FilmCabbage Changes for 2022
Updated: Apr 20
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 security (which is a 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.
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. To offset this, we have introduced another change - applicants can request additional multiples when they apply (so 5X, or even 6X for exceptional projects, rather than simply 4X) if they need to repay an investor or replace the initial funds to complete the project. That is not to suggest they will be able to be approved for those additional multiples, but the opportunity is there for them. 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. But please keep in mind, 4X is the highest multiple that most film projects will be able to qualify for.
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.