Film Business Loans

Business loans may come through lenders or investors. When you work with a lender, you will repay the loan over time at a set interest rate. When you work with an investor, you will not repay the loan; instead, you will offer equity in your business and share your profits with the investor. Many film companies opt to use both formats in order to gain the appropriate amount of financing needed for what can be a very expensive endeavor.

Structuring Film Financing

Films are typically set up as individual companies or limited liability companies (LLCs). This means each film is independently structured with the state government. Each film will purchase its own insurance, and each film will have a separate tax identification number. Even the large production studios use this model in order to protect themselves and their businesses from liabilities and problems associated with film financing.

It is difficult to anticipate how much a film will end up making, and setting up each endeavor as an independent film production will help assure your whole company does not go bankrupt because one film fails to gross enough profit. This structure also protects the film's producers from a certain amount of liability by separating the film from their personal finances. Because of this unique structure, though, it is hard for any one film to truly develop credit. 

Seeking Senior Loans

Senior loans are traditional financing opportunities provided by banks or lenders. You may need to use your individual credit and assets in order to secure these loans since your film will not have a financial history of its own. You may use small business loan opportunities in order to finance your movie, or you may seek unique options for business startup loans. In any case, you will be evaluated both on your financial stability and the potential for profit in your film.

With most businesses, borrowers seek senior loans first and investors second. With the film business, however, you may need to do this in reverse order. Having funds from investors before approaching a lender will show the lender you already have some financial stability. 

Seeking Subordinate Loans

A large portion of your film business loan will come through investors. These investors are often heavily involved in the film business and known for financing new movie opportunities. Most new film producers will attempt to network with this group of people in order to secure subordinate lenders early on in the filmmaking process.

Subordinate lenders are last in line to recover funds from you if the film goes bankrupt. They also do not get paid an interest rate on the dollars they provide. Instead, they will ask for a portion of proceeds from the movie. Some financiers will want even more involvement in the film, often including a film credit or some say over who is casted or who directs the film, for example. If you are not comfortable allowing another person to have input into your new film, you may want to avoid using investor funds so you maintain control.