What is cross-collateralization?
In a typical developer-publisher deal, once the developer royalty advance has been recouped, the developer would expect to receive royalties for subsequent sales. With cross-collateralization, that is not so clear. Cross-collateralization means that royalties earned in connection with the sale of one game title or system SKU can be used to recoup development advances paid in connection with another title or system SKU. When a publisher contracts for multiple system versions of one game, it is not unusual for the initial contract draft to provide that royalties earned from sales of any version can be used to recoup advances paid for all versions. Publishers justify this detail by citing efficiencies in simultaneous multi-platform development and sharing of resources that may make it difficult to allocate costs to each version of the game. Rather than attempt to allocate or pro-rate costs to each version, it is easier and much more advantageous for the publisher to “cross” everything. Ta
Cross-collateralization is the ability to make use of cash flow generated by one project to cover the expenses of a different project. This strategy is employed in a number of different business situations. Often, the ability to engage is this type of financial arrangement is covered in the terms and conditions of legal documents related to the projects in question. One example of the use of cross-collateralization is found in the recording industry. A record company may choose to use the proceeds generated by the sale of one musical release to fund the development of a new release. Essentially, this means that money is advanced from one project to cover the expenses of a new project. As the new release begins to earn money for the company, the advanced funds are repaid to the original project. The use of cross-collateralization may be utilized in property management as well. In the event that a shortfall takes place with one property, the owner may choose to make use of the cash flow
If you have significant and verifiable equity in other properties, oftentimes you can allow SDI to place a lien on that property to help further secure your loan. If you credit is trending lower, if your deal is tight, or if you would like to undertake a significant Rehab project, then this is a good option to help get the deal pushed through.
