Film Financing

Film Companies have 4 main ways of getting the funds they need for film production and these are:
.Government Grants
.Tax Schemes
.Debt Finance
.Equity Finance


Government Grants
Sometimes the Government will give grants to a film production company if certain Criteria are met. A lot of the time the government will give grants to films being made in certain areas because they believe that this may attract people to the area and help to stimulate employment and tourism. Government Subsidies are often pure grants meaning that they expect no money in return because in theory the tourism that films could attract shot in certain places is payment enough.


Tax Schemes
A number of countries have introduced legislation that has the effect of generating enhanced tax deductions for producers or owners of films. Schemes are created which effectively sell the enhanced tax deductions to wealthy individuals with large tax liabilities. The individuals pay the producer a fee in order to obtain the tax deductions. The individual will often become the legal owner of the film or certain rights relating to the film, but the producer will in substance continue as the real owner of the economic rights to exploit the film Governments are beginning to recognise that enhanced tax deductions are an inefficient way of supporting the film industry (information from http://en.wikipedia.org/wiki/Film_finance) So basically the film producers sell off the Tax deductions to rich people who then sort of become a part owner of the film but the producers are still the owner and have the rights to the film. so that when the film is released the people who bought the Tax Deductions can make money off the film aswell its like investing in a films success basically.


Debt Financing is based on pre–sales and television pre–sales. The pre sales is based on the script and cast selling the right to distribute a film in other territories before said film is completed. If the film has any big names in it or if the genre of the film is big at the time, they film will be expected to do well once finished. A deposit of 20% is made by the buyer into the film bank account upon the signing of a pre sale and the leftover 80% due to be paid upon the films delivery to the foreign film agent.
It is more usual for a producer to see the TV rights of this film after it’s been produced made, sometimes it can be possible to sell the rights in advance and use the money to pay for production. A television station will be a subsidiary of the movie studio’s parent company.


Equity Finance – This requires the film makers to sell interests to the film or Film Company in exchange for all funding. For example if a film maker sells 50% of the corporate interest to an investor, then the investor will lose his entire investment if the film is a complete failure. And if the film is a success then the investor will receive 50% of every £/$ that the film makes, far more than what a lender would get. So an investor would only receive his/her money back if the film shows a return.