Can’t find financing for your film project? Here are 7 direct steps to securing capital funding for your life’s dream!

As film makers, the last thing most of us want to deal with is the mind-numbing, and oft times emotionally crippling process of raising money to finance our projects. While we would like to be able to focus on our craft, it was Samuel Z. Arkoff who gave us all a reality check when he stated that “The film business is 95% business and 5% film.”

And, in the current climate of film-making (ironic that it’s still called “film-making”, even though almost no one actually shoots on film anymore), where anyone with fifty bucks, a few friends, an iPhone, and a terrible idea can shoot a movie and post it to YouTube, it is becoming increasingly more difficult to convince financiers to commit any substantial amount of money to fund an independent feature.

To be sure, there are solutions to this dilemma, but before we get into that, let’s identify some of the issues that film makers are faced with today.

In a recent study conducted by the analytics firm, FilmProfit, it was discovered that for every thousand independent films distributed into the marketplace, “Just around 10% will be released theatrically; many of those will be shown on under a hundred screens.”

40% to 60% will be released into one of the top two tiers of digital platforms (Netflix, iTunes, and Amazon being the top tier, and VUDU, Google Play, and Direct TV occupying the second tier).

10% to 20% of those thousand films will be disbursed directly into the DVD (and Blu Ray) market for direct sales through online and retail outlets, as well as be sold directly into the foreign markets for a one-time fee for territorial rights.

The remaining 10% of sales will fall into what is un-affectionately referred to as “The Dumping Ground”. This includes self-distribution of finished product and/or allowing a low-end distributor to bundle your product into a library.

While the lower end of the distribution outlets may seem like a dismal outcome for your cinematic baby, if properly developed, your project will have a substantially better chance of winding up in the top fifty percent of distribution releases, rather than the dumping grounds.

Now that you have an idea of the potential fate of your finished product, let’s discuss something a bit more relevant to you at this stage; namely, how do you get your project made? Clearly, the two book-ends to this issue are finance and distribution.

Unfortunately, as most film makers have discovered, this often becomes a “chicken or the egg” proposition. Most financiers won’t give you the time of day unless you have talent and distribution attached, and most distributors won’t give you a real bankable commitment (letters of interest are simply that) without having your funding in place first.

Let’s put distribution on the shelf for a moment and concentrate on financing. To be clear, there are actually two stages of financing; development funding, and capital funding.

Development funds are the monies necessary to complete what I refer to as the “laundry list.” The items on this list are things such as: forming a single purpose entity and transferring your intellectual property to that company, creating a day out of days schedule and a bondable budget, acquiring proper analytics prepared by a reputable analytics firm, creating a digital media footprint, securing a Producer’s Representative, addressing casting, etc.… All of these steps substantiate value and mitigate the risk of financing your project.

Properly developing your movie can cost anywhere from $20,000 to $100,000. Just like creating a production budget, figuring out exactly how much development will cost depends what will be required to satisfy a capital funding source. Upon hearing this, most film makers quickly acquire “deer in the headlights syndrome” and allow mild panic to set in. This first hurdle also seems to be where the two paths to independent film making diverge.

A select few will address this issue head-on and set their minds to acquiring these funds as well as searching for the proper resources to complete these tasks.

Most, however, will take the path of least resistance and waste a substantial amount of resources, money, and most importantly, time, attempting to “package” their movie with artwork, look books, non-bondable budget top sheets, letters of interest from distributors, agents, casting directors, and so on.

On a side note, Letters of Interest (LOI’s), from distributors and /or actors have absolutely no value to any reputable financier. Unless a distributor is delivering a minimum sales guarantee, or an actor (or their agent) is formally committing in writing to play a role in your movie, general interest letters are non-bankable as well as a complete waste of everyone’s time.

As a brief case study I submit the following: K.C., a film maker, spent two years in film school, and although he had a movie idea for his thesis, he decided to pursue the project later. He subsequently spent three additional years attempting to “package” his film with no success. K.C. finally reached the inevitable conclusion and decided to change his methodology. “I finally realized after three years that nobody cared about my film except me, and that what I was doing was obviously not working.”

Recently, K.C. raised the money to properly develop his project, contacted the analytics firm, Film Profit, as well as Moving Picture Media Group’s development division, and worked with them to put together all of the necessary elements to meet the requirements for capital funding. He is, at the time of this writing, fielding two separate offers for capital funding, and he is slating production for later this year.

While this may sound inspiring, it does not address a critical question. How did K.C. raise the initial development funding? While there are several ways to accomplish this, the two most common methods are; A) seeking private equity, which falls under the realm of “friends and family”, and B) contacting a finance facilitator and raising your development funds through a debt component such as loans and /or lines of credit.

Many film makers cannot, or will not, take on additional debt to develop their project. While the “cannot” issue is easily remedied, the “will not” attitude is why there are thousands of film ideas out there that will never get made. The reality is that if someone is not willing to take any risk to pursue their own dream, then how can they possibly expect anyone else to take that risk for them?

While you obviously will want to mitigate any such risk as much as humanly possible, there is still a risk to being a film maker. And, if you are not willing to accept that risk…then you are in the wrong business. There are numerous stories out there about film makers taking risks to get their films made (research Robert Rodriguez and Edward Burns as examples), and absolutely no stories about film makers who sat on their posteriors doing nothing and were showered with money and opportunity (the odd actress that was discovered by a producer while working at the local Quickie Mart in Duluth, Iowa doesn’t count).

So let’s discuss the “cannot take on debt” scenario. According to Michael Praver, founder of FilmFundingL.A.com, “There are two reasons that potential clients do not qualify for credit lines. They either have bad credit, or no existing credit.” Both of these situations are manageable and can be rectified with any reputable finance manager. Praver adds, “Clients can also bring in someone who is credit worthy to help them establish the credit lines they need to develop their projects.”

The bottom line is that if you are serious about making a film, there are a lot of options for securing development funding.

Let’s get back to capital funding. While there are a few steps to cover between development funding and capital funding, with regard to the latter, remember that any capital funding that you approach, whether that source is private equity (private individuals and /or funding groups), or debt financing (finance institutions and /or banks), is going to require that you have certain necessary elements in place before they consider financing your project.

Here are seven steps to help you along:

Step 1: Develop your material. Just having a script in hand is not enough. Screenwriting is not a solitary endeavor. Just like a novelist needs a proofreader, editor, and a typesetter, screenwriting is a collaborative effort as well. At the very least, once a script is finished it should be sent to a coverage house for analysis. As Jeanette Issa, a reputable screenwriter and coverage analyst puts it, “There is no such thing as a perfect first draft. It is important to have an objective viewpoint to your story, as many writers can become too close to their work.” In addition, having an analytics firm, media and marketing firm and a producer’s representative weighing in on the material is essential to insuring that your story is marketable.

Step 2: Build your network. I would put an exclamation mark after this step, but that just seems redundant. Not only was Rome not built in a day, it wasn’t built by one person either. This is perhaps the most crucial part of film making. Having a couple of friends that share your vision is not a network. Your network should include a finance facilitator to assist in securing development funding, a producer’s representative to assist in world-wide distribution, a legal representative for the myriad of deals and agreements that will need to be negotiated, a web designer and graphic arts team, a digital marketing advisor to build an audience for your project, an analytics firm to create a detailed market study, projections, a production partner to assist in securing capital funding, etc.… All of these elements will be critical to insuring that you meet the requirements for capital funding. You are in essence creating a business. And like any business, without the proper infrastructure it will fail.

Step 3: Create a detailed business proposal. While many film makers feel that they can create an impressive proposal without having the actual financial analysis and accurate information, such a proposal is not worth the paper it’s printed on. The table of contents for a useful proposal needs to include, but is not limited to, risk analysis, an executive summary, financial projections, market study, audience mapping, comparisons and trends, a detailed release plan for world-wide distribution in any and all media, and a plethora of other verified data on your specific project. Your budget and schedule, as well as every other aspect of development, will be greatly affected by this information. Understand that this proposal is going to be reviewed by the accountants and attorneys of your potential funding source, neither of which have any concerns with any of the creative elements of your project.

Step 4: Build the infrastructure of your project. Many film makers overlook this basic principal of business. Forming a single purpose entity, usually in the form of a limited liability company (LLC) is crucial for several reasons. First and foremost, like the name implies, the entity you form will limit the liability you can incur from any disputes that may arise from the creation of your project, protecting (to some extent) the members and the intellectual property itself.

Additionally, the company’s Operating Agreement will detail how your business is structured, how you will operate, who is in charge, how you can assign the rights to your property to third parties, and all of the other tedious details that you don’t want to think about. Your legal representation will be invaluable in this regard.

Step 5: Build your audience. “Social media” seems to be the 21st century buzz word that has replaced the 1990’s catch phrase, “Synergy”. Both words are nebulous at best; however, the definition for social media with regard to the entertainment industry has a very specific meaning. Facebook, Instagram, Twitter, YouTube, and various other media outlets allow people to share ideas and communicate, but without substantial expertise and effort they do not specifically target a defined audience.

Finding an audience is only part of the challenge. Posting to all of your friends does not build an audience of followers that can be monetized. This is why so many crowdfunding efforts have failed. A digital media firm, working in conjunction with your producer’s rep and an analytics firm can help you not only identify, access, and build a specific audience, but drive that audience to your website and other social media sources . This is not just an audience that is aware of your project, but a core audience of fans that will monetarily support your project when it becomes available in the marketplace.

Step 6: Create a distribution model. Having a Producer’s Representative is crucial for this step. This person should be brought on as soon as you begin the development process. Many film makers put a lot of effort into securing actors to their picture(s) before they even know if those actors have any value in the marketplace. A producer’s rep. will work directly with your potential distributor(s) to determine not only how to maximize your world-wide market sales, but which actors will add the most value to your project, based on its genre, budget, and distribution model.

As evidenced in the independent film release study discussed previously in this article, a majority of projects will never be released theatrically. As such, A-list actors may cost more money than they are worth from a distribution and budgetary standpoint. By focusing on exactly how your film will be released and distributed into the marketplace, and streamlining your production costs accordingly, you will be able to maximize your potential revenue, and minimize the financial risks in making your project.

It is worth mentioning that with the proper network on board, your credibility and credentials as a film maker will increase dramatically. This will translate into distributors (and financiers) having the confidence to make a stronger commitment to your project.

Step 7: Securing capital funding. Unless you are working with a production company and /or a producer that already has relationships with verified funding sources, much of the development process will have to be completed before you can secure a funding source. The reason for this is that actual financiers get approached every day by film makers trying to get their projects funded. Needless to say, even the most approachable investors are fairly jaded and unimpressed with most ideas that come their way. Even though they may nod and smile appropriately as you regale them with your cinema masterpiece, without all of the above components in place it is fairly unlikely that an investor will be writing you a check to cover your production costs.

In the case that you have a producing partner on board, who has such relationships with a financier, you can often times get a letter from a funder that shows interest, but that letter will be contingent upon delivery of everything mentioned previously before it will be valid. There is no easy path or shortcut to financing.

Investors are interested in maximum profit with minimum exposure to risk. Enthusiasm and creative brilliance does not mitigate risk. And, unless you have a track record showing that your last five films were box office successes, you will need to present a marketable business model and a credible team for your financial resources, as well as be willing to expose yourself to a certain amount of risk in order make your feature project a success.

Ray Ellingsen is a partner at Moving Pictures Media Group (MPMG) where he oversees the development, funding, and production of films and television shows. Ray managed the largest film studio in the state of Arizona, and has 30 years professional experience as a filmmaker. To connect with Ray please click here.