Film Financing - The Facts

In today’s market, financing your independent film is all about striking the right balance:

Don’t scrimp too much for the sake of saving cash. You’ll have a better film if you raise enough money to use high-quality actors, for example, or to shoot on high-definition video instead of standard video.

At the same time, be smart when you create your budget. Fund-raising for an independent film is no small feat, especially in a down economy, and you don’t want to reach beyond your means. To help you plan, we’ve listed some of the sources of financing that are most common these days.

You probably already know the most common source of funding: private equity. Private equity is comprised of the donations from Dad, the hopeful contribution from a friend, etc..

Go beyond your immediate circle of friends and family to seek out financing from other investors — especially those with deep pockets. Remember that the initial private equity often spawns later contributions. If people see you’ve already raised a good chunk of money, they may be more likely to gamble on your project.

Another funding option is the presale. This is the situation in which a distributor buys rights to your movie for a certain territory ahead of time, and then helps you fund production. The hope is that the distributor will get his or her advance back when your movie becomes a hit and rakes in the ticket sales.

Obviously, the distributor has to have some faith that the film will find an audience. Because many films flop, it’s not so easy to attract a presale. You’ll have more luck if you have top-notch — and well-known — actors, and a seasoned director and producer. (Even B-list stars who act in straight-to-video projects can attract presales.) It also pays to work with foreign sales agents, because they know the foreign distributors.

If you’re fortunate enough to attract presales, you’ve scored a double victory. You will have raised money and secured distributors at the same time.

One type of presale that can be helpful, but is rare, is the international co-production. When the distributor gets more involved in your film, to the point of becoming a co-producer, he or she may feel more confident that the movie will be made well. Then the distributor takes a larger stake in the movie. Again, you’ll want to work with a foreign sales agent.

International co-productions have become more common with documentaries, thanks to the growing desire by cable and satellite networks to seek out nonfiction programs.

When you’re creating a budget, remember that you may be able to qualify for some tax incentives by filming in foreign locations. As long as you don’t spend everything on travel costs, and you partner with local production companies, tax incentives could save you a bundle.