Getting financing for your film project doesn’t need to be hard. In this post, we’ll cover the steps and options you have as a movie producer to get financing to cover various aspects of the movie production process.
1. Understand Film Financing Options
Producing a feature film or television series isn’t easy for various reasons, but one of the biggest challenges is the cost of production. You likely landed on this page looking for ways to help pay the costs of getting a project across the finish line. There are several different ways to get funding, each with different purposes and implied risks, which means they cost of the funding is different too.
Here are some of the most common options for film financing:
- Major studios: Major film studios, such as Disney, Warner Bros., and Universal Pictures, often have significant resources available to finance their own productions, as well as to invest in independent productions.
- Independent production companies: Independent production companies, such as A24 and Focus Features, specialize in financing and producing independent films, and can often provide more flexible financing options for filmmakers.
- Film investment companies: Film investment companies, such as FilmNation and Entertainment Studios, specialize in investing in film projects and can provide a significant source of financing for filmmakers.
- Film funds: Film funds, such as the National Film and Video Foundation in South Africa, provide financing for film projects through government grants, loans, and other forms of financial support.
- Banks and other financial institutions: Banks and other financial institutions, such as Goldman Sachs and Citi, can provide financing for film projects in the form of loans, lines of credit, and other financial instruments.
- Government agencies: Government agencies, such as the National Endowment for the Arts in the United States, can provide financing for film projects through grants and other forms of financial support.
- Private investors: Private investors, such as wealthy individuals and investment groups, can provide financing for film projects through investments in the film, or by participating in film funds or other investment vehicles.
- Crowdfunding: Crowdfunding has emerged as a popular financing option for filmmakers in recent years. This involves using websites such as Kickstarter and Indiegogo to solicit funds from the public, usually in exchange for rewards such as a copy of the film or a producer credit.
- Pre-sales: Pre-sales refer to the practice of selling distribution rights for a film prior to its completion. This can provide a significant source of financing for filmmakers, as it allows them to secure funds for the production of the film.
It is important to note that the film financing process can be complex and challenging, and that filmmakers may need to seek out multiple sources of financing in order to fully fund their projects. Blue Fox Financing (wwwbluefoxfinacing.com can help with any questions you may have. Nevertheless, by taking advantage of these financing options, filmmakers can bring their creative visions to life and reach audiences around the world.
So let’s define these different film financing options:
Equity Investment
Equity financing involves offering investors a share of the profits generated by a film in exchange for their investment. This approach is an alternative to other film funding methods such as loans or grants. Generally, equity financing lowers the financial risk for the producer, but carries high risk for investors.
Key elements of a film equity investment agreement, including the amount of the investment, the percentage of profits that the investor will receive, the timeline for repayment, and any restrictions on the use of the funds. It also provides tips for making the agreement work for both the filmmaker and the investor, such as clearly defining the roles and responsibilities of each party, setting realistic expectations for profits, and ensuring that all parties understand the risks involved.
Equity film investment refers to the process of investing money into the production of a film in exchange for an ownership stake in the project. This means that the investor becomes a shareholder in the film and is entitled to a portion of its profits if it is successful.
Equity film investment can be an attractive option for investors who are looking for alternative investment opportunities, as the film industry has the potential for high returns. However, it is also a high-risk investment, as there is no guarantee that a film will be successful and make a profit.
In order to participate in equity film investment, an individual must generally meet certain financial requirements and be an accredited investor. Accredited investors are individuals who meet certain income or net worth thresholds set by the Securities and Exchange Commission (SEC).
Investing in film can be a complex process and requires a thorough understanding of the industry, the production process, and the distribution and marketing strategies. It is important for potential investors to carefully research and evaluate the opportunity before making a decision.
It’s always a good idea to consult with a financial advisor or attorney to understand the risks and benefits of equity film investment, and to determine if it is a suitable option for your investment portfolio.
Bridge Loans
Bridge loans are short-term financing options that help filmmakers bridge the gap between the development and production stages of their movie projects. Film bridge loans are used to cover pre-production costs, including casting, location scouting, and script development, among others production costs. The loan is typically secured against the future income of the film, such as its distribution and box office profits, and repaid through follow-on financing secured closer to project completion.
They are typically used when the production company needs to secure funds quickly to keep the production process moving forward, but may not yet have the necessary funds from other sources such as pre-sales or equity investments.
Bridge loans are designed to provide a temporary source of financing and are usually secured against the expected future revenue of the film, such as distribution rights, pre-sales, or tax credits. They are typically used to cover costs such as production expenses, talent salaries, and post-production costs.
The terms of film bridge loans can vary, but they usually have a short repayment period of 6 to 18 months. The interest rate can also vary depending on the creditworthiness of the borrower and the expected revenue of the film.
Film bridge loans are typically used by production companies that are looking to secure financing quickly and without the need for extensive due diligence or negotiations. However, they can also be a high-risk investment, as there is no guarantee that the film will be successful or generate enough revenue to repay the loan.
It is important for both the lender and the borrower to carefully evaluate the risk and potential return on investment before entering into a film bridge loan agreement. A financial advisor or attorney can help both parties understand the terms of the loan and ensure that all parties are protected.
Pre-Sales and Minimum Guarantees
Pre-sales refer to the process of selling distribution rights to a film in advance of its completion. In a typical pre-sale arrangement, a film production company will negotiate deals with distributors in various territories around the world. The distributor will agree to pay a certain amount, called a minimum guarantee (MG), for the rights to distribute the film in their territory. Some agreements provide up-front advances so funds from these deals can be used to cover the costs of production.
Pre-sales can be a crucial aspect of film financing, as they provide a way for production companies to reduce financial risk and ensure that they have the funds they need to complete the production of a film. Additionally, by securing distribution rights in advance, film production companies can demonstrate to investors that there is demand for their film and that it has a good chance of being successful commercially. MG loans can be secured using the distributor agreement as collateral when the MG payment is predicated on the film’s completion.
In the film industry, pre-sales and minimum guarantees refer to the process of securing financing for a film before it is produced. This can involve selling distribution rights or securing commitments from buyers for future distribution in certain territories or platforms. The pre-sale of these rights helps to offset the costs of producing the film and can provide a degree of financial stability for the production.
Minimum guarantees refer to the minimum amount of money that a distributor or a sales agent guarantees to pay to the film’s producer or financier in exchange for the rights to distribute the film in a certain territory or platform. The minimum guarantee is essentially a commitment to pay a specific amount, regardless of the film’s actual performance in that territory or platform. This helps to mitigate some of the risk for the financier or producer, as they are guaranteed to receive a certain amount of money even if the film doesn’t perform as well as expected.
In the film industry, pre-sales and minimum guarantees are important tools for securing financing and mitigating risk, and can play a critical role in the success of a film production.
State and Local Tax Credits
Film production tax credits are incentives offered by governments to encourage film production in their jurisdictions. By offering tax credits, governments can incentivize filmmakers to choose their location over others, creating jobs and generating revenue through the various stages of production, such as pre-production, filming, and post-production. This can include hiring local crew, renting equipment and facilities, purchasing supplies, and using local businesses for catering and other services.
Film tax credits are typically approved prior to production, but not funded until completion of the project. There are investors that will purchase the tax credit receivable at a discount or lend against it to provide funding prior to the film’s completion.
A state film tax credit is a financial incentive offered by some state governments to encourage film production within their jurisdiction. The tax credit provides a reduction in the amount of taxes that a film production company is required to pay, based on a percentage of the qualified production expenses incurred while making the film within the state. The purpose of the tax credit is to make the state a more attractive location for film production, which can bring in jobs, economic activity, and increased tax revenue.
The specific details of state film tax credits can vary widely, with some states offering a higher percentage of tax credits, while others may have more restrictive eligibility criteria. Some states may also require that a certain portion of the film be shot within their borders in order to qualify for the credit.
Overall, state film tax credits can be an effective way for state governments to attract film production and promote economic growth, but they can also be controversial, as they often divert tax revenue away from other government programs.
It is difficult to determine which state has the “best” film tax credit, as it can depend on various factors such as the specific needs and goals of a film production company. However, some states that are known to offer generous film tax incentives include Georgia, Louisiana, and New Mexico.
In Georgia, for example, productions can receive a tax credit of up to 30% on qualified expenses, including wages for Georgia residents. Louisiana offers a similar tax credit program, with a maximum credit of 30% for in-state expenses.
In New Mexico, the state offers a 25% tax credit for in-state expenses, including wages for New Mexico residents, with an additional 5% credit available for productions that make significant use of local businesses.
It is important to note that while these states offer attractive film tax credits, they may also have other factors to consider such as the availability of production infrastructure, crew and talent, and local support. Additionally, state film tax credits are subject to change, so it is best to check with the relevant state agencies for the most up-to-date information.
Lending against a film tax credit involves using the tax credits generated by a film production as collateral for a loan. Here are the steps involved in lending against a film tax credit:
- Determine eligibility: The first step in lending against a film tax credit is to determine if the film production is eligible for tax credits. This can depend on a variety of factors, such as the location of the film production, the type of film being made, and the qualifications of the filmmakers.
- Apply for tax credits: If the film production is eligible for tax credits, the next step is to apply for the credits. This typically involves submitting a detailed application to the relevant government agency, along with any necessary documentation and information.
- Secure financing: Once the tax credits have been approved, the next step is to secure financing. This can involve working with a lender or financial institution that specializes in lending against tax credits, or it can involve working with a film investment company that specializes in financing film projects.
- Provide collateral: The next step in lending against a film tax credit is to provide the tax credits as collateral for the loan. This typically involves assigning the tax credits to the lender, who will then use them to secure the loan.
- Repay the loan: Finally, once the film production has been completed and the tax credits have been generated, the loan must be repaid. This typically involves using the tax credits to repay the loan, along with any interest and other fees that may be due.
It is important to note that lending against a film tax credit can be a complex and challenging process, and that filmmakers may need to work with a financial advisor or tax expert in order to fully understand the process and ensure that they are in compliance with all relevant laws and regulations. Nevertheless, by lending against a film tax credit, filmmakers can access additional funding to help finance their projects, and bring their creative visions to life.
2. Find Film Financing Partners
There are many entities that offer these different film financing products. From traditional banks, individual financier investors to large investment funds, and a multitude of state film commission offices.
With all of these different funding options for film projects, how do you choose the appropriate financial path? How do you know if you’re getting the lowest cost funding?
Here at Blue Fox Financing, we believe our Film Financing Marketplace platform provides the best experience for filmmakers to find the best financing options for their project. If you don’t have a Sales Agent already in place helping you find the best pre-sale distribution agreements, Blue Fox Financing can help with that too with our Representation service and our close relationship with Blue Fox Entertainment.
3. Apply for Funding
While each type of funding product has different underwriting requirements, generally you will need to provide a complete overview of your film project to get approved. Financial applications can include any combination of the following:
- Script and story analysis
- Talent lists
- Financial budget and plan
- General Ledger / Cost Report
- Production schedule
- Tax Credit certification
- Pre-sale distribution agreements
- Other financing agreements
With Blue Fox Financing’s expertise in this area, we can perform our own assessment of the viability of getting funding and advise you on any deficiencies in your application that should be fixed prior to submission to our list of lenders and financiers. If this process seems overly complicated, our Consulting Service may be a better fit.
4. Close on Funding
Once your application for funding is completed and submitted to our funding sources, underwriting occurs to assess risk in the project. Financiers become comfortable with funding a project the closer it is to being complete and with more distribution agreements executed, showing interest in the final product. If the project passes their internal underwriting standards, term sheets will be received and we will review these with you to determine the best path forward for your film project. Once a financing option is selected, you will formally close on your deal through a legal closing process and transfer of funds similar to any large financial transaction.
Summary
Film financing can come from a variety of sources, including major studios, independent production companies, film investment companies, film funds, banks and other financial institutions, government agencies, and private investors.
The specific mix of funding sources for a film can depend on several factors, such as the size and scope of the production, the type of film being made, and the experience and track record of the filmmakers. In some cases, a film may be fully financed by a single source, such as a major studio, while in other cases, the financing may come from a combination of sources, such as a combination of private investment and government subsidies.
In general, film financing can be a complex and challenging process, as the film industry is known for its high risk and uncertainty. This can make it difficult to secure sufficient financing to fully fund a film, and it is not uncommon for filmmakers to have to seek out multiple sources of funding in order to get their projects off the ground.
Despite these challenges, film financing is a critical component of the film industry, as it allows filmmakers to bring their creative vision to life, and reach audiences around the world. Whether through major studios, independent production companies, or other sources, film financing is essential to the success and growth of the film industry.
Here are some steps involved in getting a film financed:
- Develop a strong business plan: Before you can secure financing for your film, you need to have a clear and well-thought-out plan for the project. This should include a detailed budget, a production timeline, and a marketing and distribution strategy.
- Build a network of contacts: Building a network of contacts within the film industry can help you to identify potential financiers and investors, as well as to gain insights into the financing process. This network can include producers, agents, lawyers, and other industry professionals.
- Create a pitch deck: A pitch deck is a visual presentation that provides an overview of your film project, including the story, budget, marketing and distribution plans, and other key information. This can be used to help you secure financing, as well as to generate interest and support from potential investors.
- Identify potential financiers: Based on your business plan and network of contacts, you can begin to identify potential financiers and investors who may be interested in supporting your film. This can include major studios, independent production companies, film investment companies, film funds, banks and other financial institutions, government agencies, and private investors.
- Approach potential financiers: Once you have identified potential financiers, you can begin to approach them to discuss your film project and to explore financing options. This may involve meeting with financiers in person, presenting your pitch deck, and negotiating the terms of any financing agreement.
- Secure financing: After you have successfully approached and negotiated with potential financiers, you can begin the process of securing the financing for your film. This may involve finalizing the terms of the financing agreement, securing any necessary legal documentation, and beginning the production process.
It is important to note that the process of getting a film financed can be complex and challenging, and that success may depend on several factors, such as the strength of your business plan, the quality of your pitch deck, and the experience and reputation of the filmmakers involved. However, by following these steps, you can increase your chances of successfully securing the financing you need to bring your film to life.
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