You found the right script. You have lined up a professional crew, and you know the perfect talent to make your project shine. There is just one problem. You have exhausted your personal finances and have no idea how to pay for translating that killer script into a blockbuster film. That is where a lesson in Film Finance 101 comes in handy.
Types of Film Financing
Film financing can be broken down into six general categories:
- Deferred Payment
- Gap Loan
Equity funding is the use of your own money or that of investors in exchange for shares of ownership in the project. The challenge is to convince investors their rate of return will exceed that of what they could earn by investing in other avenues, such as stocks, bonds, business project. In the process, you will need to show how your venture will increase their wealth with a minimal risk of loss.
Pre-Sales is related to gap funding. With pre-sales, you work directly with film distributors to project the profitability of the film. Those projections can be used to entice equity investors as well as convince a bank to loan you money. The distributor may also provide you some upfront capital.
Spread the word about your project through social media or crowdfunding websites, such as Kickstarter, and allow perfect strangers to donate money toward your film. The advantages of this process are:
- Anyone with any amount of money can participate.
- You do not have to give up any equity in exchange for the money or pay it back.
- It is a great way to build excitement about the project before it is completed.
You may be able to negotiate a deal with the talent and crew to wait for payment until the film is complete. However, the more experience and respected they are, the less likely they may be to wait for payment. They have seen too many movies fail at the box office to give their work away for free.
Gap funding is any amount you have to borrow from the bank. It is called gap because it fills the gap between the amount needed to produce the film and the amount raised by other means that do not require a repayment. The goal is to finance 15 percent or less of the costs.