Finance is often the most difficult part of the entire process of making a film. It’s
the stage that stops many film projects actually happening. There are as many ways to finance
a film as there are to make a film. But there are some typical patterns. In this video I
share 4 money sources for indie filmmakers that will help you to set up their financial plan.
Coming up!
Hello everyone! And welcome back to another video.
My name is Ani Asfura and just to let you know, in this channel I share tips and tools
to help indie filmmakers to produce their films and make them visible to their audience.
So, if you want to know more about how the film business works and you want to be part
of this community, consider subscribing. Now, let’s jump into the video.
When people make a film early in their career, they usually get the funds from their family
and friends, right? We all have done it. But you can only do it like once or twice, but
after that, especially if you’re working with bigger budgets, you need to start using
more conventional industry- focused methods. Outside the Hollywood studio system, this
usually means putting together funding from a mix of different industry sources, like
private and public funding, or even from distributors and sales agents.
The first money source we are going to talk about is Licensing of Rights. As you know,
sales agents and distributors pay money for the rights of a finished film but also, you
can pre-sale the rights before the project is even made, when you have a script and some
talent attached, in which case they pay a certain amount upfront so their money can
be used as finance to make the film. As a producer, a pre-sale to a distributor
is one of the most important potential sources of film finance. It brings money into the
production process and it ensures that the film will be shown to the audience.
The distributor could take a certain territory and put up an advance of 15% or 20% of the
wealth of that territory, and that could be cash flowed during production, or it might
be paid on delivery, in which case you then need a bank to come in and discount that distribution
agreement. Now, you’ll be wondering why sales agents
and distributors are willing to proceed this way. And the main reason is because they are
interested in securing a great product for their distribution system at the lowest cost
and the lowest risk. Their motive for funding a film, in most cases, is commercial.
But there are two other motives for funding a film: its economic and cultural value. For
that, let’s check number 2. Soft Money. Film is particularly attractive to economic
development targets because it is perceived as creating knowledge-intensive jobs and bringing
additional benefits to the economy, in the form of tourism and image.
On the other hand, film has a cultural value, is a record of life, moments in history, politics,
social issues. Films are the reflection of the human behavior. An archive of memories
for the human being. Because of these two reasons, many governments
around the world are keen to support filmmakers and to help ensure that films reflects the
national culture as also the spending of a good amount of money in the local economy.
This is often known as ‘soft money’ because the terms under which it needs to be paid
back are less strict than for commercial investors and, in some circumstances it may not need
to be paid back at all. This soft money can come from ‘tax credits’
or funds available to support the development and production of films.
Tax credits is usually a very clean and simple mechanism where a production spends an amount
of money in a specific country, and you get a tax credit at the end. This kind of support
is offered by the UK, Germany, France, Czech Republic, Canada, Australia, Colombia and
other countries as well. And usually involves to work with local studio facilities and skilled
production crews. Then we have the Public Funds or Grants.
Many countries have government bodies with funds available to support the development
and production of films. Once you apply, these bodies will look at your film project and
decide whether or not it is interesting enough and culturally significant that they should
be supported. These kinds of funds, creatively driven, also push certain filmmakers that
these countries think can do exceptionally well because they go a little bit further,
taking some risks. Next, we have number 3. Equity Investment.
Private sector money. This is when people make an equity investment in a film and in
return they earn a share of profits. This can be a risky investment because many films
do not earn a profit. One example of this kind of funding is the
money that you receive when friends and family invest in your film, as they usually make
an investment in the form of equity. Often the motive here is more to support the filmmaker
than to generate an economic return. Also, there are commercial funds that are
often ‘tax advantaged’. This encourages investment because these individuals will
be getting a tax benefit for putting money into the film production or distribution,
and again, those investors will be treated as equity investors.
And finally, the individual investors, people who like the film business and take some risks
to find that movie that could make them earn some profits in the way.
Last, number 4. Bank Loans. Banks can play an important role in the financing
process, but you have to be clear about one thing. Banks do not invest in films. They
lend money to film projects which enables the producer to cash flow their production.
So how do they lend? First, the reputation of the producer or their
colleagues is extremely important. A producer with a ‘good track record’ gives the banker
a certain amount of comfort or confidence in the project. But if you're producing a
film for the first time, they key is to have someone attached to the project that has that
experience and can guide you and could give them confidence as well.
Second, the completion guarantee. A third party reassurance that the production team
is likely to deliver the project on time and to budget, and that if it all goes wrong,
the guarantor will step in and complete the project.
And finally, in the pre-sales contract, the distributor undertakes to repay the bank on
delivery of the film. The bank makes an assessment of this credit risk on the basis of the reputation
and financial statements of the distributor. Well, as you could see, there are different
types of financiers which are possible, and of course, depending on the film and who comes
together, then you have to make sure that all their interests are aligned.
I hope all this information was helpful for you, letting me know in the comments below.
And if you thought it was valuable, hit the like button. Thank you so much for checking
out this video and the channel. Keep crushing it! And see you next time.