Film Financing

There are many ways in which films get funding to make a film. Im going to be talking about the four main methods which help to get the money they need to fund a film. These four methods are Government Grants, Tax Schemes, Debt Finance and Equity Finance.


The term Governement Grants means where a number of governments run programs to subsidise the cost of producing films. For instance, in the United Kingdom the UK Film Council provides funding to producers provided certain conditions are met. Also, for exmaple, states in America such as New York and Oklamhoma provide a subsidy on the basis that all guidelines are met, and all or part of the film is filmed int hat state.These Governments are willing to provide these subsidies as they hope it will attract creative individuals to their territory and stimulate employment. Government subsidies are pure grants most of the time, where the government expects no financial return.


Tax Schemes are created which effectively sell the enhanced tax deductions to wealthy individuals with large tax liabilities. The individuals pay the producer a fee in order to obtain the tax deductions. The individual will often become the legal owner of the film or certain rights relating to the film, but the producer will in substance continue as the real owner of the economic rights to exploit the film. Also, films with little commercial or artistic merit are produced simply to generate tax deductions.


Debt Finance is based on pre-sales and television pre-sales. Based on the script and cast, pre-sale is selling the right to distribute a film in different territories before the film is completed. If a film has a big name in it and the rights are sold, they expect the film to do well once it has been made. Once the deal has been made the distributor will insist that the producer delivers on certain elements of the content and cast. Upon the singing of a pre-sale, a deposit of 20% will be made by the buyer into the films bank account. Although it is more usual for a producer to sell the TV rights of this film after it has been made, it is sometimes possible to sell the rights in advance and use the money to pay for the production. In some cases the television station will be a subsidiary of the movie studio's parent company.


The fourth method is Equity Finance. Equity financing requires the filmmaker to sell interests in either the film or film company in exchange for the funding. The of this method is that the investor will only recieve his money back if the film shows a return. If a filmmaker sells 50% of the corporate interest to an investor, for example, then the investor will lose his entire investment if the film is a complete failure. If the film is a tremendous success, the investor will receive 50% of every £/$ of profit, which is far more than what a lender would get.