They say that money makes the world go ‘round; if not the world, it is certainly a key factor in making your film! Having this wonderful vision of how you will make your film and getting it done are two different dreams. The objective for you is to make them come together, and unless you have independent resources, or a lot of influence with the right people, it is a highly significant challenge.
Although in this digital age, a producer is able to shoot a high-quality film for a relatively low price, the bad news is that it can still cost you many thousands of dollars. Keep in mind that paying an average of about $50 million for a feature film is considered a routine expenditure. Another consideration is that while the digital technology will enable you to capture and edit an image on tape, you must still pay for a crew, location expenses, licensing and a lot more. These factors will be an influence even with the smallest of films, and the question now must be how to go about financing a film!
If you are prepared to negotiate the subject of film ownership, then you could enter into a co-production agreement, or arrange to sell part ownership to a third party – for example, a studio. This type of agreement entitles filmmakers to enter into an agreement with another party that is generally a production company with studio and equipment. This co-producer is then entitled to a percentage of the film ownership in exchange for the services provided to the filmmaker.
Depending on the terms of the agreement, the co-producer may own part of the film copyright, equity in the filmmaker’s company, or a percentage of the profits made by the film. Generally, however, the agreement is a combination of all of these factors! When selling this concept, a filmmaker will include a package for the film that consists of the script, recognized star(s) and director. Should the studio elect to buy this package, it may be treated as a co-production, but usually the copyright to the film reverts to the studio.
Studios to Other Options
Although many filmmakers are willing to sell off their film rights to a major studio, a common problem that arises is that you are not a recognized film producer who is able to gain the interest of a top ranked studio. One option available to you is to venture into the world of television and online video. This could enable you to negotiate a deal with a media source and shoot your film with their financial backing. However, just as with a film studio, this type of enterprise will usually want to possess all the rights to your film.
This is a situation that does not appeal to most makers of independent films. They want at least part ownership of their film and, therefore, they seek various financing alternatives. There are in effect four options: search for investors, finance the film by paying out of pocket, go into debt, or utilize state production incentives for partial financing.
The first option of paying out of pocket is a straightforward procedure. It’s simply a question of raising the necessary finance by selling stocks, bonds, or using any other means of personal financing available. Although this is a method that carries the highest risk factor and expense, it also has the potential to be the most lucrative one. From a legal point of view, it is considered the most advantageous for a filmmaker, as it is a reasonable assumption that the majority of filmmakers do not have a few hundred thousand dollars just waiting to be used for financing their films!
In certain instances, film producers will make the decision to script and shoot a film according to available resources. However, the drawbacks with this method include a film not being suitable as a low-budget project. In addition, in order to give your project the best chance of success, you need recognized actors in the lead rolls, with all the trimmings that go with them.
Financing a Dream
Debt is not a good prospect for anyone; however, if you want to fulfill your dream and make your film, the results could justify the means! Loans can either be negotiated by collateral or can be unsecured. In the event of defaulting on a secured loan, the lender can take possession of the entity that has been given as the collateral. Should there be a default on an unsecured loan, then the lender must sue the debtor for the money they borrowed. However, independent filmmakers are versatile people and try to finance their projects by various means!
Filmmakers generally believe in the world of plastic finance, or credit cards. Although they are a form of high-cost debt, they are the favored method of financing, whether paying for a meal or renting studio accessories. The costs associated with a film are regularly paid for by the plastic card. There are many quoted cases where massive debt has been incurred on credit cards and the new card rollovers that followed. This is designed to maintain a balance that gains breathing space for as long as possible. Needless to say, this method of financing is not considered successful, and the result is frequently bankruptcy.
The personal loan route is available in certain circumstances and is generally arranged by way of a bank, with appropriate collateral lodged against default on the repayment. An option that is explored by many is the taking of an additional loan on their home or other property. Perceptions of a promissory note vary, with some filmmakers using this method as an attempt to avoid a securities issue. Caution is advised, however, as a promissory note could still be regarded as a security, particularly if a lender will receive a percentage of the profits made by the film.
For producers who apply to borrow based on using state tax credits, this is a procedure in which money is borrowed against the value of the tax credit, with the assistance of a qualified lending facility.