(originally published 08/21/19)

Guaranteed investments like Treasury Bonds are always very low yield - no risk usually means very low return.  Locking in your money for years can get you a few more basis points, but in general an annual ROI of 2% is a high return for a guaranteed security. Movies are an entirely different matter.  Investors in film have the opportunity to make a lot of money by providing equity capital to a production.... or they could lose every single cent.  That's why finding equity investors for a film is always challenging - the chance they could lose all of their capital is just too great. BUT..... what if you could invite potential investors to your film and tell them that their investment is completely guaranteed?  That they are 100% iron-clad guaranteed to receive their full principal, plus a 10% premium, within a year..... AND receive a share of backend profits?  That their worst-case scenario would be a minimum guaranteed return of their principal plus 10% - but if it's a runaway success they could add millions on the backend. Would that be an easier sell?  Because that is exactly what FilmCabbage makes possible. Suppose you have a movie with a $10M budget which we have approved for financing.  To receive our loan you need to have the initial funds that make the whole thing happen, which is a minimum of 20% of the budget ($2M).  With that, we lend you 4 times that amount to cover 80% ($8M) of the budget, and with your initial 20% the full budget is covered.  But under this scenario those initial funds must be spent into the project to complete it, and the investor won't see a return until the movie is released and generating revenue.  If it isn't successful, they may never see their money back at all. So instead, rather than have your investor put up 20% of the budget, you would have them put up 25% ($2.5M) instead.  That way our 4 times multiple of those initial funds will cover the entire budget ($10M).  The investor's $2.5M would simply sit idle as the loan loss reserve while our loan funds are spent into the film to complete it, after which the investor funds would simply be returned to them.  Their money wouldn't be spent into the film, and is never at any risk.  The entire time it sits idle, it is fully covered by multiple levels of guarantees;  Brinks or G4S will have a 100% guarantee on it in the form of their SKR (safekeeping receipt – see our “Financial Safekeeping” page for those details), and additionally it is fully insured through the professional insurance of the law firm will hold it in escrow.  Their money is clearly and verifiably fully guaranteed to be returned to them, in full. Since that principal is fully guaranteed to be repaid, all the filmmaker would need to do is pay them their 10% premium as part of the financing cost of the film - by building that financing cost into the budget, FilmCabbage will even lend you the money to pay their premium with.  As a result, within a year the investor has already received their minimum return - 100% of their principal plus a 10% bonus.  As an additional incentive to use their money to trigger your loan, you'd offer them a share of the backend profits that could potentially double or triple their investment.... but their WORST CASE scenario will always be a ROI of 10%. By structuring your loan deal in this manner, FilmCabbage covers the entire cost of the production and shoulders all the financial risk, leaving your investor a completely no-risk position – they are guaranteed to be fully repaid with interest, and retain a share of the backend.  They quite literally have a 100% guarantee of their money - just as though it were a Treasury Bill - only with 5 times the ROI of other guaranteed investments. Have questions on how to make it happen?  Contact us today!

(originally published 08/02/19)

When we launched FilmCabbage back in the spring of 2018, it's clear that we made some naive assumptions – our program offers tremendous benefits to filmmakers with basically no risk, so we assumed developing partnerships and funding movies would be pretty straightforward. But what we didn't consider carefully enough at that time is that most filmmakers don't understand the financial security measures used in high finance very well, and as a result were very reluctant to move forward.

In our lending program all funds sit in a 3rd party escrow until they are “drawn down” into the project. That goes for our 80% as well as our borrower's initial 20%. This is necessary for two reasons: (1) So that funds are disbursed only as required by the project's costs, and (2) To ensure that the borrower's initial funds remain completely “idle”; that they are never depleted or encumbered until after our 80% loan funds are disbursed. The borrower's initial 20% sit in the Trust/Escrow account of a recognized US law firm, but we always also put in place an additional financial guarantee to insure the safety and security of those funds. This is done at our cost and only for the peace of mind of the borrower.

In our long history of wholesale lending, the additional guarantee we used was a simple surety bond – the party holding the funds in escrow would already have surety policies covering any amounts they held in escrow, and the borrower was simply added as a “rider” to that policy. This offered a full insurance-based guarantee of the safety of their funds. In the wholesale space, everyone understands surety bonds and are very comfortable with them – but we found that filmmakers don't really know much about sureties, and they didn't like that coverage.

So we instead developed a new method to secure their 20% before it went to the escrow – a Financial Guarantee Bond. Under this method, a  “guarantor” (in this case, a multi-billion dollar investment trust) would set aside from their own trust assets an amount equal to the borrower's 20%, which was moved into a separate escrow account naming our borrower as the beneficiary.  They then formed a contract with the borrower called a “Financial Guarantee”; this stated that if for any reason their funds were not returned from the escrow, the Guarantor would replenish those funds from the amount they had set aside.  But.... the Investment Trust company we made these arrangements with is a private company and their financial statements are not publicly available, so there was limited due diligence that our clients could do on them. So with few exceptions, filmmakers didn't like that coverage either....

As a result we have now developed a process that offers an inarguable, iron-clad guarantee that any clients can be completely comfortable with. When the borrower's 20% goes to the escrow, it is fully and independently guaranteed by Brinks, G4S, Ferrari Group or Malca-Amit, the largest asset security/safekeeping companies in the world. In exactly the same manner as when they pick up cash from a bank in an armoured car, these companies assume "care and control" of the borrower's funds and issue them a SKR (SafeKeeping Receipt). This is a contract where they (the safekeeping company) assume full liability for that money and fully guarantee its safe return. This guarantee remains in place throughout the entire loan process – the borrower's funds are fully guaranteed until they are returned, in full. The SKR is set up before any money has to be moved anywhere, so all documentation regarding the security of the borrower's money is fully vetted and approved in advance. Our clients can always be 100% certain they are completely secure and guaranteed at all times before they pay any fees or escrow any funds.

Brinks and G4S are the two largest world class Security Houses on the planet (with Ferrari and Malac-Amit being smaller but equally trusted), and their entire business and reputation is based on their ability to safeguard any and all assets put under their protection. With this agreement and process in place, we can state authoritatively that we have in place the most iron clad guarantee possible for the security of client's initial 20% funds.

One last thought.... even the most cursory examination into these companies and the SKRs (Safekeeping Receipts) they use to secure assets will show that any greater security and financial guarantee for our clients is quite literally impossible. Any potential FilmCabbage client who will doubt this security need not apply. We have established these partnerships at great expense and effort, and since there is no more comprehensive or easily verifiable guarantee possible, we can't waste any further time on clients that doubt their reputation or ability to deliver on their guarantees.

(originally published 04/04/19)

When discussing our lending program with filmmakers, one of the frequent points of contention is the "drawdown schedule" - the way our funds are released to the borrower in monthly tranches instead of all at once.  It can take as few as 8 months to make the full amount available, but can take as long as 12 months.  Most film borrowers want all the money right away, or at least half as the first tranche.  That never happens in the FilmCabbage program, and there are a couple of reasons why. First, the slow release of funds across time is our only financial safeguard, since we are lending literally millions of dollars to every borrower.  If we set up a credit facility for a filmmaker for a $25M production and wired it all to them right away, it is only a matter of time before one decides that Fiji looks nice and vanishes with the money.  Releasing funds slowly as they are spent into the production (and oversight confirms that they are being spent appropriately) is our built-in protection from fraudulent borrowers. Secondly, when we lend to film production we make the highly risky assumption that the project will be successful, since our only collateral is the film itself.  To offset our risk, we obtain a surety bond to insure each of our individual loans.  The insurer then becomes the one shouldering all of the risk.  The risk assessment we have done to analyze your production is sent directly to them, and they use it to establish how fast they are comfortable with the funds going out.  The riskier the production, the slower the funds become available.  Solid, established filmmakers with a track record of success will be able to receive funds faster than less experienced filmmakers.  And though we advocate for the proposed drawdown suggested by the borrower, at the end of the day it is the insurer has the ultimate say the actual drawdown - as the owners of the risk, they have that right. Many producers have said that their completion guarantor requires them to have all the money on day one of production, or they will not bond it.  But FilmCabbage will be able to show them that we are contracted to provide our portion of the production budget, that we have already escrowed the full amount of the loan, and that the monthly tranches are already set up.  With nothing else guaranteeing our loan funds they have to work with those assurances, and most are able to. There are going to be cases, especially with newer filmmakers, where they simply cannot start production without the full amount (or the vast majority) being available.  We can still work with those projects, but only in a very specific way.  In those cases, the filmmaker can simply wait throughout the drawdown schedule until all funds are fully available.  If the money is made available across 10 months, you would simply wait until the 10 months had passed and the entire credit facility would then be available.  Since you hadn't actually drawn any of the funds across that period, there would be no principal in the field so you wouldn't be paying or accumulating any interest.  But then you could set up a transfer of the full amount as you need it, or transfer the full amount to the completion bonder's account for disbursement. FilmCabbage makes every attempt to get you the funds you need, when you need them.  But the release of funds over time (a 8 to 12 month period) is a hard and fast rule that every borrower must work within.