How Do Bridge Loans for Motion Picture Finance Work?
Very rarely is a film project financed with a single form of funding from the start. In fact, financing a motion picture will typically include a creative mix of several different forms of funding. Including bank loans, investment financing, the sale of securities and other types of support for the business. In the event that a gap in financing exists, bridge loans for motion picture finance may be used to provide for the immediate funding needs required in order to pursue production.
Also called development loans. Bridge loans for motion picture finance are provided. As a means of bridging the gap in cash flow that a producer might have during the early stages.
In which essential planning of the production is just kicking off. And start-up funds are necessary in order to further pursue financing through other resources. Including bank lending, investors, crowdfunding and other options.
What are Bridge Loans?
Bridge loans, also known as development loans, are investor loans that are provided early on in the production process. To bridge the finance gap that a producer might have when a film is in development.
And has just started the process of seeking financing through various other sources. Similar to the benefits provided by donor crowdfunding.
Bridge loans are used by producers to raise the initial funding that is required. In order to get a film “greenlit” so that the producer may then work more affirmatively on securing the full production budget.
Why are Bridge Loans Attractive to Investors?
Many investors appreciate bridge loans. Because they are the first to be paid back. In the event that full financing of the production budget is secured. Thus, the first draw down which occurs during a production will be used to pay back the investment of a bridge loan.
Which was received earlier during film development. Therefore, many investors are content with the idea of investing now. And seeing their investment returned to them during pre-production.
Rather than the typical investor that normally wouldn’t receive any payback of investment funds. Until the film was distributed, profitable, and drawing in revenues.
What if the Film Never Secures Full Financing for Production?
Bridge loans for motion picture finance are generally paid back during pre-production. But in the event that a film is unable to secure the necessary additional financing for production to take place.
Investors that provide bridge loans will not be 100% out of their money. At least not normally. Most of the time, a bridge loan is secured by a lien on the copyright of the original script.
This means that if the bridge loan is not paid back? The investor has the right to the copyright of the film. Therefore, if someone tries to produce the film in the future before they will have any rights to the copyright that initial bridge loan will be required for payment.
In Summation
As you can see, bridge loans have the power to act as the first investment for a production. And represent a unique opportunity for investors that many can find interest in.
However, a bridge loan for motion picture finance can be used to get started with a production. While the producer then works on securing additional financial coverage for the latter points of production.
Secured by a copyright line. These loans are one of the many ways that film producers can look at financing a film.
