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Source / Author:  The Movie Guide 2015




INVESTING IN MOVIES is becoming more difficult with banks becoming more cautious about to whom they will lend money, and international sales and television licences both being less lucrative sources for pre-sales than in the past. There is an increasing reliance on “soft” money from tax shelter funds and public subsidies. In these difficult market conditions, most independent producers are having to give away most of their potential upside from the success of their film simply to get the film financed in the first place.

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The US studios are also looking for new ways to finance films to feed their distribution slates to keep the production costs off balance sheet and enable them to spread their own resources further.

Financiers may be interested in investing in the film for any of a number of reasons. Usually they will be looking to make a positive return on their investment and will be banking on the revenues generated by the film (in all its windows of exploitation) exceeding the costs of development, production and distribution. Investors might also have artistic or political reasons for investing, for example if it is Government policy to support the indigenous film industry, or may be investing as part of a longer term strategy to build up experience and expertise in a particular sector.

An excellent new guide to raising finance for independent production in the UK called “Get Your Film Financed” has recently been published by the Shooting People Press.

The Main Sources of Finance


these are distribution agreements providing advances or minimum guarantees (MGs) against the likely revenues in individual territories. Pre-sales are not generally paid in advance but they provide guarantees of future revenues which the producer can take to the bank to cash flow the production. However, the banks will discount the value of the pre-sales (ie. advance cash only up to a proportion of the total value of the sale) and for some territories or individual distributors with poor track records and credit ratings will be wary of advancing any cash against these estimates without a Letter of Credit from a bank in that territory. The bank will want assurances that the MGs are realistic and the prospects of receiving the guaranteed sums reasonable before they advance any money. They will also demand that there is a completion bond in place to ensure that the film is completed and is available for sale to the contracting parties.

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 Incentives and subsidies:

subsidies are available at the national, regional and European-wide level. In the UK, subsidies are available from the UK Film Council’s Development, New Cinema and Premiere Funds, and also from funds administered by Scottish Screen, Sgrin, the Northern Ireland Film and Television Commission and the regional film agencies serving the regions of England. The Isle of Man also provides incentives for films shot on the island. At the European level, the MEDIA+ programme provides subsidies for development, training and distribution (but not production).


it is also possible to access subsidies in most countries of Europe, by making a film under the European Convention on Cinematographic Co-Productions, or, further afield, through one of the UK’s bilateral co-production agreements with Australia, Canada and New Zealand (the UK also has bilateral treaties with France, Germany, Italy and Norway but these countries are also signatories to the European Convention). Co-productions can be official, in which case they must adhere to the rules set out in the treaty and guidance notes issued by the Department for Culture, Media and Sport, or unofficial but only official co-productions will qualify for national subsidies or fiscal incentives.

UK tax driven finance:

the Finance Acts since 1997 have introduced two major tax breaks for film production: s.48 which allows producers to write off the production cost of films costing less than £15 million in one year; and s.42 which enables a three year write off of production costs for films of any budget. Because production companies rarely have large tax liabilities to write these concessions off against, these allowances are generally sold on to third party financiers who make a contribution to the production budget in return for being able to use the tax write-off to reduce their tax liabilities. This is called a sale and leaseback deal and is currently worth about 14% of the film’s budget to the producer. These current arrangements are being reviewed by the Treasury and might be replaced with a tax credit scheme offering relief on production expenditure incurred in the UK. Another tax benefit is the Enterprise Investment Scheme (EIS) which provides an incentive for individual private investors to invest in businesses (including film production).


International tax driven finance:

these facilities often become available as a result of creating an official co-production but can be accessed directly by UK production companies. German tax rules, in particular, mean that there is private finance available from that country for investment in UK film companies. Moreover, the German authorities do not insist on any production spend taking place in Germany which gives the film company more flexibility than is generally available under such fiscal arrangements.

Equity investment:

the City of London is still generally quite wary about investing in film companies, but there are now a few schemes which have raised private equity from individual investors looking to make a healthy return from film production. These funds are not necessarily tax-driven but aim to pool money from a number of individuals which can then be invested into a slate of films to spread the risk for the investors.


Gap financing:

this bridges any gap that remains between the amount of finance that the producer has been able to raise and the production costs of the film. This finance is generally based on the potential value of the film in any territories that have not yet been pre-sold and can, therefore, provide some revenues from the exploitation of the film in those countries. This is a small and specialised market which is unlikely to fund more than 20% of the total budget and will only advance funds on the basis of sales estimates of at least twice the level needed to repay the finance.

Below the line investment:

production support may be made available by facilities houses or other providers of services to the production sector in return for using their services. Such finance is particularly associated with certain Eastern European countries who use such deals to attract valuable foreign currency (especially US dollars) into the country. Deferrals by cast and crew also fall into the category of below the line investment because they reduce the cost of the production to the level for which finance can be found.

Other financing:

finance can also be raised by factoring in likely income flows from ancillary rights such as music and publishing; through product placement deals; and through sponsorship which could become a more important factor in the future.


The need to piece together finance from such a wide range of sources means that the cost of putting the finance package together has increased markedly. The legal costs for even a small film can now exceed $100 thousand. Against that, however, with interest rates at historically low levels the cost of borrowing has reduced. Although North America pre-sales can be very difficult to put in place, not only can they provide an important part of the total budget, they can help stimulate sales in other territories and give the banks more confidence in the estimates received for those territories.


Top Tips

  • Effective quality control at every stage of development, production and post-production is essential. Question everything at every stage.
  • Raising finance for independent productions is getting increasingly difficult, with both international sales and television licences generating less revenue than before.
  • In these market conditions, most independent producers have to give away most of their potential upside in order to get their film financed.
  • The main sources of finance are: pre-sales, tax incentives, co-productions, equity investment, gap financing and below the line investment, including deferrals.

The key to generating finance from pre-sales is a North American sale which can be worth 25% or more of the total and can help to generate sales in other territories and give the banks more confidence in the estimates received from those territories.



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