The recent Global Pandemic has created an enormous amount of volatility and uncertainty in the markets, as well as across the economies of the world. In response to this, governments are slashing interest rates in an effort to stimulate economies and to help offer financial support to those Companies in need. As a result, LIBOR has been in free fall for the last few weeks; keep in mind though that these low rates will only last until the Covid19 situation is under control, after which it will return to its normal levels.

FilmCabbage however, is a private business and we need to maintain profitability through this crisis or risk not being able to maintain our business model. As a result, as of March 19, 2020 we are freezing our loan interest rate at 3.5% per annum until further notice. When the crisis has passed we plan to return to our standard LIBOR-based interest rates.

Stay safe everyone!

(originally published 01/24/20)

On the wholesale side of our business (where we lend money to retail lenders for them to mark up and re-lend) the FilmCabbage program has historically only dealt with very large loans - minimum amounts of $80M USD.  When we created the "direct-to-the-end-borrower" version of the program (of which FilmCabbage is a part) we were initially able to set it up to do loans as small as $4M USD, and process those loans exactly the same as the larger ones. However since the program hadn't really been seeing a lot of activity for these smaller loans, in the fall of 2019 the program was reined in to only be able to submit for the banking compliance process a minimum of $20M in loans.  This doesn't mean we can no longer do the smaller loans, but now there is a different process we have to follow to fund them.  That process is to submit small loans only as part of a "group" of loans, where their cumulative total can break through that minimum threshold. For instance, if you need a $4M loan (where your initial funds are the minimum $1M), we can provide the loan but it must be submitted to compliance at the same time as other loans that will total a minimum of $20M in loans.  That could mean submitting 5 different loans of $4M together, or a $4M loan with another loan of $16M.  Or, if we have any $20M loans ready to submit we can submit any/all small deals with it as the total loan amount is already larger than $20M.  This process doesn't tie the small loan together in any way to the other loans, but they simply must be submitted to compliance at the same time to achieve that minimum $20M in loans for all submissions. As a result, sometimes there could be a bit of a time lag in getting smaller deals through the 60 day compliance process.  The compliance period itself will always be around 60 days, but if we don't have a lot of loans to submit at the time when a small one is ready, it might take a few extra days to a few extra weeks to accumulate additional loans to submit that one with. This post is written so that any potential borrowers are aware that the $20M loan requirement is in place and that smaller loans might experience a minor slowdown before they start the 60 day compliance period.  Any loan of $20M or more can be submitted by itself so there will never be any lag there - but smaller deals may see a slightly longer processing time.

(originally published 09/10/19)

Caution is the watchword when it comes to film lending programs. There are always plenty of con artists out there looking for new ways to defraud film investors. Most recently, the president of WeatherVane Productions, another film producer and a former Wells Fargo employee were indicted on charges of fraud and money laundering after years of operation.  See the Justice Department release here: fbclid=IwAR2vWkooM6R-FNU1m3m_N7XLD__jkkJTJL9AQDqB8l6RtbHwnwQGHlN9Sj4

Remembering these people are considered innocent until proven otherwise in court, the indictment alleges that the accused would partner with investors to “match funds” – the production would provide 50% of the money required, and the accused would provide the other half. What they allegedly did instead was build a pyramid scheme where money coming in for new projects was used to fund existing loans, with large amounts going to the accused to finance their lifestyle; like all pyramid schemes it was only a matter of time before it collapsed on itself. The co-accused former bank employee's role was to provide false banking information to investor inquiries that their funds were still in place and safe.

I am posting article this today to describe how the FilmCabbage program is different from the WeatherVane program and others like it in very key ways, in particular relating to the security of the client/investor's funds. During TIFF I've had several people mention the Weathervane case, so I feel it is important to spell these differences out.

First, FilmCabbage takes no partnership or ownership position in the projects we fund. The investor's funds are always their own, and ONLY their own. While they sit in the 3rd party law firm's escrow they can't be leveraged, used to collateralize any additional loans or credit lines, or anything else. Those funds simply sit idle in that account until they are returned to the account of origin. It would appear that WeatherVane was counting on profits from the movies they actually made to help keep their scheme going – alternately FilmCabbage charges interest-only on top of principal, and have no claim on the profits of projects we fund.

Secondly are the organizations FilmCabbage partners with to make our program possible. We work closely with Price Waterhouse (who do our risk assessments and provide the loan custodian in every deal), HSBC Head Office in the UK, only top tier, easily vetted law firms to hold funds in escrow, and Brinks and G4S to provide financial guarantees for the client's funds. In all elements of the FilmCabbage process related to our client's funds, for their peace of mind we partner only with the largest and most respected institutions and service providers in the industry.

But the most important point of differentiation is the pillar of additional security FilmCabbage builds around all client funds. The indictment against WeatherVane states that they used falsified “Performance Bonds” to secure investor money. What FilmCabbage does instead is provide unquestionable, fully verifiable security that cannot be falsified. We have specially developed agreements in place with Brinks, G4S, Ferrari Group and Malca-Amit where they provide an unconditional guarantee of client's funds in full at all times. This guarantee remains in full effect until those initial funds are returned from the escrow to the account of origin.

Additionally, since our clients work directly with their fiduciary law firm and the safekeeping companies in setting up this security, they have every opportunity to vet all documents ahead of execution, so they can be confirmed with lawyers, bankers, or anyone else they desire. FilmCabbage clients can also receive confirmation of their funds and/or the SKR any time that they require.

In any deals where funds are escrowed using a banking instrument (a SBLC or Bank Guarantee) the language of the instrument needs to adhere closely to the ICC/UCP 600 international banking standard, but FilmCabbage ENCOURAGES them to have their bank add a stipulation that the instrument must be returned in full value and without encumbrance. Your own bankers will confirm that this completely guarantees the safety of the money backing the instrument.

FilmCabbage uses these security methods to provide unconditional, independently verifiable security for the funds of each and every client at all times. And since we have no upfront fees, and no fees of any kind until after the borrower is receiving funding from us, every client has the ability to abandon the process at any time if they ever feel that there is any risk, and never be out a single cent.

On a considerably more personal note, I detest the fact that I felt compelled to write this piece. Fraudsters make it incredibly difficult for legitimate lenders to establish trust in the film industry. So that FilmCabbage clients do not need to worry about such issues with our program, our processes are designed to fully confirm everything pertaining to the security of client funds throughout the entire process. FilmCabbage mitigates all financial risk so our clients can always be completely assured their films will be successfully funded.

Cliff Endicott, President - FilmCabbage