The different types of film funding

The headline says it all, so let's get started.

When you raise capital for a film or are asked to invest, you should have preferably a general idea of the different types of options you have and which ones you can use in your particular situation in order to gain the most value (for everyone). It all comes down to being honest with your situation and to make a deal where all parts are happy. If everyone is happy the chances are the production will be a nice experience rather than a nightmare. Below are some of the most common types of investments you will come across as an investor or filmmaker. By the way, a place where a lot of people talk about film financing is, Sundance.

throwing money


Are investments in a project made by a single investor, a group of investors and/or investments from colleagues/family. It's also called Private Equity and it require that the investor own a stake in the film or operating structure and must be paid back (typically on their principal investment + 20%) before profit is seen on the side of the filmmakers. This is often times the easiest type of investment but can be hard to handle depending on the size of the investment or numbers of investors.

What to remember; Equity investments require that the investor own a stake in the film or entity and must be paid back before an potential profit is seen. It is generally a good deal for the investor (depending on the project of course) and it can be a good deal for the project or entity. However the risk of losing the full investment is as always, very high.


Tax Incentives, rebates & credits

This can be worst and hardest piece of the investment puzzle. Tax incentives are today an important part of film productions and is most definitely the strongest reason to why a production is filmed in an area or country other than California for example. Individual state and country legislation enables producers to subsidize spent costs for production. Tax incentives often require a producer to hire a certain number of local crew employees, use local vendors, hotels and services etc. The draw back is that tax credits are often based on application processes and is usually lengthy, months and years are common for a single production.



Pre-sales agreements are made with distributors before the film is produced. These agreements are often based on the strength of the project's marketability and sales potential in each territory, a rule is to always have marketable cast attached early on in order to be able to sell the movie if the opportunity presents itself. The project will usually be valued by a distribution company based on the script, attached talent and crew. The market might also be taken into account. If an agreement is made, this will enable the producer to take a bank loan using the pre-sales deal as collateral. Pre-sales can also be a direct payment (at a discounted rate) from a buyer, often a distribution company.

What to remember; As with almost every investment, pre-sales require the producer to pay back the capital before profiting. Pre-sales can be a great way to secure distribution and distribution is often extremely valuable for a producer and potential investors.


Gap, supergap & mezzanine gap

In motion pictures, gap and super gap financing is a form of mezzanine debt financing where the producer wishes to complete their film finance package by securing a loan that is secured against the film's unsold territories and rights. Some gap financiers who will only lend against the value of unsold foreign rights. The value is decided based of the quality of the script, cast, genre, director, producer, as well as whether it has theatrical distribution in the US from a major film studio.

The interesting thing here is the valuation is also based on the historical and current market and trends of each foreign territory. As I said before, it is a dangerous game to play because it is an unpredictable practice. Domestic distribution is also unpredictable and far from a sure thing today.

Generally, gap or supergap loans are recouped after the first production loan is recouped (you can say it´s on second place in the hierarchy). The gap or supergap loan will be recouped before an equity financiers investment. Its not hard to understand why many gap investors are banks with high risk, high reward type of deal.



It goes without saying that loans are common in film financing and we all know how they work. It is actually not that different from an equity investment. The real difference between a loan and an equity investment has to do with risk. A loan comes with lower risk, as long as the loan is secured and have collateral backing it. The borrower is obligated to repay the loan and interest to the creditor. The creditor on the other hand does not see any revenue except from the interest paid.


Bridge financing

Bridge finance has become more common in film making in recent years. Bridge financing is an answer to the problem of "needing funding to get the actors" but not getting the funding without the actors. Bridge financing can be used in scenarios where a filmmaker has a letter of intent from an investor to finance a film provided the filmmaker can attach an approved actor. The problem then becomes an issue of acquiring financing for the actor's payment. In this instance, a short-term lender can provide a bridge loan to secure the actor with the note as collateral; once the actor's payment is in an escrow account, the equity investment can be triggered, and the bridge loan would be paid back with interest.

A note; Bridge financing can be a great way for an investor to invest a smaller sum in a movie for a short duration and knowing where the money will go. Knowing where your investment actually goes is usually an important step in doing an investment and for producers this can be the investment that kick-starts the production.


Thanks for reading. I hope this was easy enough to understand. If you have any questions, please get in touch or click here if you want to know more about the basics around film funding.