may also abstain from voting on this proposal.

Our Board of Directors has determined that holding an advisory vote on executive compensation every year is the most appropriate alternative for us. Our executive compensation disclosures are made annually and our Board has determined that holding an annual advisory vote on executive compensation provides us with direct and immediate feedback on our compensation policies, programs and disclosures. We also believe that an annual vote creates a procedural consistency from year to year.

This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on our Board. Although non-binding, our Board and Compensation Committee will review and consider the voting results. Notwithstanding our Board’s recommendation and the outcome of the shareholder vote, our Board may in the future decide to vary its practice regarding the frequency of our advisory votes based on factors such as discussions with shareholders whether we expect future material changes to our compensation policies, programs and disclosures.

The proxy card provides shareholders with the opportunity to choose among four options (holding the vote every year, every two years, every three years or abstain) and, therefore, shareholders will not be voting to approve or disapprove the recommendation of our Board.

Our Board recommends a vote FOR the option of Every Year as the frequency which shareholders are provided with an advisory vote on the compensation of our executive officers.

We provide our shareholders with the annual opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with SEC rules. The vote on this resolution is not intended to address any specific element of compensation; rather, the advisory vote relates to the overall compensation of our Named Executive Officers. We value this vote as important feedback from our shareholders.

We believe that there should be a strong link between executive compensation and our performance and the performance of our Named Executive Officers. This Proxy Statement contains a detailed description of the 2020 compensation of our Named Executive Officers. The Compensation Committee and our Board of Directors believe that our policies and procedures are effective in achieving our goals and that the compensation of our Named Executive Officers will contribute to our long-term success.

Accordingly, we ask our shareholders to vote on the following resolution:

Resolved, that the compensation paid to the Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosure is approved.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTCompensation Committee Report

The function of the Compensation Committee is to advise senior management on the administration of our compensation programs and plans, review and approve corporate goals and objectives relevant to CEO compensation, review and approve corporate goals and objectives relevant to the compensation of our other executive officers, evaluate the performance of the executive officers in light of those goals and objectives, set the executive officers’ compensation levels based on this evaluation and assist our CEO in formulating compensation programs applicable to our senior management.

Our Compensation Committee has reviewed and discussed with our management the Compensation Discussion and Analysis section of this Proxy Statement. Based upon the reviews and discussions, we have recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement.

Submitted by the Compensation Committee of the Board of Directors

Alan H. Mantel – Chair

Daniel J. Ballen

John P. Pitstick

Compensation Discussion and Analysis

Overview

The Committee’s Role

As a guiding mandate, our goal is to implement an executive compensation plan that reflects our shareholders’ desires and adheres to industry best practices.

Our compensation process is determined by our Compensation Committee, in consultation with our CEO. The Committee considered the views of Mr. Farrar, their assessments of our executives’ individual performance and ranges of peer compensation in approving 2020 executive compensation.

Role of the Compensation Consultant

The Compensation Committee retained Mercer (US) Inc. as an independent compensation consultant to assist the Compensation Committee with conducting a review of our director and executive compensation practices, an examination of relevant peer and industry practices and recommendations for 2020 and 2021 compensation.

Our Compensation Committee considered whether any conflicts of interest would arise due to its 2020 engagement of Mercer. Mercer previously provided compensation consulting services to us and was paid $40,000 during 2018 and $25,000 during 2019. The Compensation Committee reviewed and analyzed Mercer’s prior services to and compensation from us and all other factors deemed relevant and required by SEC rules and concluded that the proposed engagement of Mercer by our Compensation Committee for director and executive compensation work did not raise a conflict of interest and that Mercer remained independent.

Peer Selection

We and our compensation consultant analyzed comparable peer compensation as a general frame of reference for considering the appropriateness of our executive compensation programs and to ensure our executive officers are appropriately aligned with peers.

Our selected peer group also represents companies that have a fair amount in common with our business and, hence, are reasonably comparable for purposes of relative performance:

Our Compensation Committee conducted an analysis of comparable peer compensation as a general frame of reference for considering the appropriateness of our executive compensation programs and to ensure our CEO and other executive officers’ compensation is aligned with peers.

Our list of peers changed from our 2019 peer group – four companies were removed from the peer group and five mostly smaller companies were added. The following 15 companies were used as compensation peers for our 2020 and 2021 compensation programs:

The Compensation Committee believes the peer group provided an appropriate benchmark given the size and scope of our firm. Target compensation should be sufficiently competitive with industry peers to attract and retain executives with similar levels of experience, skills and responsibilities. Peer group data serves as an important and informative reference point in evaluating our executive compensation. Our Compensation Committee compared the components of our 2020 compensation program as well as total compensation to the peer group data and determined that our 2020 compensation program was appropriate and competitive.

The below analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program and each material element of compensation for the fiscal year ended December 31, 2020 that we provided to each person who served as our principal executive officer and our other two most highly compensation executive officers during 2020, all of whom we refer to collectively as our Named Executive Officers.

Our 2020 Named Executive Officers

Our Named Executive Officers for the fiscal year ended December 31, 2020 were as follows:

Executive Compensation Objectives and Philosophy

The goal of our executive compensation program is to create long-term value for our investors while at the same time reward our executives for superior financial and operating performance and encourage them to remain with us for long, productive careers. We believe the most effective way to achieve this objective is to design an executive compensation program rewarding the achievement of each executive and aligning executives’ interests with those of our investors by using equity as a component of compensation. The following are the core elements of our executive compensation program:

By incorporating these elements, we believe our executive compensation program is responsive to our investors’ objectives and effective in attracting, motivating and retaining the level of talent necessary to grow and manage our business successfully.

Process for Determining Compensation

In determining the compensation of the Chief Executive Officer, our Compensation Committee performs a thorough and detailed process. At the end of the year, our Compensation Committee reviews our CEO’s performance and our performance and meets (with and without the CEO) to conduct these evaluations. While our Compensation Committee tries to ensure that a substantial portion of the CEO’s compensation is directly linked to his performance and the performance of our business, our Compensation Committee also seeks to set his compensation in a manner that is competitive with compensation for similarly performing executive officers with similar responsibilities in companies we consider our peers.

In determining the compensation of each of our executive officers (other than the CEO), our Compensation Committee seeks the input of the CEO. At the end of each year, the CEO assesses our executive officers’ performance against the business unit (or area of responsibility) and individual goals and objectives. Our Compensation Committee and the CEO then review the CEO’s assessments and discusses and approves the compensation for each executive officer.

Considerations in Setting 2020 Compensation

In approving 2020 compensation for our Named Executive Officers, our Compensation Committee took under advisement the recommendation of the CEO relating to the total compensation for our Named Executive Officers. Our Compensation Committee discussed and approved 2020 compensation for each of our Named Executive Officers. Our Compensation Committee believes that the total 2020 compensation for our executive officers was competitive while at the same time being responsible to our investors.

The following is a summary of key considerations that affected the development of 2020 compensation decisions for our executive officers:

We expect that going forward, the Compensation Committee will adhere to the compensation philosophy described above. In addition, we anticipate that the Compensation Committee will continue to retain an independent compensation consultant from time to time who will provide the Compensation Committee with input and additional compensation programs to further align executive officer compensation with our shareholders’ interests.

Elements of 2020 Compensation Program

There are three key components of our executive compensation program for our Named Executive Officers:

We believe that offering each of the components of our executive compensation program is necessary to remain competitive in attracting and retaining talented executives. Base salaries and discretionary cash bonuses are designed to reward executives for their performance and our performance. Furthermore, the cash incentive bonuses and long-term equity incentive compensation align the executive’s goals with our goals and those of our shareholders. The components of incentive compensation (the cash bonus and equity awards) are significantly “at risk,” as the cash bonuses and the value of the equity awards may depend on our business successes. Collectively, these components are designed to reward and influence the executive’s individual performance and our short-term and long-term performance.

Base Salary

We pay our Named Executive Officers base salaries to compensate them for services rendered each year at a pre-established amount. The following table summarizes the annual base salaries for the year ended December 31, 2020 of our Named Executive Officers:

Effective for 2021, the base salaries of each of Messrs. Farrar, Szczepaniak and Taylor were increased to $600,000, $375,000 and $300,000, respectively.

Cash Incentive Bonus

In addition to receiving base salaries, our Named Executive Officers are eligible to receive cash incentive bonuses.

We awarded discretionary cash bonuses to our Named Executive Officers for 2020. Cash bonuses are designed to incentivize our Named Executive Officers at a variable level of compensation that is “at risk,” based on our performance and the performance of each executive. Bonuses are awarded at the discretion of the Compensation Committee, with input from our CEO. We use discretionary bonuses to reward corporate and individual performance. In determining the amount of cash bonus for each Named Executive Officer, we considered the key considerations discussed above. The following table provides the cash incentive bonus earned by each Named Executive Officer in 2020. Each bonus was paid in January 2021, but reflected as 2020 compensation.

Long-Term Equity Incentive Compensation – 2020 Omnibus Incentive Plan

In addition to base salary and cash bonus compensation, each of our Named Executive Officers was provided long-term equity incentive compensation. The use of long-term equity incentives creates a link between executive compensation and our long-term performance, thereby creating alignment between executive and investor interests.

Equity awards under our 2020 Omnibus Incentive Plan are designed to reward our Named Executive Officers for long-term shareholder value creation. The IPO awards made to certain employees under the 2020 Incentive Plan were granted to recognize such individuals’ efforts on our behalf in connection with our formation and the IPO, to ensure their alignment with our shareholders’ interests and to provide a retention element to their compensation.

The purpose of the 2020 Incentive Plan is to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders.

In connection with our January 2020 IPO, we granted unvested options with a pro rata three-year vesting schedule to our Named Executive Officers. The following table provides the grant date fair value of long-term equity incentives granted to each Named Executive Officer during 2020:

In January 2021, we granted to each of Messrs. Farrar, Szczepaniak and Taylor 180,000, 60,000 and 60,000, respectively, shares of three-year restricted stock.

Other Considerations

Compensation Risk Management

Our Compensation Committee has considered whether our compensation policies and practices reward employees for imprudent risk taking and has determined that our compensation policies and practices are not reasonably likely to have a material adverse effect on us. The Compensation Committee’s assessment will be conducted annually. Management reviews with our Compensation Committee our compensation programs, focusing on incentive programs, risks and mitigation factors. Based on the totality of this information, the Compensation Committee determines whether any portion of such compensation encourages excessive risk taking and concludes whether or not our compensation programs are reasonably likely to have a material adverse effect on us.

In assessing risks, our Compensation Committee considers mitigating factors such as the multiple elements of our compensation packages, including base salary, cash bonuses, equity awards that are subject to vesting conditions, our ability to implement or enforce clawback policies and regulations and other factors deemed relevant by the Committee.

Tax Considerations

Our Compensation Committee is aware that tax deductions for executive pay in excess of $1 million per year is not deductible for tax purposes. Our Compensation Committee awards executive compensation based on the factors described above, notwithstanding the non-deductibility of certain amounts.

Executive Compensation Tables

Summary Compensation Table

Some of the items under this caption constitute taxable income to the Named Executive Officers. These amounts are reported as taxable income for the executives pursuant to IRS rules which differ from the SEC reporting rules used to report the amounts reflected in this table and these notes.

None of our Named Executive Officers had non-equity incentive plan compensation, pensions or qualified deferred compensation earnings required to be reported above.

2020 Compensation Plan Outcomes

Grants of Plan-Based Awards in 2020

Equity Awards to Our Named Executive Officers

Non-Equity Incentive Plan Awards to Our Named Executive Officers

None

Outstanding Equity Awards at Fiscal Year-End 2020

This table provides information on the holdings of equity awards by our Named Executive Officers at December 31, 2020.

Option Exercises and Stock Vested in Fiscal 2020

No equity vested during 2020 nor did any of our Named Executive Officers exercise options or warrants during 2020.

Pension Benefits in 2020

None

Non-Qualified Deferred Compensation

None

Potential Payments upon Termination of Employment or Change-in-Control

The following information describes and quantifies (where possible) certain compensation that would become payable under then-existing agreements and plans if the named executive officer’s employment had terminated on December 31, 2020.

Named Executive Officer Termination Payments

No Severance Payments

None of our executive officers are entitled to any severance payments.

Summary of Payments upon Termination or Change-in-Control

The table below shows the estimated value of payments to which a named executive officer would have been entitled if the executive’s employment had been terminated on December 31, 2020. For purposes of valuing these amounts, we made the following assumptions:

Audit Matters

The Audit Committee selected KPMG LLP as our independent registered public accounting firm (our independent auditors) for 2021, and we are requesting our shareholders to ratify this selection. This proposal is being submitted to shareholders because we believe that this action follows sound corporate practice and is in the best interests of the shareholders. If the shareholders do not ratify the selection, such a vote will not be binding, but the Audit Committee will reconsider the selection of independent auditors. If the shareholders ratify the selection, the Audit Committee, in its discretion, may still direct the appointment of new independent auditors at any time during the year if the Committee believes that this change would be in our and our shareholders’ best interests.

Fees Paid to Our Independent Auditors

The following table sets forth certainthe aggregate fees incurred by us for 2020 and 2019 relating to services performed by KPMG:

A description of the types of services provided in each category is as follows:

The Board considered whether providing the non-audit services included in this table was compatible with maintaining KPMG LLP’s independence and concluded that it was.

Audit Committee Pre-Approval Process

Consistent with SEC policies regarding auditor independence and our Audit Committee’s charter, the Audit Committee has responsibility for engaging, setting compensation for and reviewing the performance of our independent auditor. In exercising this responsibility, the Audit Committee has established procedures relating to the approval of all audit and non-audit services that are to be performed by our independent auditor and pre-approves all audit and permitted non-audit services provided by any independent registered public accounting firm prior to each engagement.

We have been advised that representatives of KPMG will attend the Annual Meeting and will have an opportunity to make a statement.

Audit Committee Report

Management is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles and the establishment and effectiveness of internal controls and procedures designed to assure compliance with generally accepted accounting principles and applicable laws and regulations. Our independent auditors during 2020, KPMG LLP, were responsible for performing an independent audit of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (PCAOB) and expressing an opinion as to the conformity of our financial statements with generally accepted accounting principles. Our independent auditors had free access to the Audit Committee to discuss any matters they deemed appropriate.

In performing our oversight role, the Audit Committee reviewed and discussed our audited financial statements with each of management and our independent auditors and discussed with our independent auditors the matters required to be discussed by Auditing Standards No. 16, Communications with Audit Committees, as required by the PCAOB. The Audit Committee has received the written disclosures and letters from our independent auditors in accordance with the applicable requirements of the PCAOB regarding auditor independence and has discussed with the auditors the auditors’ independence. Based on the reports and discussions described in this Report, the Audit Committee recommended to our Board that our audited financial statements for 2020 be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC.

Submitted by the Audit Committee of the Board of Directors

John P. Pitstick – Chair

Joy L. Schaefer

Dorika M. Beckett

Stock Ownership Information

Beneficial Ownership by Principal Stockholders

Based on information available to us as of March 22, 2021, the following are the only stockholders known to us to beneficially own more than five percent of our outstanding Series A Convertible Preferred Stock (“Series A Preferred”) and our common stock. Except as noted, all percentages in the table are based on 45,000 shares of Series A Preferred outstanding and 20,567,494 shares of common stock outstanding. Holders of Series A Preferred are entitled to vote together with holders of common stock. Each share of Series A Preferred entitles the holder to the same voting power as approximately 259.74 shares of common stock.

Beneficial Ownership of Directors and Management

The following table below sets forth information as of the close of business on March 22, 2021 regarding the beneficial ownership of our Common Stockcommon stock by: (i) each of our directors; (ii) each of our Named Executive Officers and (iii) all directors and executive officers as a group. Unless otherwise noted, each beneficial owner exercises sole voting and investment power over the owner’s reported shares. All percentages in the table are based on 20,087,494 shares of common stock outstanding.

Equity Compensation Plan Information

Outstanding Equity Awards

The following table summarizes information regarding our shares under our equity compensation plans as of December 31, 2020:

Rate of Equity Award Grants

During 2020, we issued a total of 785,000 awards under our 2020 Omnibus Incentive Plan, representing a rate of equity award grants, or so-called burn rate, of approximately 3.9%.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who beneficially own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC within two business days. To our knowledge all such persons filed the required reports on a timely basis during 2020 with the exception of the following:

Additional Information

Biographies of Other Executive Officers

Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the safe-harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements about our future. Forward-looking statements may contain expectations regarding revenues, earnings, operations, share prices (including estimates or projections of the future prices of our shares), future market conditions, future compensation plans or policies, expenses and other results, and may include statements of future performance, plans and objectives. Forward-looking statements also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ materially from the anticipated results indicated in these forward-looking statements. Information regarding important factors that could cause actual results to differ from those in our forward-looking statements is contained in our Annual Report and other documents we file with the SEC. Any forward-looking statement speaks only as of the date on which that statement is made. We will not update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as required by applicable law.

Other Important Information for Our Shareholders

Online Access to Proxy Materials

This Proxy Statement and the following additional proxy materials are available online at proxyvote.com:

Attending our Annual Meting

Holders of our shares at the close of business on March 22, 2021, the record date, are permitted to virtually attend our Annual Meeting. At the close of business on the record date there were 20,567,494 shares of common stock outstanding and entitled to vote, each of which entitles the holder to one vote on each proposal, and 45,000 shares of our Series A Preferred Stock with voting rights equivalent to 11,688,310 common shares – with total combined voting rights equal to 32,255,804 votes.

VOTING

Whether you hold shares directly as a shareholder of record or beneficially in street name, you may vote your shares without attending the Annual Meeting. Voting instructions, including instructions for both telephonic and internet voting, are outlined in the Notice of Internet Availability of Proxy Materials and on your proxy card.

Other than voting during the virtual Annual Meeting, the deadline for voting by telephone or using the internet is 11:59 p.m. EDT on Tuesday, May 18, 2021.

Shares represented by properly executed proxies, received by us or voted by telephone or via the internet, which together compriseare not revoked, will be voted at the Annual Meeting in accordance with the instructions contained in such proxies. Subject to the broker non-vote rules, if instructions are not given, proxies will be voted for the election of each nominee, for every year as the frequency for our advisory vote on executive compensation, for the approval of our executive officer compensation and for the ratification of our independent auditors. Your shares will not be voted if you do not return a signed proxy card or vote by telephone, via the internet or during the virtual Annual Meeting.

Shareholder of Record / Street Name

Shareholder of Record. If your shares are registered directly in your name with our transfer agent, American Stock Transfer and Trust Company, you are considered a “shareholder of record” of those shares.

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a bank, brokerage firm or other financial organization, then you are a beneficial owner of shares held in street name. In that case, you will have received these proxy materials from the organization holding your account and, as a beneficial owner, you have the right to direct that organization as to how to vote the shares held in your account.

Revocation of Proxies

Any proxy may be revoked at any time before it is exercised by giving written notice of revocation to our Corporate Secretary, at our address set forth herein, by executing and delivering a later-dated proxy, either in writing, by telephone or via the internet, or by voting stock,virtually at the Annual Meeting. Virtual attendance at the Annual Meeting will not alone constitute revocation of a proxy. If your shares are held in a brokerage, bank, or other institutional account, you must obtain a proxy from that entity showing that you were the record holder as of [•], 2020, the Record Date (exceptclose of business on March 22, 2021 in order to vote your shares at the Annual Meeting.

Required Votes for Each Proposal

Election of Directors – Our Bylaws require that each director in an uncontested election be elected by the vote of the majority of the votes cast with respect to such director. A majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director.

Vote on the Frequency of Advisory Votes to Approve Executive Compensation – The frequency with a plurality of the votes cast will be deemed to be the approved result.    

Approval of Executive Officer Compensation – The approval of our Named Executive Officers’ compensation requires the affirmative vote of the holders of a majority of our shares voted on the matter. The vote is advisory and therefore is not binding on the Compensation Committee, our Board of Directors or us.

Ratification of KPMG LLP as indicated below) by:Auditors – Ratification of the selection of KPMG LLP as our independent auditors requires the affirmative vote of the holders of a majority of the shares voted on the matter.

Broker Non-Votes and Abstentions

A “broker non-vote” occurs when your broker submits a proxy for the meeting with respect to the ratification of our auditors but does not vote on non-discretionary matters because you did not provide voting instructions on these matters. Abstentions and broker non-votes will not be counted as votes cast and therefore will have no effect for the purpose of determining whether a majority or plurality of votes cast has been achieved for our non-discretionary matters.

Requests for our Annual Report and Governance Documents

You may request a written copy of the following documents without charge by writing to our General Counsel and Corporate Secretary, Roland T. Kelly, at 30699 Russell Ranch Road, Suite 295, Westlake Village, California 91362, or go to www.velfinance.com for an electronic copy.