Interim, gap, or bridge financing as it is sometimes referred to, is the mechanism by which film producers and others in the entertainment industry secure cash flow capital to cover interim costs during the film production process. It is a very specialized form of financing designed to only provide interim capital based on a set of guarantees made by the producer(s) of the project. This is perhaps the least sexy part of the business of film-making but it is nevertheless critical to ensuring the project is finished on time and within budget.
What does the producer need for the pitch?
In order for a project to be eligible for interim financing the producer should have all the necessary capital raised to complete the project, in advance. This includes private equity capital, government grants, tax credits, and pre-sale agreements with broadcasters and distributers. These sources of capital will likely be taken as collateral in the interim financing deal.
The producer should ensure that he/she removes as much speculation from the project as possible, to convey the bankability of the investment and to demonstrate momentum on the project. When creating a pitch for interim financing, the producer will need to include:
Who should the producer make his/her pitch to?
Once the producer is able to secure the necessary guarantees, securities, and agreements, he/she is ready to seek interim financing from private investors, banking institutions, and/or government funds. In Canada there are several established entities that have dedicated mechanisms to provide interim financing for film and other entertainment projects.
Although the above listed sources play a major role in providing interim financing, some film makers have also turned to crowdfunding (including Kickstarter, Indiegogo, and many others) as a potential source of financing. New specialized platforms, like Slated.com, offer access to large networks of sophisticated private investors providing financing solutions for all stages of the film process.
What should the producer keep in mind?
When raising interim financing the producer should keep in mind that there are positives and negatives to seeking financing from each type of potential investor. Institutional investors like banks and government funds will take a hands-off approach to the project’s development, but will require the producer to meet stringent guarantee criteria before approving the interim financing. Private equity investors, on the other hand, will likely require fewer guarantees but will require input on the development of the project. Regardless of the source of the interim financing, the producer must make an investment proposal that is professional, personal, and tailored to meet the demands of the specific investor(s). By keeping the proposal simple and remembering to include all of the elements described above, the producer will increase his/her chances of securing the needed capital.
About these authors: Claudius du Plooy has over ten years of experience in matters of business law, securities law, commercial real estate development, entertainment law and international trade law. Jovan Kljajic is a student at Du Plooy Law with an interest in entertainment, business, and intellectual property law.