The Finance Plan of a Film — A Breakdown

A lot of our users on Filmarket Hub have stated how they tend to be in the darkness regarding production values, preparing finance plans to present to possible investors for their film or TV series project. It is a very important part of the process of making films which, due to lack of information on the matter, screenwriters and directors tend to be in the darkness in that regard.

So, today we’re going to try shed a bit of light on one of the ways in which you can structure the finance plan for a feature film which is ready for preproduction.

First of all, let’s refresh our memories on what is a finance plan.

The finance plan is the document in which you specify how much money you need to make your project, in this case a feature film, and how you’re going to obtain (or you have already obtained) that money. You’re also showing where’s the money coming from and that your sources of income are reliable.

To simplify the example, we’re going to suppose we’re working on the first feature film of an up and coming female director, with a budget of 1 million euros.

Before getting down to the example, let’s go over what types of financing can a film project aspire to or look for.

Soft money or public funding:

We’re talking about all that money that you can get applying through public competition, launched by the ministry of culture or the national film institute (which most countries in Europe and Latin America, tend to have). It’s a type of funding that, depending on the country you’re applying in, there will be more or less chances for you to get any funding. In other words, it is not the same to try to get funding in France or in Spain, as quantities available for that are much bigger in France compared to Spain, for instance.

Hard Money or Private Investment (and the so called tax rebates):

The last decade, in Spain, since the creation of the Law of Cinema in 2007 and the drastic cut back in public funding for film, production companies started to form a type of economic associations that facilitated a posterior tax rebate process of up to 20% of the invested quantity. This percentage isn’t as large as in some other countries, where it can get to 40%, but it has helped productions get by and investors get a good deal on their tax rebate. This has become a good way for people who earn large quantities of money to contribute to film, helping out producers in need of financing.

Presales of broadcasting rights:

Another way of getting financing for your film, though might be one of the most difficult ways, is by getting a pre-sale on the broadcasting rights to your content; be it to TV channels or OTT platforms (Netflix, Rakuten TV, Hulu…).

The broadcasting rights are those rights which, as its name indicates, allows to whom possesses them to receive the revenue that it makes. Usually, this is something that is negotiated via an international sales agent or the distributor of the film (in each territory) will decide upon a price to cede these rights for a certain period of time. In other occasions, the production company might negotiate this kind of deal, but it’s not the norm, though the last few years this is changing, with the appearance of Netflix and Amazon as major players who are giving voice to filmmakers that traditionally wouldn’t have a way out into the market.

Indirect Financing

A type of financing that’s very popular (for lack of a better term) amongst independent filmmakers, is the one in which high ranking/high paying members cede part or all of their salary for shares into the film. Once released, they’d get paid back through the income generated at the box office (if there’s any revenue after the break even).

This is the most “economical” way of financing a film, not the most advisable, as it is a sort of last card to play, which burns out crew quickly if asked one too many times to exchange their honoraries for shares on future revenue.

Coproduction

This form of financing deserves a post on its own, which we will publish here soon enough.

The coproduction process tries to unite the forces of two or more production companies with a common objective: to share the financial, organizational and managerial weight of the production of a film. Moreover, when working together with a production company from another country (it could also be local, but let’s imagine it’s an across borders production), not only this collaboration will ease getting financing, but it can also bring us fiscal advantages in that other territory, access to public funding, discounts and lower prices in the rental of equipment, locations, postproduction etc.

Bank Loan or “Gap financing”

The simplest and most straightforward way of getting cash flow is to ask for a bank loan. Some banks are more film production friendly then others, but more importantly, if you present to them a solidly structured finance plan, in which you have already covered a good amount of your budget, it can become a very good ally to cover that last part of the budget you need to cover to get it green lit.

Then, what does our finance plan look like?

In this case, most of the budget is covered by private investors; who will get a 25% tax rebate once the expense on the production is allocated. The public funding is also a big chunk of the budget, though in most cases it wont be this large, unfortunately. We’ve also presupposed that the film rights have been sold to one OTT company and a public tv broadcaster, which will be shown on after the film has been released in theatres across the country. Finally, to cover the last 5% of budget, we’ve asked the bank for a loan. This example is a very round and simple financing plan, we could divide it into many more items, receiving financing from other outlets: crowdfunding, hedge funds (which would fall into private investment), in kind investments (a postproduction company that doesn’t charge you for their services), etc.

In conclusion, the important thing is to know all the financing tools you’ve got at your hands, so as to build a plan that will work for your project. There’s many ways you can combine the different options of financing; in the end it is about showing that you have thought about how to go from script to reality in a logical, sensible and consistent way.