At times, producing an independent film can seem like a Herculean task. Although having a creative vision is critical to achieve success in this industry, ideas, unfortunately, do not transform into a motion picture without money. Finding money is often the most precarious part of making a film. Typically, independent films are funded through loans, equity, or both.
Loans can come from a variety of sources, including banks, investment funds, financing companies, and private individuals. A loan, which is typically documented by a promissory note (and sometimes a loan agreement as well), is simply a promise to repay the loan amount plus interest at a time in the future. Lenders generally do not own equity in your film company and typically have no voting rights.
On the other hand, an equity investor acquires an ownership interest in the film company and its primary asset—the film. An equity investor generally receives a return on his/her investment only if the film is profitable. Equity investors can potentially reap a much greater value than their initial investment but, should the film fail to generate a profit, there is typically no obligation for the film company to repay the investor.
If you would like to discuss various strategies of funding for your film or have other entertainment law questions, please contact us.