Understanding the Drawdown Schedule
(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.