Everything You Need to Know About Film Financing
You have a marvelous idea for a film, as well as a compelling script and a stellar cast and crew. The reality is, however, filmmaking can be an expensive venture. Films are often financed in various ways, which means you might seek multiple forms of financing for a single production. Understanding film financing is critical to your overall understanding of the world of production. Here is virtually everything you need to know about the subject.
Packaging — what are you selling?
It’s helpful to familiarize yourself with film development terms such as packaging. What is packaging? Packaging is the process of bundling your script, screenwriter, director, and maybe a movie star or two, and “attaching” them to your project before you pursue funding. This can set your project apart and increase interest from investors of all kinds.
Create a film budget
You need to have a comprehensive film budget, and this goes for productions from Hollywood blockbusters to tiny independent productions. Your budget will serve as your guide as you pursue financial backing. Know how much to ask for before you start down the road of film financing. Your budget should include all aspects of production, from creative development and pre-production through to actual production and then final finishing in post-production. You might need to present different levels of detail in your budget to different types of investors, so consider your budget to be a working document and be prepared to present various iterations.
Generate excitement with a pitch trailer
If you are seeking finishing funds or perhaps still in the pre-production phase of your film, consider putting together a pitch trailer video for your potential investors. The pitch trailer allows you to show potential investors and collaborators your unique and stylized vision for your film. Oftentimes, pitch trailers are self-financed, and other times they are also used for marketing purposes. The pitch trailer is especially important if you are using the crowdfunding strategy to finance your film, which we will discuss in further detail.
Understand the different types of film financing
There are many different ways to go about raising capital for your production. Having an understanding of what each type of financing means is a great place to start. Let’s dive in to the different types of film financing and what they mean for your and your production.
Of course, if you have the cash, or are willing to take out loans yourself, you can self-finance your film. This is risky, so proceed with caution and develop a good understanding of what financial impact this might have on you and/or your production company.
Equity financing means that you are essentially entering into a partnership with investors. You might provide your investors with a title, such as co-producer. Investors need to be vetted and normally have no say in the production process or final film. Basically, they provide the money, show up to the premiere, and if your film is profitable, they will see a return on their investment. If you are going to pursue the equity route, establish an LLC for your production company.
Many independent film producers will seek out crowdfunding. There are many different platforms to help with this process. For example, Seed and Spark is a production-specific crowdfunding platform that provides filmmakers with feedback before their campaign goes live as well as additional support.
Slated is another production-specific platform that is made up of financiers, producers, writers, and other professionals. Slated will provide you with a ranking for your production as a way to anticipate your chances of gaining funding through the platform.
If you find you are coming up short on your production finances, consider applying for a gap loan through a bank. A gap loan will usually cover around 10% of your overall production budget, as that tends to be the level of risk that financial institutions, such as banks, are willing to take.
When we talk about soft money, we’re referring to financing that is provided without the expectation of being repaid after the production is distributed. Consider applying for film grants from various institutions at all stages of production. The grant application process is labor intensive, but folks are usually looking to donate to projects that will have an impact on the world, as well as possess a high likelihood of being finished in a timely manner. Consider applying for fiscal sponsorship from a nonprofit organization. Fiscal sponsorship allows you to accept tax-deductible donations.
Pre-sales as a distribution agreement
In a pre-sales agreement, you enter into an agreement with film financiers based upon your package that you created in the development stage of production, which includes your script, talent, and notable crew. You agree to the when and how of your film’s distribution before the film is finished. Depending on the terms of the agreement and your budget, you could actually make a profit before the film is even finished.
Many producers will defer their own fee payments until the film has been fully funded. This means you are taking a bit of risk and working on spec here, but it allows you to take a full payment at the end of the financing process while investing your skills and talent in the project. If you are asking your cast and crew to accept deferred payments, be realistic about your financial projections for the film. They are taking a big risk here for the sake of your project, so keep this in mind.
That was a lot of information, wasn’t it? Now that you know everything you need to know about film financing, get out there and start on your next great film!