We’re also in Week 2 of the Film Financing Essentials course and talking about private equity. So let’s pick up the conversation there….
There seems to be a lot of ‘schemes’ lately out there for film financing. Like these ones heavily discussed in the FS Forums,
I’ve also received emails from some of you asking me about the validity of these schemes which essentially ask the producer to put up a deposit of anywhere from $25K to $60K (I’ve seen all ranges) to cover ‘legal fees’ in exchange for say $2.5 million in financing.
Now….I actually know a producer who participated in one of these deals and, surprise (!) – they paid the deposit and no financing followed.
What these financing schemes amount to are essentially lines of credit – personal loans secured by your deposit and/or other personal assets.
For that you might as well finance your film on no interest credit cards!
So once again what we’re talking about here is debt disguised as equity.
In constructing mine and clients’ finance plans, I always start with real equity. Private money from real people I can verify and who have real credits to their name. Ideally ones we can meet in person and who will escrow money without any ‘deposit’ which never makes sense and is always a red flag.
Sometimes distributors will act as equity investors (for the right projects and packages of course). I received an offer from a distributor recently on a film I’m producing – they wanted to put in 25% of the equity needed for full ownership. Obviously that’s not a deal I could take as it would leave me nothing else to offer any other investors.
So be careful what you offer in return to your equity investors! You can’t raise equity on a project when all rights and ownership are already spoken for – there is no upside left at that point.
What are your thoughts on raising private equity? Let’s discuss in the comments section below….