Sources of Production Finance

Once you've sucesfully raised enough money to transform your idea into a script, produced a business plan attractive enough to lure an investor and have signed up your Hollywood A-list cast then you are ready to rasie Production Finance. Out of this money you will fund the film's production right through until you have a finsished product ready to sell. Unless of course you plan to sell and distribute the film yourself, in which case you might need to aacount for this in your plan.


Where to Find Production Finance

There are numerous sources of production finance available to the independent producer and most independent film funding will be made up from a number of these different sources, broadly speaking they are;

Private Equity/Venture Capital – This is recoupable investment provided by individuals, specialist funds, VCT’s, or Enterprise Investment Schemes in return for a share of the profits.

Co-Producer Financing – A partnering producer may provide some equity finance in return for certain distribution rights. Co-producers are often sourced from different countries so that they are able to access a wider pool of Soft Financing options.

Soft Finance – This is finance that often doesn’t require recoupment and comes in the form of Grants, Product Placement, Tax Incentives, Crowd-sourced Funding;

• Grants – There are a number of grants available for British Films but these quite often involve jumping through a number of hoops. (Which one would naturally expect)



• Product Placement – This is sought from companies that provide cash or in-kind services in return for screen-time or marketing associate with the film. Examples include Aston Martin and Omega whose products are associated with the Bond movies.



• Tax Incentives – This is funding that is based on legislative tax breaks aimed at producers. Currently in the UK there is film tax relief offered to British Qualifying Films - Films that must be certified by the British UK Film Council. (This will be the subject of a blog entry as soon as I can get my head around all the details!)



• Crowd-Sourced Funding – Some producers have successfully raised finance for their films via the web by offering credits or roles as extras in a film to all that donate say $10. Your success at raising this type of funding largely depends on your creativity and web-savvy.

Gap Financing – Banks often provide a gap loan to help the producers get the production across the line. Banks will typically use projected sales income as collateral.

Pre-sales – This is where a distributor is willing on the strength of the proposition to offer to buy the rights to distribute the film in a certain territory before the film has been made. This can be used as collateral to borrow money and put towards the finance of the film.

Deferments – This is where cast and crew part-finance the film by deferring their fees to the end and recovering them from sales revenue, naturally with an enhancement for taking some of the risk.

I've said this before; the key is to maximise your Soft Financing streams so that you and your investors move quicker into Net Profit Distribution. Each one of these sources of revenue deserves a separate post and I shall endeavour to write about my experiences with each one as we move forward.