Film Financing 101: Investment vs Gap Finance for Film

Film financing is an important aspect of film production. It generally begins in the earliest stages of development as soon as an idea for a film is composed. The overall basis of film financing is to determine the potential value of a film before it’s produced and distributed. And well before the true value of the project is to be realized. Film financing can include a variety of different types of support from investors. And through things like grants and equity financing. But what’s the difference between investment vs gap finance for film?

Investment Financing for Film

Investment financing for a film is generally backed by a private investor. One that offers a particular investment toward the film. Without any major means of securing the investment.

Also, investment financing represents a high-risk venture. Few investors are truly interested in because of the inherent risks associated with this type of investment.

Those who are interested in diversifying their investment portfolio might look to providing private equity investments. As well as those who are incredibly wealthy and have a strong love for film. 

Gap Financing for Film

Gap financing for film represents a form of funding that can “fill the gap”. Once a producer has secured other forms of funds and financing. And are seeking a small percentage of their total funding balance to be finalized.

Furthermore, gap financing involves procuring the loan. In addition to securing it against the value of the film’s unsold foreign territories or domestic territories. 

Lending

Gap financing, although a secured form of financing that is a bit safer than investment financing. It still represents an unpredictable practice that can lead to a number of unknown outcomes.

This type of lending, against the foreign value estimate of a film, is preferred. In comparison to some other forms of lending. But it is certainly not a perfect scenario.

Mezzanine Loans

Mezzanine loans, or gap financing funds, are recuperated second to bank loans but before any equity financing is paid out.

If a gap loan represents more than 10-15% of the total production loan that is required to shoot the film. It becomes known as a super gap loan.

A super gap loan is essentially a loan. It will fill a larger gap in financing than what the bank would normally want to cover. Which is between 10 and 15% at most.

Investment vs. Gap Finance for Film

So, which funding is right for you and your film project, investment vs gap finance for film? The answer is largely based on scenarios that are unique to your project. And which can only be established through your own analysis of your funding needs.

However, when examining the potential to use investment vs gap finance for film. The typical producer will first seek investment funding. And will later seek gap financing to fill the gap in any funding that was unable to be secured through private equity investing.