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We have made major updates to our 4-1 Program for 2022, which will help us focus the business on the types of loans that are most profitable for us. Some of these changes will make it more difficult for us to work with small projects, but position us better overall for the long run.

The change that makes it more difficult to work with small projects is the minimum amount of funds that borrowers must already have raised to qualify, from $1M USD to $10M USD or $10M Euro. Our profitability on smaller loans was negligible, and for some reason the smallest borrowers always seem to be the biggest headaches. As a result, we will only work on loans where the client's initial funds are $10M or more moving forward.

We have also made some changes to the deposit mechanism for loans. As has been the situation for some time, clients have the option of using their own bank to hold their deposit (providing it has been set up in a manner that works for their loan), or by using a BG/SBLC. Both of these mechanisms result in a "discounting" of the amount held by the client when assessing their loan (usually to 80% of the face value). To prevent discounting, previously there was also the option of depositing the initial funds into a US Investment Bank (where the funds are housed in their US Federal Reserve Account) but that method has resulted in delays that we want to avoid in the future. As a result the deposit method now is to deposit the funds into a registered and fully regulated security (a fixed income coupon bond), where the bond issuer/guarantor is a Banking and Investment company called XXXXXXX (which is co-owned by Credit Suisse). The bond represents a formal debt of XXXXXXX (and through them, of Credit Suisse) to the depositor of their amount. All borrowers using this deposit method will have every opportunity to vet the bond and the issuing bank before making their deposit, to confirm its security and the security of their funds.

Clients who have initial funds of $12.5M USD or more will have the option of leaving their funds in their own bank, and their bankers working with ours to block the funds to the bond. Clients withe less than $12.5M USD will be required to move their funds in order to attain loans - there will be options for this as well. We have a number of internationally recognized custodial banks (such as HSBC UK, TD-NYC, the Bank of Ireland and Commonwealth Bank in Australia) that will hold deposits in non-depletion accounts (where all funds cannot move, except to be returned to the account of origin), and the bankers from the custodial bank will also work with your banker to show how the funds are secured at their bank, and doubly guaranteed by the bond.

The most important element of that process is ensuring the security of the client's initial funds. But another important element is the "coupon" on the bond is that it pays interest to the client throughout the time their funds are pledged to the bond. That interest rate is 7% per annum, and proceeds are paid monthly. Those proceeds are the client's to do with as they please, and can be used to defray interest costs, to repay principal, or for anything else the client wishes that is unrelated to the loan. As the lending interest rates continue to rise, this coupon payout is of great value to all clients.

The next change for 2022 is the length of time for deposits to be held. Previously client deposits were held for 13 months. As a result of new requirements from our insurers, deposits must now remain in place until the loan is repaid (or closed by some other method). There is still never any claim or encumbrance against those funds, but they must remain in place until the loan is repaid. After assessing the project, if it is accepted for a loan, we can offer then anywhere from 1X (the amount of their initial funds) to 4X, to even higher multiples if our risk assessment finds it justified.

Finally, another change is the introduction of a "non-recourse/non-repay" loan. When we see a project that we think is a sure winner, we may offer to fund the project in a more "venture capital" manner. The project would be required to still have raised 20% of the funds, but we may offer to then make their loan "non-repay". This means they will never have to repay any principal or interest. We would negotiate an equity position in the project to share in the profits, but this is something we can offer to projects whose profit potential we feel strongly about.

There have been no changes to our SBLC 100% Funding Program, or our Asset Backed Line of Credit Program.

(NOTE, Dec 2, 2021; this blog post refers to a process that is no longer current. Please see the Multiples Lending Program page for the most current information about that program).

In our blog post of April 13 we described how our process had been updated so that each of our clients's initial 20% funds would be held with a regulated investment bank, in the bank's primary account (which is housed at the US Federal Reserve Bank). The plan at that time was that the borrower's 20% funds would be wired to the investment bank's account. Borrowers had complete security of their money by having it held by a FINCEN regulated bank. However, it remained a fact that their funds were being held by a 3rd party.

We have now made another significant advancement to our process to offer the Borrower an even higher level of security, where THEY (the Borrower) never relinquish control of their funds.

Upon reaching the point in the loan setup process where the Borrower must position their 20% funds to begin the final compliance approval process, they are no longer required to move their money to the control of a 3rd party. At that point in the process, we (FilmCabbage) will make arrangements for the Investment Bank to reach out directly to the Borrower. The bank will onboard the Borrower as a client, and set them up with THEIR OWN ACCOUNT with the investment bank. That way, when their 20% initial funds move (as required) to that bank, it will be in the Borrower's OWN ACCOUNT. The Borrower will have full access to this account online so they can see their funds and have access to them at any and all times. If the Borrower decides to withdraw from the loan process, they themselves make the arrangements with the bank to wire it back to their original account. The Borrower always has complete control.

This is a significant improvement to the comfort level for our borrowers, as they now deal directly with the bank and never have move control of their money to a 3rd party. Their funds are always in an account in their name, and they retain complete control of them at all times. The Borrower will still be required sign a "Deposit Agreement" (where they agree to the required terms of keeping their funds undepleted and unencumbered through the appropriate length of time), but FilmCabbage will have no involvement whatsoever with their funds. It will be handled only between the Borrower and the Investment Bank.

Our process remains fluid, as we are always making small changes to improve the process for both us and for our Borrowers. And now, no matter the size of the project the Borrower always has total control of their own initial funds, so there can be no question about the complete safety and security of those monies.

(NOTE, Dec 2, 2021; this blog post refers to a process that is no longer current. Please see the Multiples Lending Program page for the most current information about that program).

2020 and into 2021 has presented major challenges for most businesses, FilmCabbage included. Our regular 4-1 program went on hold for a time in 2020 (in that we weren't taking any new applications) as many of our required banking processes were seriously affected by COVID-related issues: even today some of those banking processes experience delays.

The advantage to having this downtime has been the continuing evolution of our lending programs. We introduced our Asset Backed Line of Credit program last May, followed in the late summer by the SBLC 100% Funding program. We have also continued to improve the 4-1 Lending Program, now to the point where the security behind all client-related funds is as iron-clad as we can make it.

For clients seeking a $40M+ loan (so their initial funds ready to deploy into the program would be $10M or more) we've made it possible for clients to keep their funds in their own bank accounts, if the accounts are set up in the appropriate way. Additionally, for clients whose initial funds are less than $10M we have changed that process in such a way as to offer them the best possible security.

Previously we had those deposits going into Law Firm escrow accounts, secondarily secured by SKRs (safekeeping receipts) backed by our gold holdings with Brinks and G4S. We experienced a few logistical issues with that across 2020 and as a result have an even more secure method in place moving forward. Rather than law firm escrows, client funds are now held in the safekeeping account of a US-based investment bank, fully regulated as a bank by the BSA (Bank Secrecy Act), AML (anti money laundering) protocols and Fincen (Financial Crimes Enforcement Network). This bank acts as the safekeeping agent, and houses these deposits in their account with the Federal Reserve Bank in Kansas City. The investment bank provides to the depositor a letter confirming that they will hold the funds per the deposit agreement , assuring the client that those funds can ONLY be moved back to the account they were wired in from, and confirming the terms in which the deposit will be returned.

Our program continues to evolve, both for the security of our clients but also to provide better security for FilmCabbage, all of which leads to much easier and simpler client relationships and facilitation of projects.

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