When your production company intends to finance movies, you will need to be aware of several key terms that are part of the film financing vocabulary. Terms such as "active investor" (a person or company that gives money with the expectation of having an active part in the production process), "attachment" (an actor or actress who is already signed on, or attached to the project) and "WGA" (the Writers Guild of America) will be commonly used, and you must know what they mean.

After you learn the terms that are involved in the independent financing process, you will be ready to seek out film funding for your company's projects. There are a few things you will need to do at this point:

1. Hire a lawyer who understands film production financing.

2. Learn what the Securities and Exchange Commission is and how it can affect your business.

3. Create contracts for the investors who will be financing film production activities on your behalf.

Action Steps
The best contacts and resources to help you get it done

Get help from an entertainment securities lawyer when financing films

An entertainment lawyer will help your production company when you are looking for start-up financing film production funding. One important thing they will do for you is 'exemption filing,' which is the process of filing for an exemption from the Securities and Exchange Commission's (SEC) federal registration policy to save your company a large sum of money. When this process is successful, it becomes known as an 'exempt offering.' Another important service a lawyer will provide is an 'initial public offering.' This involves obtaining the rights to offer the final film to for public consumption. Entertainment lawyers also work with the SEC to provide legal investment contracts to private film investors, which is known as a 'registered offering.' Only a certified entertainment lawyer is qualified to carry out these essential duties.

I recommend: Retain the services of Blake & Wang P.A., Entertainment Lawyer or The Law Office of Bonnie J. Chermak.

Hire a registered agent when your company is ready to obtain movie production financing

A film production company will be an established corporation or Limited Liability Company (LLC). LLCs are nothing more than businesses registered within any state. Every LLC is required to have a registered agent. This individual provides compliance services to the business owner to make sure the business is up to date on any rules and regulations for the state they are filming in.

I recommend: Hire a registered agent from Incorporators USA or Northwest Registered Agent.

Sign a private placement memorandum contract with independent film financing investors

A private placement memorandum (PPM) is a contract signed by an investor that will have nothing to do with the production of the film. The PPM is also referred to by other film production financing key terms such as 'small securities offering,' 'limited offering' or 'exempt securities offering.' Regardless of the name used, the PPM is a legally binding contract that stipulates the investor will offer film finance capital and have no other involvement unless the movie makes a profit.

I recommend: Find companies that provide PPMs such as Regulation D Resources Enterprises or PPMPro.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Learn the important film production financing key terms before attempting to talk to industry professionals so that they will be assured you know what you are doing.
• •  Understand the expectations from active film financiers who intend to be involved in the production of your film before accepting any money or signing contracts.

Once you have come up with an idea for a great film and received the proper education and training needs, it is time to move onto securing film funding. Depending on the size of the project, this may be as simple as getting someone interested in your project. However, film production financing is usually the most challenging aspect of creating a film.

The ease of securing film production finances depends greatly on the quality, originality and marketability of your idea. It also depends on current market trends, artistic merit of the film and the quality of the cast and crew involved.

Before seeking out film financing you must:

1. Create a professional business plan detailing the project from beginning to completion.
2. Establish a budget that is realistic and as detailed as possible.
3. Begin the project as much as you can to prove your dedication to the project.

Action Steps
The best contacts and resources to help you get it done

Government grants can help with film finance

Grants are an excellent way to secure funding since they never have to be paid back. They are usually in small amounts, however. Government grants are usually awarded to film makers with important subject matters and often documentaries.

I recommend: Search for independent film grants at International Documentary Association or Independent Feature Project.

Find film financing companies

Finding companies solely dedicated to start up financing film production is not easy. Take the time to research film financiers.

I recommend: Emerald Elephant Entertainment provides film financing in Arizona. IndieVest is a film studio and financier that provides independent film financing. Peacefulfish is one of a few film financing companies that works with film financiers and filmmakers, and also sponsors workshops on film production financing.

Secure pre-sale film finance deals

Pre-sales deals are secured through a distributor who is willing to commit to buying your film and allowing you a percentage of the sales revenue as the film maker. This is the way that most big-budget movie producers obtain financing, but it is hard to secure pre-sales when you are first starting. You can get a pre-production loan from a bank with a promise of a pre-sale from a distributor.

I recommend: Try MarVista Entertainment, Allied Entertainment Group, or Artisan Entertainment.

Get production loans

Production loans are not terribly hard to secure if you have good credit and assets like any other loan. You must have personal hard assets, which can make filming a big personal risk. Many times loans of this kind have high interest rates as well.

I recommend: Apply for a loan at eLoan, Bank of America or LendingTree.

Try to get negative pick-up deals

With a negative pick-up deal, you license the film to a distributor for a previously agreed upon price after completion. You can usually take proof of commitment to a bank to get film finance before production then. Be sure the delivery requirements are realistic and in your favor.

I recommend: Try to get a deal with Fox Searchlight Pictures, Kino International or Magnepix.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Try to get big names associated with the project whether it is a director, producer or actor willing to work low-budget.
• •  Have a plan to save money in places such as props, costumes, special effects and scenery.
• •  Your film has a better chance if the subject matter is of social importance.

Financing films is a tricky business. In order to get money to make an independent film you must convince lenders they are making a worthwhile investment that will provide a return on their money and, perhaps, turn a profit. It is impossible to know for sure if any movie will do well and make money, so the film financiers must believe in the project almost as much as the movie makers.

To start off, it is essential to create a pitch that is designed to sell potential investors on the cinematic story you want to tell. Once you are prepared to sell your story, it's time to get out there and find the money. When looking for start-up financing, film production companies have a few avenues to pursue. Some of the methods for film production financing include:

1. Taking out a business loan to finance movies that your production company feels will be profitable;

2. Finding film investors who are willing to give you money to begin or continue production;

3. Working with independent film financing organizations.

Action Steps
The best contacts and resources to help you get it done

Request a business loan when financing films

A loan may be the easiest way to obtain film finance capital, but it must be paid back regardless of whether your movie makes or loses money. The payback amount will also include interest, so it can be an even larger loss if the movie does not do well. Most movie loans will be unsecured, because there is no collateral put up to back the loan, and will therefore come with a higher interest rate. A lender is taking a risk on a loan that is not secured and, the greater the risk, the higher the price.

I recommend: Start financing films with money borrowed from Business Loan HQ, Hollywood Funding or Global Financial Services.

Receive film financing from an independent film distributor

One of the most important film production financing basics is that independent film makers and distributors often work together to create movies that would otherwise never be made. This is also known as a 'pre-sale agreement,' and it involves a film maker convincing a distributor to provide financing in exchange for the distribution rights to theaters or for DVD releases. The actual money will either come from the distribution company or they will secure a loan to provide the funding.

I recommend: Work with distribution and film financing companies such as the Independent Film Finance Alliance or IndieVest.

Obtain movie production financing from an investor

An investor is a person or group that provides money to produce a film in exchange for a piece of the back end. That means, if the film does well, the investor recoups the money and then earns part of the profits. Because every investment is a risk, if the movie does not make money the production company is not expected to repay the investors.

I recommend: Get involved with investors such as FilmProposals or Bingham McCutchen.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Secure film funding from backers that will make an equity investment. This means they will get a percentage of the profit if the movie does well, stock in your production company or a limited partnership on the project they are helping to finance.
• •  Find out if your production company is eligible to receive an exemption from the federal registration policy created by the U.S. Securities and Exchange Commission. Without an exemption, this policy could end up costing your company extra money.
• •  Work with other independent film makers who can help guide you through the film production financing basics when you are embarking on your first project.