Fortunately, more and more banks and financial institutions are considering film and movie projects for extending loans and lines of credit to help them cope with the high costs that making a movie and commercializing it implies.
Therefore, these new loan products will help those undertaking such projects to finance not only the production of the film but also the distribution, exhibition, marketing, promotion, etc.
The way these loans and lines of credit are articulated is not fixed and depending on the type of the film, there are different options. If the movie is more cost intensive, more funds may be required but more revenues will be expected.
Percentage Of Financing For Unknown Producers
It’s important to note that lenders usually don’t finance 100% of the production unless the producer is well known in the industry. Instead, for unknown producers, they will provide half of the money needed to produce, market and distribute the movie and they expect the producer or producers to raise at least 25% of the funds from other private investors.
In the event that these funds are obtained and if the distribution company has already agreed with the producers to provide the services needed to distribute the movie, then the lender may provide the remaining amount. Basically, the lenders will want you to be convinced that the project is viable and that the movie will produce the returns expected; At least enough to repay the money owed.
Insurance And collateral
Since these are risky transactions, the lenders will want to covert their steps and therefore will require proper insurance from the borrowers. There are special insurance coverage for movie producers provided by specialized insurance companies that are used to dealing with movie producers and distributors. These insurances cover for any accidents occurred during the production along with protection for delays in distribution and exhibition, etc.
The lender may also require to provide some sort of collateral in order to approve the loan needed to produce or distribute the movie. As regards to production, a common form of collateral is the land where the production company sits in or the production machinery such as cameras, cranes, trailers, etc. The distribution companies usually have the rights to more than one movie and therefore they may be required to secure the loan with those rights since though a movie may not pay out, some of the others can produce revenue.