The Ongoing Evolution of the FilmCabbage Program

When we introduced FilmCabbage in 2018, the processes we had in place for the FundingNet Multiples Program had been operating reliably and problem-free since 2005, when the program was strictly a wholesale lending program. Since the onset of the COVID19 epidemic in 2020 there have been some challenges to those processes, which has resulted in major updates to our program to ensure the security of our clients' initial funds.

Whereas we had previously used 3rd party fiduciary companies and registered escrow agents to hold client funds in safekeeping, FilmCabbage clients had often asked us for a more regulated method - one where the security of their funds would always be under the constant scrutiny of financial authorities. As a result, as described on the various pages of the FilmCabbage website, we have overhauled all processes related to client funds so that everything now exists in a completely regulated environment where the borrower / investor's qualifying capital is not only overseen by a fully regulated entity, but also earning 5% / yr. while it sits safely on the sidelines.

Now, when clients approach our Multiples or Loan Sponsor Programs they are put directly in touch with a Trust Attorney, who will represent the client in placing their funds in a non-depletion escrow account. There are 7+ ways clients can pledge their funds to this security which, once in place, unlocks multiples of their initial amount to become their loan. Since all funds will be held in a governmentally regulated escrow/trust account (with oversight from the American Bar Association and the US Department of Justice, responsible for overseeing the administration of private trustees under 28 U.S.C. § 586 and 11 U.S.C), and clients deal directly with the Trust Attorney regarding everything having to do with their Qualifying Capital (an attorney who their own lawyers can examine to any level of scrutiny they require) it ensures that their funds are always safe, secured and earning while their loan is outstanding.

Once the loan is settled, their funds are released from any requirement to remain in safekeeping and are free to be re-allocated elsewhere. There is NO CASE EVER that the client's initial funds do not end up back with them - even when the project fails and they are unable to repay us. That's correct - their funds will never be used as collateral for the loan, and never at any risk of loss. Only FundingNet/FilmCabbage's loan funds are at risk, as we assume all potential risk for the project at hand.

At FundingNet and FilmCabbage we strive to ensure any risk to the client funds is always fully mitigated. By evolving our processes and safekeeping mechanisms into a fully regulated environment, we have eliminated any possibility that client funds could ever be exposed to risk or ever be mis-used by the involved 3rd parties. FundingNet never has any involvement with client funds, but in making these changes we have completely ensured that all parties are always fully protected.

Please Watch Out for Fraudulent Documents

(written by FilmCabbage President Cliff Endicott)

Last week I received an inquiry from someone on LinkedIn about "FundingNet's PING Program". This was a surprise to me, as we do not have any such program.

Note:

A "Ping" Program is a specific bank trading platform program, usually done as a Joint Venture between an investor and a trader. We have seen any number of these offerings from other companies, and though there are some legitimate offerings, 99 times out 100 they are flat-out frauds. FundingNet NEVER touches these trades or offers clients any direct participation in any bank trading platforms. Ever.

I told the person inquiring that we do not offer any such program, and he forwarded me two documents that had been sent to him. Once was a PDF outlining a major bank PING offering.... but he said the broker told him it was a FundingNet program. He also sent me a "CIS" PDF that is an even bigger issue because it has FundingNet's name on it (they took our CIS form and modified it, and are using it to lead people to believe this is OUR program, which it is not).

Today the same documents were received by one of our other executives, so these fraudulent documents are making the rounds.

What does this mean? It would appear that someone is out there trying to steal from investors, and are telling people that the offering is a FundingNet program. Obviously this is troubling to us, and we are trying to find the point of origin so we can legally have them cease and desist. But if you see these documents, or if anyone offers you a PING program they suggest is ours, be sure to tell them FundingNet has NO SUCH PROGRAM and that you know the offer is a fraud. Then run (don't walk) away from anyone offering it.

Cliff Endicott

VP - FundingNet

President, FilmCabbage

FilmCabbage Changes for 2022

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 problems that we want to avoid in the future. As a result the deposit method now is to deposit the funds with a highly reputable escrow/trust attorney, who the borrower will work directly with on the safe escrowing of their funds. FundingNet has no presence whatsoever in that part of the process - it is handled entirely between the trust attorney and the client. Clients are encouraged to investigate such trust attorneys to any level of scrutiny they desire, to ensure their being in good standing with the American Bar Association and the Department of Justice (who oversees US-based Trust accounts under 28 U.S.C. § 586 and 11 U.S.C.).

Clients may also potentially also have the option of leaving their funds in their own bank, where their bankers work with ours to block the funds for the duration of the loan. In most cases where the client's initial funds are under $50M USD they will be required to use the escrow/trust route, it is possible our banking partners will find a way to make it work with their money being held in their own account.

The most important element of that process is ensuring the security of the client's initial funds. But another important element is the "interest" paid on the client's initial funds so they continue to earn a small return of interest throughout the loan. That interest rate paid is 5% 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, depending on the size of loan required.

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.