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Jeffrey Scott: Can you finance a film without using entirely equity?

Jeffrey Scott posted a question to executive producers and producers:
March 11, 2015 at 10:47 am | 515 views | 3 comments

I'm not sure what the best way to finance a movie is.  With all the work and low wages we have to put in, as we;ll as deffered costs and donated favors we have to pull in, (thank god ProductionNext lets us track them) I don't want to give up 60% of my revenue to whoever puts up the money.   



That answer will depend on several things, Jeff.

The commonly accepted method is to finance roughly 20% out of Equity, 20% out of international presales, 20% in Product Placement and brand endorsements (I can turn you on to a great service for this.), 20% in state tax incentives, and 20% in "gap" financing.

Traditionally, both gap and Presale financing are accomplished using money from a bank. The Money from the presales are done with lower interest since you're guaranteed to get that money when you deliver the product, however the money from Gap financing often comes with a heavy interest. Sometimes that interest is as much as 50% to represent the risk. However, in recent years angel investors have been coming in with Debt financing to cover the gap, opposed to the equity financing people generally think they come in with.

However, if you have no names and a first time director, you can pretty much write off Presales, since the presales rely on the director's style and the value of the name talent by territory and region. You can also write off the Brand integration/product placement due primarily to the fact that brands want someone they know that will carry the film and ensure people will see it.

So essentially, if you have a first time director, then the only real possibilities for investment angels (both in equity and debt) and tax incentives. However there are also the standards of Crowdfunding and Grants, but that's not as easy as people tend to think it is.


Great answer, Maria!


On second thoughts, I should add something. This model is great for budgets of a certain size. If you are working with a $100,000 or less budget, then this is not the model to be using. What is the budget you are working with, Jeffrey?