The details of independent film financing can be a difficult to wrap your head around, especially if you're not business savvy. Many of us know how to go about receiving financing through crowdfunding platforms, like Kickstarter and Indiegogo, because the process is relatively simple. But when it comes to getting financing from other sources, you'll need to have a little knowledge on how the business of film works. Producer Cassian Elwes (Blue Valentine, Ain't Them Bodies Saints, Lee Daniels' The Butler,) as well as others, break down the process at a ScreenCraft seminar, giving helpful information on how financing an indie film works and where the money comes from.
With 62 credits to his name, Elwes is not only one of the most influential people in independent film, but also one of the leading industry experts on film finance. In the video, he explains the different types of financing, as well as where it all comes from. He describes it within the framework of a hypothetical situation: a $5M film that already has made $2M in pre-sales.
This is the money a bank will lend you, usually after you've made considerable headway in pre-sales (selling the right to distribute before the film is completed -- based on the script and cast.) Elwes explains that the interest on this kind of financing is usually low, because the risk for the bank is low. If you've got a pre-sale deal, that means that the risk lies mostly with a different party, because they're the ones making sure the film gets made. So, a bank would be willing to take on a certain percentage of the film cost (Elwes, in his hypothetical, says $1.5M.)
This includes tax credits and incentives, co-productions, subsidies, rebates, etc. Elwes says that you can sell your tax credit for cash, which puts however much money the credit was for toward your film budget. So, according to Elwes' hypothetical, if that tax credit is worth $1M, then you have half of the budget for your film, but the question is where to get the rest of the financing.
Do you have rich friends and family who want to invest in your film by writing you a multimillion dollar check? No?Well, you might have to look for an equity investor who is willing to pay to own a certain percentage of your movie, which means they receive a certain percentage of all the profits. However, Elwes explains that very few equity investors are willing to put down considerable amounts of money toward a film ($2.5M in his hypothetical.)
So, to combat this, he explains the process producers are using now, where they convince an equity investor to invest a smaller amount ($1M or $1.25M in the hypothetical,) and find another investor to pick up the Gap, or "Mezzanine" financing.
Gap / "Mezzanine"
This is a low-risk investment without huge returns, which is perfect for certain businesses who want to be conservative and play it safe, because they're simply "closing the gap" that is left in the film finance package. Sometimes, these companies (or company) will put up the rest of the money needed to finance the film, and others may lend against the unsold foreign rights.
Check out the video below to hear it from Elwes himself.
Another interesting thing talked about in the video is the current trend of private investors, in that in the last few years, though it has been harder to get loans from banks, it has been easier to raise private equity. So, more private individuals and companies are looking to loan filmmakers money at interest rates of 10% to %15 -- depending on the deal and which part of the financing is being covered.
What do you think? What has your experience been when financing your projects? Let us know in the comments.
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Just shoot it for $2M. Golan-Globus.
September 29, 2013 at 6:50PM, Edited September 4, 8:21AM
Or just shoot it for whatever you can afford even if all you have is a few thousand dollars. That's what Robert Rodriguez and Chris Nolan did with their first films
September 30, 2013 at 2:34PM, Edited September 4, 8:21AM
I wonder if some people with funds may invest into an inexpensive studio lot, where these low-medium budgeted films can be shot. Something like this, except a lot smaller.
September 30, 2013 at 9:21PM, Edited September 4, 8:21AM
You can shoot zero/micro budget your entire careers but it will likely not make you a living. Make your 1st film by any means possible but then learn the business. It is a business after all and to be cynical about that fact from the start of your career is not a good way to proceed.
October 1, 2013 at 1:58AM, Edited September 4, 8:21AM
You dont millions of $ to make a film. All you need is your vision, and no budget crew.
October 3, 2013 at 2:46PM, Edited September 4, 8:21AM
I took a mortgage out on my house and that was pretty easy. I probably won't get enough from movie revenues to pay back the loan so I'll be keeping my day job to pay it back. The upside is I have total artistic control and a great looking calling card I can link to when I seek jobs as a Director or Cinematographer.
July 20, 2014 at 10:31AM, Edited September 4, 8:56AM
I think it's laughable that the only comments are people saying "you don't need financing". To make a mid range or even low budget film with some recognizable talent to get visible international distro that will require more people involved than craigslist responders and your uncle. Maybe not depending who those people are but to not be ready to take on a variety of filmmaking situations at different levels is setting yourself up for obscurity
July 20, 2014 at 12:14PM, Edited September 4, 8:56AM
Well I think this was a good bit of info. I live in Italy now and the business is a bit different. I have a friend right now packaging a fim and he is half way there on 5M Euro. Well it is coming down to the argument of stars. They have french and Italian distribution. They need their 2.5m and the holed up is the stars fro mthe distributors to the co producers. The Name Game. I am shooting a short in October. Shorts don't make money and have a extremely limited audience. But I have sponsors because of the social message and they are all small private businesses whom I have offered a branding option on locations and or products used in the film.
July 20, 2014 at 11:04PM, Edited September 4, 8:56AM
Sigh, this info is in just about every film financing book out there. How about identifying which companies do presages reputably? which companies do gap financing. How about listing the banks that lend against pre sales? How about a resource of where to find "accredited" equity investors without violating securities laws? (you have to know them before soliciting then for money... hang out at country clubs?) and finally. how about identifying the institutions that loan the money at those rates of 10 and 15%? Otherwise its pretty generalized and useless information.
July 21, 2014 at 10:30AM, Edited September 4, 8:56AM
I used my saving to finance the movie Bit Parts. It was a micro budget horror movie that was distributed by a horrible group, who ended up jacking us over for any profits. Since I had put all my money into the movie, I had no money to hire a lawyer to sue them. The movie had mild success, but I never saw a penny of the profits. We did secure additional funds from outside people, but haven't been able to pay them back either. It's not just about where you get your money, or if you'll make it back, but about being careful during all aspects of the process. Good luck to all film makers.
July 21, 2014 at 5:55PM, Edited September 4, 8:56AM