Tips for Financing a Film Project Through Private Source Financing
The marketplace is so much different today than it was a decade or two ago. In a world where Indie Films are produced more frequently than ever before, finding financing can be challenging at best. There’s just so much competition out there. We’re showing you how Indie filmmakers are financing their film projects through private source financing from individuals that are looking to invest in motion picture films.
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What is Private Equity?
Before you can ever fully understand what it takes to obtain private source financing for your film you need to understand what private equity is.
As a new producer, you may have heard the phrase before, and questioned what it meant or maybe you’ve never been faced with a conversation in which private equity has come up. Either way, it’s important to know the term and what it means.
Private equity is the proper term used to describe a financial investment into film that comes from a private individual. This financial investment may not only be monetary.
Other contributions can also be considered private equity, but for simplicity purposes, we’re going to call private equity a private investment of money for the production of a film.
To better understand how private equity works, consider the scenario below:
Your cousin is willing to invest $15,000 into your movie. When you accept the money from your cousin he becomes what is known as an equity investor. In exchange for the investment, you agree to pay your cousin back from the profit you make from the film. You also agree to share your cousin’s name in the film credits.
Deals like this happen a lot when you’re seeking financing options for a film, especially if you’re just starting out and new to film production.
Now that you know what a private source financing option is, let’s take a look at some of the top tips to acquire the right financing for your project.
Be Safe
You can’t just reach out to everyone and anyone about private equity financing. All too often a new filmmaker will head out to seek financing armed with a script and a dream–nothing more.
Unfortunately, asking for money to finance a film without following proper securities laws can be deemed both a criminal and civil offense that is punishable by law. So before you place an ad seeking private equity investors or any other financing for your film, you need to speak with an attorney.
Prepare the PPM
As you prepare to seek funding for your film, you must prepare a private placement memorandum or PPM. This is a basic collection of appropriate documentation that outlines what your movie is, who your team is, and what the film industry is.
This documentation will be used to support your request for equity financing from private investors.
A professionally drafted PPM provides investors with a customized image of your movie and helps them to confidently consider financially backing your project.
The investor will see that there is no guarantee that they will make money off the film but they will have confidence in the ability of your film to succeed and they know that if the film does succeed, money is to be made.
A professional PPM will provide the investor with the following details:
- State and federal investor notices.
- Risk assessment factors.
- Producer bios.
- Production team and cast bios.
- Production timeline.
- Script synopsis.
- Updated description of the film business.
- Description of the film itself.
- Details regarding the offering.
- Details on the use of proceeds.
- Accounting details.
- Any other details required to lay out a transparent financial map for the investor.
Know Local Laws & Structure a Deal that is Mutually Beneficial
Before you finance a film in the private sector, make sure you are fully aware of the local laws and regulations that must be followed and consider hiring counsel to ensure you take the safest steps towards getting the funds that you need.
Financing continues to shift with the shifting of the film industry. Your dedication to properly structuring a deal that works both for your and for your investor will ensure the greatest chance of success in getting the funding that you need.
Communication is Key
A deal that only benefits you will most certainly never get funded. Likewise, a deal that benefits the investor but hardly benefits you will most certainly not be very exciting or acceptable on your end.
As you work to structure your equity financing, make sure you fully understand what can be done to ensure the deal is mutually beneficial for both parties.
These are just a few basic tips to follow when financing a film project through private source funding. As you work to find financing for your film, remember that quality content and the relationships you build with your crew, talent, and investors are key to the success of your project. Transparency is key in all situations.
