We’ve done a lot of talking on this blog about financing $1-$5 million films, but yesterday on the Film Specific Facebook page I received a question about how to finance Micro Budgets, specifically in the $500K and under range. What a great question…. so let’s explore it shall we?
First of all, the person who asked the question wanted to know if pre-sales and bank financing apply to Micro Budgets. The answer is no, and the reason why is actually two fold. First, the fact remains that Pre-Sales and Bank Financing are predicated on having name cast attached to your project, and at the $500K and under range, it’s unlikely that you’ll have strong enough names to merit Pre-Sales (it’s not impossible, but it’s extremely rare). Second, as Adrian Ward from National Bank Of California stated in my interview with him, (and I’m paraphrasing here) – it’s basically not worth it for a bank to get involved in any budget under the $1.5 million mark, especially considering the admin costs alone in processing the loan paperwork.
So while you can see there may be a few limitations to working with a sub $500K budget, but let’s look at some possible solutions. Here’s the formula I would use for financing if I were going to Produce something in the micro budget range:
Private Equity + Crowd Funding + Tax Incentives + Sponsorship = your micro budget!
Now let’s break down each component…..
1. Private Equity
Private equity is still the #1 way most micro budgeted films are financed. Realize that it’s not necessarily the smartest way to finance your entire budget since depending on what your budget actually is, it will be near impossible to recoup it all. Just look at what realistic sales projections look like these days and you’ll see that bringing in anything over $100K in revenue on your micro budget film is considered a home run. Even in cases where the under $500K films have been packaged with some solid B names (like these case studies here and here)… follow up a year or two later with these filmmakers and you’ll find out they are barely half recouped. So what’s a filmmaker to do? The name of the game is supplementing (or bypassing entirely in some cases) Private Equity with other forms of micro budget financing like…..
2. Crowd Funding
Crowd funding is a great way to supplement or even entirely fund your micro budget film. Just look at what star indie producers Jen Dubin and Cora Olson did with their Kickstarter Campaign for “I AM I”. They managed to raise over $100K and then had a private investor who matched those funds, and therefore only exposed an investor to $100K worth of risk on a $200K budgeted film! You get my drift here?
Granted, “I AM I” is definitely an anomaly and there’s actually very few films who ever reach the six figure mark with crowd funding, but let’s say instead of 50% of your budget you’re even able to raise 10%-20% of your budget like my clients J.T & Kim did with their campaign for “Angel’s Perch”. You can listen to how they implemented and kept the momentum going on this campaign, and how they’re allocating the funds they raised towards their budget by listening to the case study I did with them here
3. Tax incentives
Tax incentives are a no-brainer and are essentially ‘free money’ if you live in or plan to shoot in a state that offers film incentives. Yes you’ll need to weigh any tax savings against whether it’s cheaper to shoot at home and save on travel expenses, but this form of financing for micro budgets should not be overlooked when you are plotting out your overall financing plan.
And then there’s sponsorship – often misunderstood and entirely underutilized! Let’s say you have a film with a sports theme, and you’re going to be using certain sporting goods products in your film anyway, and want to see if any of these sporting brands or companies would like to become official sponsors of your film by paying you a fee for product placement. That’s how a few of my clients right now are utilizing sponsorship to contribute to the overall budgets of their film. To be clear, it’s not easy to get sponsorship money, but it is possible and producers I’m working with on this are financing anywhere between 10% and 50% of their micro budgets like this. I even had one client who got an airline to sponsor all the flights for her travel related doc, thus saving her tens of thousands of dollars in airfare for himself and his crew plus all their gear.
So there you have it – the preferred formula for financing your micro budget film!
Now I have to ask… what do you think? Which of these has worked for you, or not worked for you and what are you willing to try?