How FilmCabbage Can Guarantee Your Investor's ROI
Updated: Oct 22, 2022
(originally published 08/21/19)
(NOTE, Dec 2, 2021; this blog post refers to a process that is no longer current. Please see the Multiples Lending Program page for the most current information about that program).
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!