The 9 Ways to Finance an Independent Film

4/26/2017

A lot of Filmmakers are only concerned with finding investors for their projects. While films require money to be made well, there’s are better ways to find that money than convincing a rich person to part with a few hundred thousand dollars. Even if you are able to get an angel investor (or a few ) on board, it’s often not in your best interest to raise your budget solely from private equity, as the more you raise the less likely it is you’ll ever see money from the back end of your project.

Don't want to read? Here's a video version from my YouTube.

So here’s a very top level guide to how you may want to structure your financial mix. The mixes in the image above loosely correspond to the financial mix of a first time film, a tested filmmaker’s film, and a documentary. They’re also a loose guideline, and by no means apply to every situation. This piece originally appeared on my medium, but I'm moving those posts over here in an effore to consoidate my presence.

Piece 1 — Skin in the game. 10–20%

Investors want you to be risking something other than your time. The theory is that it makes you more likely to be responsible with their money. This can be from friends and family, but they prefer it comes from your pocket. However, if you’ve got a mountain of student debt and no rich relatives, then there is another way…

Also, I've gotten a lot of flack for this. However, it's true for any industry, or any business. Tech companies normally have skin in the game from the founders as well, not just time, code, or intellectual property.

Piece 2 — Crowdfunding 10–20%

I know filmmakers don’t like hearing that they’ll need to crowdfund. I understand, it’s not an easy thing to do. It’s a full time job during the campaign if you want to do it successfully. However if you can, you’ll be able to put some skin the game, and get to retain more creative control and more of the back end. Due to the difficulty in finding money for film, the skin in the game for a director’s first project is often much higher than it is in other instances.

Piece 3 — Equity 20–40%

Next up is equity. This is when an investor gives you money in return for an ownership stake in the company. From a filmmaker perspective, it’s good in that if everything goes tits up, you don’t owe the investors their money back. Don't misunderstand what I mean by this. You ABSOLUTELY have a fiduciary responsibility to do your due diligence and act in the best interest of your investors to do absolutely everything in your power to make it so they recoup their investment. If you do that, or if you commit fraud, your investors will sue the pants off of you.

Also, you will need a lawyer to help you draft a PPM. You shouldn't raise any kind of money on this list without a lawyer, with the possible exception of donation based crowdfunding or grants.

It’s bad in that if everything goes extremely well, they get a huge percentage of your film. So it deserves a place in your financial mix, but ideally a small one.

For a longer list of my feelings on this topic, check out Why film needs Venture Capital, or One Simple Tool to Reopen Conversations with Investors

Piece 4 — Product Placement 10–20%

Product placement is when you get a brand to compensate you for including their product in your film. It’s more commonly in the form of donations or loans for use than hard money, but both can happen with talent and assured distribution. If you’re a first timer, it’s difficult to get anything other than donated or loaned products. Those There are some great services to help with this, including Brandwood Global.
Here’s a primer on how to go about contacting brands.

Piece 5 — Presale Backed Debt 0–20%

Everything you read tells you the presale market has dried up. To a certain degree, that is true. However it’s more convoluted than you may think. According to Jonathan Wolfe of the American Film Market, the presale market has a tendency to ebb and flow with the rise and fall of private equity in the filmmaking marketplace. There’s been a glut of equity for the past several years that’s quickly drying up.

That said, there are a lot of other factors that will determine where pre-sales end up in a few years. The form has shifted, in that it’s generally reputable sales agents that give the letters instead of buyers and territorial distributors. You then take that letter to a bank where you can borrow against it at a relatively low rate. For a more detailed analysis of the presale market, check out this article I wrote on HopeForFilm.com

Piece 6 — Tax incentives 10%-20%

While many states have cut their filmmaking tax incentives, it’s still a very viable way to cover some of the costs of making your project. It is worth noting that the tax incentive money is generally given as a letter of credit, you can then borrow against or sell to a brokerage agency. It’s not just a check from the state or country you’re shooting in.

Piece 7 — Grants 0–20%

There are still filmmaking grants that can help you to make your project. However, that’s not something that is available to all filmmakers, especially when they’re first making their projects. There are far more grants available for women and minorities, and grants are much easier to get as a completion fund once you’ve shot your film. Additionally, films made overseas are more likely to be funded by grants than those shot here in the US.

Piece 8 — Gap Debt 10–40%

Gap debt is an unbacked debt used to create a film or television series. This means that the loan has no collateral, be it product placement, Presale, or tax incentive. It used to be handled by entertainment banks for a very high interest rate, but that market has been largely taken over by private investors loaning money through slated. It almost certainly requires a completion bond.

Piece 9 — Soft money and Deferments — whatever you can
Soft money is funding that isn’t given as cash. This can be your crew taking deferred payment for their services, or receiving donated or loaned products, locations, and anything else meant to get your film made. This isn’t so much funding as cost cutting. It does donations or loans from product placement.

Thanks for reading! I would like to state that this sort of funding should not be attempted without the help of both an experienced executive producer and a lawyer. I'm not sure where people got the idea that I was encouraging people not get the help of lawyers and EPs, but some people in the comments did.

Thanks for reading this post! If you have want to know more about how to be a successful executive producer, then you might want to book a strategy session. In that strategy session we'll figure out where you are in your next steps to growing your filmmaking career are, and how we can get you from point A to point B, whether it be raising additional funds for your film, procuring distribution for your movie, or what to do for your second project.

Book your strategy session.

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in addition to writing lots of blogs, I've also written a few books. This blog is featured in The Entrepreneurial Producer, but by far my most popular book is The Guerrilla Rep: American Film Market Distribution Success on No Budget. TGR:AFM is used as a text book at more than 10 film schools nationwide, and You can find that one on all sorts of outlets. Here are some handy dandy links as to where you can find it, but my favorite places for you to get it would be your local bookstore or library. If they don't have it, they'll probably get it for you.