TRADITIONAL FUNDINGNET 80:20 LENDING PROGRAM
Offered to select clients and industries since 2005, our traditional program is based on "multiples". As the project owner, you are required to bring a minimum amount of funds to the project (20% of the total costs), and we lend you 4x the initial amount you've already raised (the remaining 80%) to fulfill the budget.
The way that we are able to do this is that our banking partner will position your initial funds as the "loan loss reserve" during the drawdown of our loan funds. When those initial funds are positioned that way, our banking partner will roll out to us a number of multiples of that amount in new credit on our credit lines with them. We take the first four multiple and place them in a credit facility to become your loan. The remaining multiples afforded to us are put to use in our other lending and trading programs, which is where we make our real profit in these loans.
In order to be positioned as a loan loss reserve, your initial funds must remain completely undepleted and unencumbered during the drawdown of our loan funds (usually in monthly tranches, across 8 to 10 months). To ensure that those funds remain undepleted and unencumbered they will be required to sit in escrow, under the control of a 3rd party law firm, during that drawdown period. Alternately, for initial funds amounts of $10M USD or more, a SBLC (standby letter of credit) from a top tier bank can be used to position the initial funds as the reserve as well.
To understand how we secure your funds and guarantee them against all perils, please see the "FInancial Safekeeping" heading below.
FilmCabbage offers borrowers an industry leading interest rate - not only do we provide you with 4x the amount of your capital as a credit facility, but we do it at the rate of "LIBOR +2", based on the existing US 12-Month LIBOR rate. The current LIBOR rate is on the right side of the page linked here:
*** PLEASE NOTE: As of March 19, 2020 we are temporarily suspending our usual interest rate of LIBOR+2, and instituting a flat interest rate of 3.5% per annum until further notice. The governments of the world have slashed interest rates in order to facilitate inexpensive lending and economic stimulation while the economies of the world deal with massive shut-downs due to the COVID-19 virus. We are a private business and need to generate interest income from our loans, and as such have frozen our interest rate for now. Once the economic crisis has passed, we will eventually return to our regular interest model - for now this flat rate will apply to all new loans.***
The crucial element of our loan process is that your money is never exposed to ANY risk whatsoever. In fact, your initial funds will sit on the sidelines, either in your own bank account or 100% guaranteed at our cost, until all of our capital is spent into the project. Your money will be the last money spent - we literally absorb the financial risk for you.
To apply for funding for your Entertainment Project, you will need to submit an application package. Prior to doing so, you should first contact us to discuss your project and review its business plan to make sure that it appears to be a good fit for our program. If it appears to be, we will provide you with all of the required documents that must be submitted to complete your application package.
Once your application package is submitted, we have our intake and risk assessment teams review all elements of the submission. If your project is accepted, within 2 weeks you will receive a Term Sheet that outlines all of the loan terms. Your receipt of our term sheet confirms that we're "in", and willing to fund your loan - as long as the loan terms are mutually agreed upon, and the process steps are followed from that point, your project is a go.
FilmCabbage loans do not require any additional corporate or personal guarantees - each loan is secured only by the actual project that our money is helping to create. You are not required to secure the loan with any additional personal or corporate assets
There are also never any up-front fees - any costs or fees associated with the loan are not due to be paid until AFTER you are receiving funding from us.
We NEVER have any Upfront Fees.
No Engagement Fees
No Due Diligence Fees
We pay our own costs, and you pay yours. As is standard for any loan, as the borrower you will be responsible for the legal costs of closing the transaction. Closing costs will be invoiced to you upon formal "close" of the deal, after compliance confirmation is complete and loan disbursements have begun. Closing costs will be fully disclosed in your Term Sheet.
There is a 3% "Lending Fee," again not due until AFTER formal "close" of the deal and commencement of loan disbursements. This fee is normally deducted from the loan funds themselves, never from your original capital.
Throughout the loan term there will be a small monthly accounting fee for a loan oversight custodian who will reconcile the costs of the production to the funds drawn, confirm that the project remains on schedule, and monitor the repayment of principal and interest. This fee will be fully described in your Term Sheet.
TO QUALIFY FOR FUNDING:
To be eligible for funding, your project must fit the following criteria, in full:
Your project must have the production elements established. A fully developed business plan must already be in place. If you only have a script but no budget or production plan, you are not yet ready to be funded. Your project doesn't necessarily have to be ready to produce immediately, but it should be basically ready to go.
Minimum funds already raised. There must already be at least $1M USD ready to deploy into the project. As a requirement to qualify for our 4x funding multiples, those initial funds must sit idly on the sidelines throughout the drawdown of our loan, either in your own bank account or 100% guaranteed at OUR cost. Once all of our loan funds are fully disbursed to you, your initial funds will then be the last money spent into the project to complete it.
Timing. All FilmCabbage loans must be approved through banking compliance, a process that takes approximately 60 days. If you require funds immediately, and cannot wait for compliance confirmation, your project will not qualify. Additionally, our funds are released in traunches as they are consumed into the production, so it takes 8 to 12 months for them to be fully deployed. If you require all funds on day 1, we will not be able to assist you.
HOW TO APPLY
The process to apply for and receive financing from FilmCabbage is as follows:
STEP 1: Contact us to discuss the details of your project so that we can determine if it suits our lending model. If it does, we will provide you the applications and documents you'll need to apply for a loan.
STEP 2: Submit your application package. This will include:
1. Proof of Funds, showing your initial funds are ready to deploy into the project
2. Project Business Plan
3. Project Use of Funds Schedule
4. Your Preferred Drawdown Schedule
5. FundingNet Entertainment Loan Application Form
6. Initialed and signed FundingNet FAQ document
7. Initialed and signed “FundingNet Benchmark Agreement”
(this document describes exact timelines to be followed throughout our lending process).
8. Personal Identification Information of Applicant/Signatory
(required for KYC, Banking Compliance and Anti-Money Laundering protocols)
We then submit your project to our independent risk assessors, who will analyze your application package to ensure the project makes sense for us to lend to.
STEP 3: If your project is accepted for funding, within ten business days you receive your "Term Sheet" which outlines the primary terms of the loan. Once both parties have agreed to terms, both parties sign the Term Sheet to proceed to the next step.
STEP 4: BANKING COMPLIANCE
At this point you will be put in contact with an independent 3rd party "Fiduciary" law firm, who is appointed to ensure compliance with all banking requirements and regulations by both parties (lender and borrower). This law firm is also responsible to ensure that your initial capital remains idle and undepleted during the drawdown of our loan, and that it is always fully guaranteed and safeguarded throughout the life of the deal. The loan is then submitted for compliance confirmation, where the central bank(s) involved examine and approve all aspects of the transaction. This compliance process takes approximately 60 days to complete.
STEP 5: During the compliance confirmation, we create the Final Loan Agreements for your signature.
STEP 6: Once compliance clearance has been complete, your loan facility is opened and disbursements commence per your loan contract.
The key element of this FilmCabbage program is the requirement that to qualify for a loan, 20% of the total budget must already be in place. It is the existence of the borrower's project, coupled with those initial funds already being pledged to the project, that makes the 4x multiple that we lend to them possible.
The only requirement of those initial funds is that they remain completely undepleted / unencumbered throughout the disbursement of our loan funds, so that they may be accurately positioned as the project's "loan loss reserve". If they were to become encumbered or depleted in any way, it would violate compliance requirements for the Loan Loss Reserve and cause the entire loan to collapse. As a result, to ensure compliance with Central Banking regulations as well as similar requirements from our insurance partners, there are specific methods and oversight required to guarantee that those funds will remain idle throughout the drawdown of our loan funds.
There are three approved methods for this assurance currently available. All three of these methods have been designed to specifically ensure our clients/borrowers that their funds are fully guaranteed and secure at all times.
The approved methods described below include the participation of a 3rd party company to act as the safekeeping agent; they will be responsible for the safekeeping of the borrower's initial funds until all of our loan funds are exhausted. A third party will also responsible for the safekeeping and distribution of OUR loan funds. For loans within North America, the safekeeping agent assigned in virtually all cases will be an easily confirmed and vetted US-based law firm.
There are three approved processes that the borrower may work with for the safekeeping and security of their initial funds. Each of these methods has been designed for specific sizes and types of loans and clients:
Method 1. The Borrower's initial funds are held in trust by the fiduciary company, after first being fully insured and guaranteed by a "safekeeping house" such as BRINKS, Ferrari Group, or Malca Amit.
This will be the most frequently used method, as it offers unconditional and easily confirmed security of funds from our world reknowned security house partners. Using this process, your initial funds are guaranteed by one of The Brinks Company, Ferrari Group or Malca-Amit, all among the most reputable asset security companies in the world.
Each client will be introduced to their loan's appointed law firm (who will hold the initial funds in trust on behalf of the borrower) at the appropriate time in the loan setup, and the borrower will have adequate time to speak with and perform due diligence on them. The safekeeping law firm will set up a simple Deposit Escrow Agreement with the borrower which will be forwarded to Brinks, Ferrari Group or Malca-Amit who then set up a SKR (SafeKeeping Receipt). This SKR offers their unconditional guarantee of the safe return of those funds, and shows the assets being held in their vaults to back that guarantee. The borrower and their legal teams will have every opportunity to confirm and verify the SKR coverage with the safekeeping law firm before moving their funds to the law firm's trust account.
The SKR coverage from the aforementioned security houses is their own corporate guarantee of the value of your funds and will remain fully in effect until their safe return. These company's entire business is the safekeeping of assets and the securing of their value, and their SKR guaranteeing your assets is the safest method of securing funds that is available anywhere, from anyone.
Once you have confirmed the law firm escrow and the SKR (SafeKeeping Receipt) coverage, you would execute the movement of your funds to the safekeeping law firm's trust account, where they will remain until our loan funds are fully disbursed. Upon completion of our loan disbursements, those initial funds will be returned to the borrower's account of origin per the Deposit Agreement.
FilmCabbage/FundingNet covers the entire cost of this SKR guarantee.
Method 2. The Borrower's funds are forwarded to the "closing" Law Firm's Trust Account where they remain until being returned.
We consider this our "wholesale method", as it is the process we use with our re-lending partners. It was designed to ensure the safety of the borrower's capital; however, it is not for the unsophisticated because it assumes the borrower has a working knowledge of the escrow process and the built-in protections of using lawyers escrow accounts to safekeep funds. This method would typically not be used for initial funds amounts of less than $10M.
Using this method the Central Bank would assign a separate law firm that will close the deal for banking compliance. Your funds would be wired directly to that law firm's trust account with Lloyd's Bank in London, which is always fully insured under their Professional Insurance coverage. This coverage offers you a 100% guarantee of the security and safe return of your funds. The responsibility of the fiduciary law firm (separate from the closing law firm holding the funds) in this case is simply to monitor those funds to ensure they remain in place in that Trust account.
Be advised that this is not a very interactive process. Once the Law Firm is assigned by the Central Bank to close the deal, they simply accept escrow deposits and close legal transactions. Extensive due diligence investigations and dialogue with the law firm is not possible. You will be informed of who the law firm is and be able to do independent research to confirm them, but they do not participate in that process. They will simply contact you and your legal team to set up the trust/escrow arrangements execute according to the terms of those arrangements.
Method 3. The Borrower's initial funds remain in their bank account, and their bank issues to the fiduciary's bank an appropriate banking instrument (a Standby Letter of Credit or a Bank Guarantee).
Utilizing this process we can ONLY work with Top Tier Banks in highly stable banking jurisdictions. This method would typically never be used for initial funds amounts of less than $10M.
Under this method the borrower's capital will remain in their bank account, and that bank would issue to the fiduciary's bank a “banking instrument” such as a “SBLC” (Standby Letter of Credit) or a “BG” (Bank Guarantee). Keep in mind that the issuing bank will charge fees (often substantial ones) to create, issue, and eventually recall and liquidate this instrument, and those costs will be fully the responsibility of the borrower.
Please note: this process is meant for clients that have a high level of sophistication in banking and finance, and who will deal directly with bankers who have extensive experience in setting up such instruments. Please also note that unless your instrument is for $10M or more, most banks are reluctant to accept them. As a result, for deals under $10M we strongly suggest "Method 1" as that option is always smoother, more expedient, and without any costs to the borrower. However, this safekeeping option is available for projects that want to use it and who qualify for it.
FundingNet & FilmCabbage have designed these safekeeping processes using best in partners and processes to mitigate risk and guarantee the complete security and safety of ours and our clients' assets, while adhering to all required compliance and legistlative requirements. Each of the processes decribed offer a full 100% guarantee of the safety and security of all funds in our program, each of which is fully verifiable.
If you have any questions about FilmCabbage's safekeeping processes, please contact us today.