MULTIPLES LENDING PROGRAM
Offered to select clients and industries since 2005, our "Multiples Lending Program" is based on multiples of the amounts already raised for the project by the borrower. As the project owner, you are required to bring a minimum amount of funds to the project (at least 25% of the total costs), and we can lend you multiples of that initial amount to fulfill the budget. Depending on the project and our assessment of the risk of the project, the multiple offered could be anywhere from 1X that initial amount, to 4X (though 3X and 4X is the most frequent).
Until the end of 2021 the minimum amount of funds that needed to be raised to qualify for this program was only $1M USD. Due to changes in the requirements of our banking and insurance partners, as well as changes in the marketplace, effective immediately the minimum amount of funds required to qualify will be the equivalent of $10M USD or $10M Euro. This change makes it very difficult for us to work with projects with budgets of less than $20M USD, unless they are part of a slate. We have some alternate solutions available for smaller projects, but to qualify for these "multiples" based loans, small stand-alone projects no longer easily fit into this program.
The basic methodology behind this program is that your initial funds are set aside and bonded, which allows for the generation of the multiples of your initial amount to furnish your loan. When the funds are bonded they are pledged to a fully licensed and regulated bond (though they never need leave your bank account), which shows our regulators that the appropriate amount of funds have been "set aside" by the borrower. When the initial funds are positioned in that way, our Bank expands our existing credit lines, and we use that additional credit to furnish your loan. There are no direct ties between the borrower and our credit lines - FundingNet alone is responsible for the repayment of those credit lines. We simply lend the funds to your project as a private loan between private entities.
If your initial funds have been provided by a 3rd party investor/lender who wants those funds returned prior to the repayment of your loan, then you should structure yur project and application package in such a manner that you can repay the investor from your loan disbursements. Note that the multiple that you will be approved for may not necessarily be the same as the multiple that you requested - all projects are assessed on a case-by-case basis.
There are several methods available to our borrowers that ensure their initial funds are positioned appropraitely throughout the loan term. All deposit options fully guarantee the safety of the Borrowers capital. To see how your funds are safely protected against all perils, please see the "Financial Safekeeping" heading on this page, below.
TO QUALIFY FOR FUNDING:
To be eligible for funding, your project must fit the following criteria, in full:
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Your project must have the production elements established. A fully developed business plan must already be in place. If you only have a script but no budget or production plan, you are not yet ready to be funded. Your project doesn't necessarily have to be ready to produce immediately, but it should be basically ready to go.
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Minimum funds already raised. There must already be at least the equivalent of $10M USD/Euro ready to deploy into the project, or slate of projects. As a requirement to qualify for our funding multiples, those initial funds must sit idly on the sidelines throughout the loan term, either in your own bank account or in the keep of one of our regulated custodial banks.
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Timing. All FilmCabbage loans must be approved through banking compliance, a process that takes approximately 60 days. If you require funds immediately, and cannot wait for compliance confirmation, your project will not qualify. Additionally, our funds are released in traunches as they are consumed into the production, so it takes 8 to 12 months for them to be fully deployed. If you require all funds on day 1, we may still be able to assist you, though the process may take a different directing, and see you working directly with one of our banking partners.
INTEREST RATE
FilmCabbage offers borrowers an industry leading interest rate - not only do we provide you with up to 4X multiples of the amount of your capital as a credit facility, but we do it at the rate of 3.5% per annum, OR "LIBOR +2", (based on the existing US 12-Month LIBOR rate) - WHICHEVER IS HIGHER The current LIBOR rate is on the right side of the page linked here:
RISK MITIGATION
We have designed our loan process in a way to ensure that your initial funds never exposed to ANY risk. In fact, your initial funds will sit safely on the sidelines, usually in your own bank account, throughout the entire loan process.
To apply for funding for your Entertainment Project, you will need to submit an application package, but prior to doing so you should first contact us to discuss your project and review its business plan to make sure that it appears to be a good fit for our program. If it appears to be, we will provide you with all of the required documents to submit to complete your application package.
Once your application package is submitted, we have our intake and risk assessment teams review all elements of the submission. If your project is accepted, you will receive a comprehensive Term Sheet that outlines the loan terms, including the LOAN MULTIPLE that you have been approved to receive. Our issuance of this term sheet confirms that we're "in", and willing to fund your project - as long as the loan terms are acceptable and the process steps are followed from that point, your project is a go.
FilmCabbage loans do not require any additional corporate or personal guarantees - each loan is secured only by the actual project that our money is helping to create. You are not required to secure the loan with any additional personal or corporate assets. There are also never any up-front fees.
FEES
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No Engagement Fees
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No Due Diligence Fees
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No Application Fees
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We pay our own costs, and you pay yours. As is standard for any loan, as the borrower you will be responsible for the legal costs of closing the transaction. Closing costs will be disclosed in your Term Sheet, and a minimum amount will be due to our appointed law firm (after your project has been assessed and accepted, and both parties have agreed to the loan terms) in order to complete the contracts and close the deal.
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There will be a 3% "Lending Fee," due AFTER formal "close" of the deal and commencement of loan disbursements. This fee is deducted from the loan funds themselves - never from your original capital.
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Throughout the loan term there will be a small monthly accounting fee for a loan oversight custodian who will reconcile the costs of the production to the funds drawn, confirm that the project remains on schedule, and monitor the repayment of principal and interest. This fee will be fully described in your Term Sheet.
HOW TO APPLY
The process to apply for and receive financing from FilmCabbage is as follows:
STEP 1: Contact us to discuss the details of your project so that we can determine if it suits our lending model. If it does, we will provide you the applications and documents you'll need to apply for a loan.
STEP 2: Submit your application package. This will include:
1. Proof of Funds, showing appropriate initial funds ready to deploy into the project
2. Project Business Plan
3. Project Use of Funds Schedule / Preferred Drawdown Schedule
4. Entertainment Loan Application Form
5. Initialed and signed FAQ document
6. Personal Identification Information of Applicant/Signatory
(required for KYC, Banking Compliance and Anti-Money Laundering protocols)
7. Articles of Incorporation.
8. Board Resolution (stating the signatory has the ability to bind the corporation to contracts).
9. Letter From the Investor Posting the Initial Funds (if applicable)
We then submit your project to our risk assessment team, who will analyze your application package to ensure the project makes sense for us to participate in.
STEP 3: If your project is accepted for funding, you will be sent your comprehensive "Term Sheet" which outlines the primary terms of the loan. Once both parties have agreed to terms, both parties sign the Term Sheet to proceed to the next step.
STEP 4: BANKING COMPLIANCE
At this point you will be put in direct contact with the Bond Group. They will handle all elements of safekeeping for your initial funds. Please see the section "Financial Safekeeping" below, which explains the basics of how this is handled. Once your initial funds are positioned appropriately, there is a 60 day compliance period where our insurers and banking regulators examine and approve the loan file, and complete any required underwriting.
STEP 5: During the compliance confirmation, we create the Final Loan Agreements for your signature. All borrowers will be required at this time to pay the minimum closing costs amount with our paymaster (who will use those funds to retain the law firm that will close the loan for us) in order to develop these contracts.
STEP 6: Once compliance clearance has been complete, your loan facility is opened and disbursements commence per your loan contract.
FINANCIAL SAFEKEEPING
The key element of this FilmCabbage program is the requirement that to qualify for a loan, a minimum of 25% of the total budget must already be in place. It is the existence of the borrower's project, coupled with those initial funds already being set aside in a regulated environment, that makes the multiple that we lend to them possible.
The only requirement of those initial funds is that they remain safekeeping throughout the loan term. If those funds were to become otherwise encumbered or depleted in any way, it would violate compliance requirements and cause the loan to collapse. As a result, to ensure compliance with all banking regulations as well as similar requirements from our insurance partners, there are specific methods and oversight required to guarantee that those funds will remain positioned appropriately throughout the loan term.
There are four approved methods (listed below) for this assurance currently available. All four of these methods have been designed to specifically ensure our clients/borrowers that their funds are fully guaranteed and secure at all times.
METHOD 1. THE BORROWER'S INITIAL FUNDS AMOUNT TO $10M USD/EUROS OR MORE; FUNDS ARE SECURED BY A REGISTERED / REGULATED BOND, AND FUNDS REMAIN IN THEIR OWN ACCOUNT AT THEIR EXISTING BANK.
In order to receive a Multiples Loan, the borrower's initial funds must amount to $10M USD or more. Smaller amounts will not qualify for a loan of multiples of their initial amount. If the Borrower banks at a “Top Tier” bank in an acceptable jurisdiction, their initial funds can be allowed to remain in their own bank account, under their control. This account must be set up in a way that still allows the loan multiples to be processed correctly. This would be accomplished by the borrower creating a brand new SPV that will never do anything but own that bank account, and house the Borrower's Project. Then the Bond Group would work with the borrower's bankers to "block" the account in favor of the bond. Usually this is done with the issuance of a returnable "CD" (Certificate of Deposit), which pledges those funds to the bond. CDs are usually valued at 100% of face value, so in almost all cases there will be no discounting and the full CD face value will be used as the base amount for the borrower's muliples.
NOTE ** This bond has a coupon rate of 5% per annum. That means that during the time your funds are in safekeeping they will continue to earn a well-above-average guaranteed return of 5% per year. Proceeds are paid monthly, so in most cases the bond is paying out proceeds before the loan has even completed it's 60 day compliance process. The full disclosure package about the bond must come from the Bond Group, as they are fully regulated and licensed in the sale of securities. BUT AT ALL TIMES, in everything having to do with your initial funds, you will be dealing ONLY with licensed and regulated securities and banking entities, so that you can have full confidence in the security of the process.
Once the borrower is directly in touch with the Bond Group, they receive full information from them about the bond, the guarantees behind it, and a full description of the security of their funds. They can take this information to their bankers and securities lawyers to examine - it will stand up to any level of due diligence.
Once satisfied that the bond and financial guarantees behind it fully secure those funds, one of our banking compliance officers would be added to the account as a signatory to have full access to the account to monitor it at their discretion. Since the funds will already be blocked, there is no possible way any signatory can do anything with them - however we also recommend that all accounts require multiple signatories for any activity, to provide borrowers with the peace of mind that nothing can ever happen to those funds.
With those funds secured in your own account and pledged to the bond, it will generate the appropriate multiples for the loan, and begin paying out the monthly proceeds on the 5% coupon rate. Any borrowers following this process will again work with only licensed and regulated securities and banking entities, so they again have full assurance of the security of their initial funds at all times.
METHOD 2. THE BORROWER PURCHASES US TREASURY BILLS, AND HOLDS THEM ON ONE OF THE BOND GROUP'S CUSTODIAL BANK'S AMERITRADE PLATFORM.
Another method that can be used (and one that is slightly simplified) is for the borrower to purchase US Treasuries (aka T-Bills) from their own Bank. These will be purchased in the borrower's own name and registered with the US Government as such. The borrower then (with the assistance of the Bond Group) has those US Treasuries forwarded to TD Bank New York, where they will continue to be held in the Borrower's name so that the bond can be issued to them in their name as well.
Many clients prefer this method over using a CD because their funds/T-Bills always remain in their name. With a CD, the CD must name the Bond Issuer as the CD beneficiary. Due to how the CD and Bond are set up there is no risk with that process, but the T-Bill option is often "more comforting" to the client. As well, borrowers can purchase US Treasuries no matter where they are in the world (which can allow funds held in less stable banking jurisdictions - eg China - to be used easily). There is no cost to this method, just a simple purchase of the US Government Securities, and can be done by virtually any bank right at the counter.
In addition to the securities being held in the borrower's name, there is the added benefit of the T-Bill's interest earnings. T-Bills pay interest, so the borrower will actually receive a few additional points paid by the US Government due to their T-Bill participation. Google "US T-Bill Rates" to see the current interest rates being paid by Treasury Bills.
NOTE ** As described in "Method 1" the bond has a coupon rate of 5% per annum.
METHOD 3. THE BORROWER'S INITIAL FUNDS AMOUNT TO $10M USD/EUROS OR MORE; FUNDS ARE SECURED BY A REGISTERED / FULLY REGULATED BOND, AND THEIR FUNDS HELD IN SAFEKEEPING WITH ONE OF THE BOND GROUP'S CUSTODIAL BANKING PARTNERS.
If the borrower does not deal with a Top Tier Bank, or if their bank is unable to issue a "CD", or if they are not interested in "Method 2", the option will be available to move the funds to one of the Bond Group's custodial banks. The process for receiving information about (and confirming) the bond will be the same as described in "Method 1" above, but rather than the Bond Group work with a returnable CD from your bank, the funds would be required to be moved to one of their custodial banks. Depending on your geography, the custodial bank used may be Toronto-Dominion NYC, HSBC UK, the Bank of Ireland or Commonwealth Bank in Australia.
If using a custodial bank, that bank will provide their own guarantees (on a bank to bank basis) that they will hold those funds in a non-deplete account (where the funds cannot be moved anywhere but back to the account they came from), that the funds can be returned to the client with 60 days written notice, and that in the event of any “default” the funds will be returned immediately to the account from which they originated. Your banker will provide you with the details of that bank-to-bank communication/guarantee.
Once the borrower has vetted the bond and all other elements of the deal, the bank will issue the borrower their bond, which represents a formal debt to the borrower from the issuer in the amount of their initial funds. The borrower will sign off on it, and wire their funds to the appropriate custodial bank for safekeeping. This bond can be redeemed at any time, with 60 days written notice. However, if the bond is redeemed prior to the loan being repaid, it will collapse the loan and result in its immediate call.
NOTE ** As described in "Method 1" this bond has a coupon rate of 5% per annum.
METHOD 4. SBLC or BANK GUARANTEE – MINIMUM $10M USD/EUROS or GREATER (initial funds remain in borrower's bank account, and a SBLC / BG / CD issued by their bank)
Utilizing this process we can ONLY work with Top Tier Banks in highly stable banking jurisdictions.
Under this method the borrower/investor's capital will remain in their bank account, and that bank would issue to the Bond Group's assigned bank a “banking instrument” such as a “SBLC” (Standby Letter of Credit) or “BG” (Bank Guarantee). Keep in mind that the issuing bank will charge fees (often substantial ones) to create, issue, and eventually recall and liquidate these instruments, and those costs will be fully the responsibility of the borrower. Both banks (issuing and receiving) will set up the transaction in as way that the SBLC/BG will be held by the receiving bank until the loan is repaid in full; at the end of the term it will be returned in full value and without encumbrance. This will likely require the Borrower to obtain extensions on the instrument used.
SBLCs/BGs are typically discounted by the receiving bank (as the funds are not in their institution). In most cases the value of this instrument will be discounted to 80% of the face value, and the amount of the loan multiples based on the discounted amount. The discounted amount will also be bonded via the same banks/securities companies, so the discounted amount will also receive the monthly payout of their 5% annual interest on the discounted amount.
Please note: this process is meant for clients that have a high level of sophistication in banking and finance, and who will deal directly with bankers who have extensive experience in setting up such instruments.
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FilmCabbage has designed these safekeeping processes using best in partners and processes to mitigate risk and guarantee the complete security and safety of ours and our clients' assets, while adhering to all required compliance and legislative requirements. Each of the processes described offer a full 100% guarantee of the safety and security of all funds in our program, each of which is fully verifiable.
If you have any questions about FilmCabbage's safekeeping processes, please contact us today.