ASSET BACKED BANK CREDIT LINE PROGRAM
Some clients find our regular program problematic, in that it takes some time to set up the loan, the drawdown schedule can sometimes cause timing challenges, and they have trouble raising the required 20% in initial funds. This program has been rolled out to offer an alternative that eliminates those potential roadblocks.
Introduced in May 2020, the "Asset Backed Bank Credit Line" program was designed to allow our clients easy access to funding with less initial requirements and less restrictive timelines than our usual lending program. In addition, it allows you to borrow from and work directly with your own bank. FundingNet simply facilitates the transaction, and fully underwrites the project with the bank.
HOW DOES IT WORK?
Unlike our standard program, this program does not require the borrower to have already raised any initial funds at all. To participate in this program, the client will instead need to have:
(a) a project ready to execute that requires a minimum of $5M in funding, and
(b) a banking relationship with an institutional lender that can execute a credit line backed by assets.
In this program FundingNet will work with the client and their bank to set up a dedicated credit line that will be underwritten IN FULL by FundingNet assets. This credit line would be set up in an amount that will fund the client's project, AND ALSO provide an equal amount of credit extended by your bank to FundingNet for use in its own programs. In effect, your bank will set up a line of credit for TWICE the amount your project requires.
FundingNet will provide the Client's bank the amount of pledged assets they determine that they will require to set up the credit line, either through a Letter of Credit from our bank, an asset pledge of gold bullion from our gold holdings, or an SKR (safekeeping receipt) issued by a central bank, Brinks or G4s, that is fully backed by our gold holdings with them. Most banks are most interested in the Letter of Credit, but we can pledge the assets to them in whichever of these three methods the bank prefers.
For example, if your project requires $50M in funding, you would request your bank to set up a $100M credit line, 50% for your project, and 50% to FundingNet. We will provide your bank with a Letter of Credit, SKR or gold pledge in the amount they require to fully secure that $100M credit line.
When our banking team works with your bank to set up the credit line, we will paper the deal with the bank so that it is clear that your project is responsible for servicing half the credit line, and FundingNet is responsible for servicing the other half. But it is always our assets that entirely back the credit line principal 100%.
WHO IS THIS PROGRAM AVAILABLE TO?
We would consider all projects that are ready to execute and have a solid business plan backing it. All that you (the client) need to be able to bring to the table to have your project considered for full funding/underwriting is a bank/banker that will be Ready, Willing and Able to set up the credit line, backed by the asset of their choice.
Once the bank has issued a "soft" confirmation that they can provide the credit line (assuming of course that the asset pledge/LC meets their requirements and all of their Due Diligence requirements are fulfilled by us), FundingNet will require that the client go through our standard application and risk assessment protocols. This is to (a) confirm that we find the project an acceptable risk for us to fully back, and (b) in case of any eventuality where FundingNet may end up holding the note for the loan.
For instance, if the project is not completed by the end of the Line-of-Credit term (or if the bank calls it early), FundingNet would need to pay out the Line-of-Credit to the bank and would then become the lender of record. So as we and our banking teams work with your bank to set up the Line-of-Credit, the FundingNet team will be working with you to process your application and set up all loan agreements to prepare for any instance where we eventually become the lender of record.
Once caveat - there is a time and opportunity cost to developing each credit line and project. As a result, if your film has a budget of less than $5M, it will be too small to be workable under this program, both for the bank in question, and for FilmCabbage. Only projects requiring a minimum of $5M in budget funds will be able to apply.
The most creative element of this program for our participating clients is that they have a zero risk position - they are not required to have any initial funds, they never have to escrow any money..... nothing. They simply facilitate putting FundingNet's bankers in touch with their banker that has expressed interest in participating.
The bank will need a great deal of due diligence confirmations, both about us (FundingNet) and our asset backing the credit line, but they will perform this diligence themselves. When our bankers are in contact with your bankers, we will have to provide them complete CIS information, and allow them to confirm the asset (whether pledged gold, Letter of Credit or SKR) with the issuing bank/entity via SWIFT banking communication. The bank performs all required due diligence confirmations to ensure that everything is appropriately secured.
FundingNet will perform its own diligence/risk assessment on your project to ensure we are comfortable backing it.
ARE THERE ANY FEES?
FundingNet will charge each participating client/project a 3% “Structuring Fee” which is due upon close of the deal (when the line of credit funds become available). This fee will cover all costs of setting up the financing with the bank, including the papering of the bank credit line, the setting up of the contracts between FundingNet and the client, and the setting up of the security required by the bank to back the credit line. This fee can be paid directly from the credit line proceeds, and can be included as a financing cost in your project budget.
We will assign an independent PWC Project Caretaker to your project, to protect our own interests. This caretaker will ensure that all funds are being used appropriately and the project remains on track, and that when it begins generating revenue that is servicing the debt to the bank. This caretaker will levy a flat $5k a month fee for a monthly analysis of the project, which will be billed to the client directly by them (FundingNet derives no income from this oversight).
In addition, since FundingNet is assuming full liability for underwriting your project, we will be taking an equity position in the project for doing so. The level of our equity position will be determined on a case-by-case basis, based on expected EBITDA, and will be part of the contract set up between the client and FundingNet.