Indie Production Financing Overview

There are numerous basic and sophisticated ways to finance a feature project, though usually involving a combination of one or more of these elements:Investment capital – yours and/or that of third parties [typically, investors get 100% of first profits earned until they recoup all of their initial investment, then receive 30-50% of all profits earned from the project, in perpetuity [deals can vary from project to project, depending on type of investors, risk factors, ancillary revenue opportunities, pre-existing distribution arrangements, etc]Sponsorship, usually in the form of product placement — $$ contributed for exposure of corporate brand in the film – this is a favorable option because sponsors are paying for the marketing value, and typically do not become part of the equity of the project; therefore, hypothetically, if you had a $1million film that secured $1million in product placement sponsorship, 100% of the profits would be returned to the filmmakers, rather than any percentage to investors] – oftentimes, however, product placement tends to be free goods and services contributed to the production, as in an automobile company providing a number of free cars for a production in exchange for brand exposure, etc

Service or production equity – e.g. personnel and/or equipment rental and/or post-production services contributed, whereby contribution is assigned a $$ value and earns a percentage of equity in the finished project and pro rata percentage of profits earned

Pre-sales of certain dis tribution windows — e.g. , pre-sale of North American dvd rights provides part or even all of funds to produce the film — this literally means, however, that you are selling off one or more specific windows, meaning that if you sell off North American dvd rights for $XX, you can use those dollars to finance your production costs, but you will no longer see any profits from domestic dvd sales

Bank financing – [investors take risks, banks do not] banks loan money against pre-sales contracts which serve as instruments of collateral; some investment bankers loan money based upon credible sales projections from a significant distribution company [some desperate low budget filmmakers have been known to put up their house or something similar as collateral — bad idea. it is possible, however, to leverage the cash flow of one’s business]

Domestic co -production deals – you find another company in Nashville or Los Angeles that brings part of the financing and/or service equity to the table

Distributor completion funding – just like it sounds – you have most of the film financed or completed and a distribution company provides the balance of financing, though this buys them both equity in the film and locks them in as the distributor – and they tend to cut deals that are heavily in favor of the distributor

Foreign co-financing – this comes in a variety of forms, through foreign production companies, networks, and governments who may require part or all of a film to be made in the foreign country providing the funding

Gap financing – the “gap” of remaining production funding is provided by either a private or institution lender, and is typically in an early position in the sequence of returns, meaning the gap financer will get their money back with interest before the investors or producers or anyone else sees a dime of profits. the only entities that will see revenues prior to gap financers are those providing P&A $$, or costs for film prints and advertising, which is typically last money in, first money out. Again, bear in mind that a single film might be financed by cobbling together some or all of the above methods of financing. The financing of each project oftentimes comes together in as creative a manner as the screenplay and other artistic elements of the project.