Finance agreements: painful but necessary

There is no standard way to finance a film – any deal can be made as long as all parties are commercially satisfied and the deal isn’t in breach of any laws. Gene Goodsell writes

Finance agreements can be painful, but unfortunately, they are also crucial because they start the production funding flowing so that production of a project can begin in earnest.

The reason that screen financing is so difficult compared to other industries is because there are so many types of financiers. There is never just a single lender involved or syndicate of lenders. Entertainment lenders each have a different kind of interest in the project because each is putting its money in for different reasons:

• Lending bank – will be interested in their fee, receiving interest (usually as a first-ranking secured creditor).
• Equity investor – will want to be repaid their investment in the film, as well as share in the profits of the film.
• Rights-based financier – this includes distributors and broadcasters who will contribute funds in order to keep any money they make from distributing the film in their own territory.
• Governments – that give grants/rebates/tax incentives will usually only offer such incentives if a large proportion of the film is made within their jurisdiction. This is because of the positive economic impact that this can have on the local economy.     

Entertainment bankers are powerful facilitators in the film business. Usually, where a project is financed with presales, an entertainment lender is involved in some capacity. The lender will have copies of all territory distribution contracts, and a completion bond will be obtained. The lender will use the distribution contracts as collateral.