7 Realistic ways to Find First Money In on your Feature Film.
When fundraising for anything, the first money is always the hardest. Investors don’t want to be the first in due to the investment seeming untested. So in order for them to feel more secure, you might need to raise some of the money in other places. Here are the 7 most realistic places for filmmakers to go to get first money in.
First money in isn’t meant to be the entirety of your budget. It’s only meant to be about 10%. Having raised 10% of your budget helps investors see that you’re serious, and aren’t going to require them to do all of the funding work themselves. With that in mind, almost every item on this list is not meant to fund your entire movie, but more serve as a jumping-off point to help you raise the funds you need to make an awesome film.
Highly Related: The 9 ways to Finance your Independent Film
1. Donation based Crowdfunding
I know most filmmakers really don’t want to hear about crowdfunding, but it’s still one of the best ways to serve as a proof of concept for a film. It’s also a great way to get first money in. Specifically for this example, I’m talking about donation based crowdfunding. I’m far from an expert in equity crowdfunding, and while there’s potential in the idea, it’s unclear how it should be executed.
That being said, donation based crowdfunding can be an excellent way to get the project rolling, and get further into development.
2. Tax Incentives
Depending on where you’re planning on shooting, Tax incentives can be a great way to get a portion of your funding in place. If you’re in the US, then shooting in Kentucky can get you as much as 35% of your budget. Granted, that will go down to about 30% once you take out a loan against it so that it becomes real money instead of a letter of credit. That loan will be fairly low interest, since Kentucky’s incentive is structured as cash.
There are a lot of things I could go into about tax incentives, but it’s more than I can cover in this blog. I might make a future blog or video about it Comment and ask.
3. Grants
There aren’t a lot of development stage grants out there, and as such the few there are tend to be in very high demand. However, if you can get some portion of you money via a grant from the Kenneth Rainin Foundation or some other development stage granter, then it cuts the risk for your investors and gives you first money in.
Keep in mind, most organizations that give grants turn you down automatically when you first apply. It can be wise to apply multiple years in a row while you try to get this film, or other films off the ground.
4. Equipment Loans
An equipment loan is a relatively low interest loan that uses any equipment you own as collateral for the money that’s being lent. I understand that this is a scary prospect for many filmmakers (With good reason) but it can be a way to get money into the project at an early stage, and serve as your first money in.
It’s also important to note that debts are paid off before equity is paid back, so your loan would be repaid and your equipment secured before any future investor got their money back. Of course, this isn’t always the case, but it generally is.
5. Personal or Business Credit
There are a few people who will loan money for films based on your personal credit. Sometimes it will be a business loan, sometimes it will be an insanely high limit credit card, but in the end it can be the money you need for development. It’s not ideal, but it can be a way to get your movie to the next level.
If you’ve been making corporate videos through your entity for a number of years your business may have enough credibility to take out a moderaate interest loan from a bank against your future corporate video earnings.
In general, this will be a percentage of your previous earnings according to you last few tax returns and whatever debt burden the business has from general operations. This is best used to offset time away from corporate work as an expansion into a new product line, I.E. your feature film.
This would most likely be considered an unsecured loan, which means it’s higher interest than the equipment loan or anything of the sort like that.
If you do go down this road, you should not forget that it often takes 12 to 18 months from delivery to a distributor to start earning royalties, and that’s not accounting for the minimum of 9-12 months to make the film and deliver it to a distributor. The interest over the course of a term like that might be hard to bear.
I should stress I’m not a lawyer or financial advisor. You should check with yours before acting on anything on this list, especially anything that’s debt base.
6. Wealthy Friends and Family
If you’re lucky enough to have accredited investors in your friends and family, then this can be a good way to get your first money in. Investors normally invest in people as much if not more than projects, so approaching someone you already know is generally an easier ask than someone you don’t. Since this blog is about getting first money in, having an investment from a wealthy friend or relative can be the quickest and easiest way to get over that hurdle.
Of course, in order to raise money from wealthy friends and family, you must HAVE wealthy friends and family. If your friends and family ARE NOT Accredited investors, then it’s best to include them in a donation-based crowdfunding round. While the SEC (Securities and Exchanges Commission) has loosened requirements for high-risk and small business investments since the JOBS Act, they’re still very strict when it comes to high risk investments, and it would be better for you to not run afoul of them.
7. Equity Investment
Finally, if you don’t have wealthy friends and family, you can chase equity investment. Normally this means that you would approach the person who owns the car dealerships in your neck of the woods, or other local business leaders. If you can get a meeting to talk to them about investing in a movie, there’s a chance that the excitement of it might help you raise a portion of your funding.
Mind you, this is not an easy sale. It’s going to take a skilled salesperson to pull it off, and a lot of research into why someone like this person who owns the car dealerships would want to invest in your project.
Thank you for reading! If you found this content valuable, check out my FREE film business resource pack. It’s got a free e-book on the indiefilm biz featuring 21 articles around similar issues covered in my blog. Around half of those articles can’t be found anywhere else. Additionally, you’ll get an indiefilm deck template you can use to create a deck for investors, contact tracking templates, form letters, and a whole lot more! Check it out below.
