1:1 LENDING PROGRAM
FundingNet has two versions of the 1:1 Lending Program - one for loans where the client's initial funds are under $10M, and a much more exciting version where the client's initial funds are in excess of $10M.
1:1 LENDING, UNDER $10M in INITIAL FUNDS
This version of the program is for clients who have raised a minimum of $4M USD, but less than the $10M threshold that would qualify them for the other version of the 1:1 Program, or the Multiples Programs. What this version of the program amounts to is basically an "insurance policy" for the project's initial funder - but one that pays them to insure their funds, rather than it being a cost to them.
Any time a project has raised the full amount of their budget, if they elect to spend that money into the project they are putting it at risk. If the project fails to generate returns, up to the entire amount raised is at risk. Many investors will want to see the project take a surety out to insure their funds, but the cost of that kind of insurance can be extremely high and add a large sum to the cost of the production. Spending that money into the production is always a risky enterprise, and insurers are fully aware of that.
In this version of our 1:1 Loan Program, FundingNet basically insures the initial funder's money at no cost to the production - and in fact pays them to do so. By bringing those initial funds to our program, those funds can stay in the production's or the investor's own bank, where they will be bonded (the same as described in the Multiples Program page) via a federally registered and regulated bond, which will pay a coupon rate of 5% (proceeds paid out monthly). FundingNet will also then lend the project an equal amount (hence the 1:1 Loan) to match the project/investor's initial funds. Then the project spends our loan funds to produce the project, while the initial funder's money remains in their own bank, at no risk from being spent into the project and earning a guaranteed 5% per year. The initial funder's money must remain in place and pledged to the bond until the loan is settled, but it is guaranteed to always be protected from any risk.
And rather than charge for this guarantee against loss (as you would with an insurance policy or surety), the project/investor is PAID a 5% coupon rate to guarantee those funds, while the project is fully funded. FundingNet assumes ALL risk for the production, while the project and investor always remain fully protected.
EXAMPLE
If a project has a $5M USD budget and the producers have raised (either themselves, or through investors) the full $5M, they can assume all risk and finance the project in full with the raised funds. However, if the project fails to generate the expected returns, the $5M they have put into the project is fully at risk of loss. By bringing that $5M to FundingNet's 1:1 Program, they keep their funds in their own bank where they are bonded, remaining risk-free and earning a guaranteed coupon rate of 5% per year. We then lend the production the equal amount of $5M, which they will use to produce the project. The bonded funds must remain in place until the loan is settled, but those bonded funds are always earning and always safe. If the project fails to generate sufficient returns, FundingNet's loan funds are the only ones at risk. If the production cannot repay the loan the initial funder's money may be required to remain in the bond for a longer period of time (to a maximum of 60 months, if the project cannot repay ANY of the loan), but they will always eventually be able to go back to the initial funder.
1:1 LENDING, $10M or MORE IN INITIAL FUNDS
This version of the program is considerably more "disruptive", and is a unique offering from FundingNet....
When the project has a budget of $10M USD or more, and they have raised the full budgetary requirement themselves or through an investor, they can come to our program in much the same way. We will arrange for them to speak to the Bond Group to bond their funds (which will remain in their own bank, in an account under their control), and it will be pledged to the same bond with the same coupon rate. We will lend the project the equal amount to fully fund the production, and assume all of the risk ourselves.
HOWEVER, if the initial funder does NOT want to leave their funds in place until the loan is settled, in this version of the program they can receive their money back in ONLY SIXTY DAYS. When the 60 day period has ended, FundingNet will basically "buy out" their account where the initial funds are housed, and replace their $10M (or whatever the amount of initial funds is). The project has their loan to fully finance the production, and the initial funder has seen their initial funds repaid in only 60 days.
This is an exciting opportunity for productions because they now have the ability to tell potential investors that they can be out in 60 days, with the project fully financed, and never see their funds exposed to any risk.
But (and this is where it gets REALLY exciting).....
Now that the initial funds are back with the initial funder, they can now use those initial funds to do the SAME THING AGAIN, and generate another loan of the same size for ANOTHER production. For companies operating the entertainment industry, this is an incredible offer, as it gives them a chance to produce as many similary budgeted films as they want, while only raising funds one time.
EXAMPLE
If a production company has 10 films they wish to produce, each with a budget of $10M, they have a total requirement of $100M for the full slate. If they were using our regular Multiples Program they would need to raise $33.33M to get a 3X multiple, and receive their required $100M in loan funds. Their $33.33M would be required to remain in place until the loan is fully settled (which can be anywhere from 12 to 60 months).
With this version of the 1:1 Program, they only need to raise $10M (enough to do the first production) and then "cycle" it over and over and be able to finance all 10 films in the slate. The production would apply for a 1:1 loan and post their $10M to the bond (as described in the Multiples Program page). After 60 days FundingNet would "buy out" the investor's bank account (where the initial funds are housed) - we wire the initial funder $10M and they would sign the original account over to us. FundingNet is now responsible for keeping those initial funds in place until the loan is settled. As a result, in addition to assuming all risk for the project, it is now FundingNet (not the project's initial funder) that has their $10M tied up for up to 60 months; not only did we assume the risk, we also assumed any lost opportunity cost of having those funds tied up. The initial funder has their $10M back, and the project is fully funded through our loan.
THEN only 60 days after they posted the first $10M, the initial funder can take the same $10M we sent them..... and do it over again to finance ANOTHER $10M film in the slate. Then 60 days after that, do it again. Then 60 days later do it again, until all 10 of the films have been fully financed through our loans. And the project, as well as having their required $100M in loans to fund their 10 films, still has the initial $10M they started with, only 60 days after posting it the last time to complete the slate.
Obviously this is a very enticing offer. Rather than get 1X, or 3X or 4X as in the Multiples Program, using this version of the 1:1 Program a production company could get 5X, or 10X or 20X in loans (cycling the same initial funds over and over again until all of their productions are fully funded). All they need to be able to do is produce the projects successively (instead of all at once), with start dates every 60 days or so.
Investors will be much easier to find if they know their funds are never at risk and fully back in their control in only 60 days, and if a production company wanted to offer them several points on the amount they bring to the program as a sweetener, it will make the entire enterprise irresistible. We believe this is one of the most unique offerings on the marketplace, as any project/investor can finance as many productions as they wish, with no risk to the project or investors.