film funding finance callsheet guide
December 5, 2014

How to Finance Your Film: A Step-by-Step Guide

So you’re a filmmaker and you’ve just written your screenplay. It’s an amazing, action-packed adventure that you’re sure the world will adore.

But where to from here? How do you go about financing a film? Who offers funding and what are you required to show them in order to procure said funding?

The financing of any production can be an arduous process, so it’s incredibly important to have at least an idea of what to expect.

UPDATE: The most recent incentives and rebates in South Africa can be found in the Filmmakers Guide to Africa 2019

“Raising financing for a film has become such a hair-raising and complex task, it’s almost as creative and difficult a process as making the damned film itself,” writes Luiz DeBarros. “Ultimately it all depends on your film’s budget. Generally, if it is a very low-budget project, then financing it is fairly easy. If it’s a medium-sized budget, it may actually be more difficult to finance than a higher budget film.”

There are many different types of funding for films but two main types encompass them all: non film industry sources and film industry investors. Non-industry investor could be your rich Uncle Sam, credit cards, or even a bank loan, while film industry sources are, as the name suggests, a person or company that finances films as part of its usual business. This includes investors, distributors, broadcasters, studios and individuals – not to mention applying for grants, deferred payments and other strategies.

Step 1: Know Your Product

how to finance fund film guide callsheet

“It’s important to think beyond the creative value of the film,” says Rafeeqah Galant, a filmmaker at Echo Ledge Productions. She recently pitched her film Nyanga Skies at the 2014 Durban FilmMart along with her production partner Matthew Griffiths. “As filmmakers we are wholly invested in our projects and stories, but funders are looking at the bigger picture – what the life of the film will be and where the film will fit in the South African, as well as global, film world. When applying for funding you must be able to objectively see what the funders are looking to support, and structure your projects to fulfil that need,” she explains.

Wesgro is the official Investment and Trade promotion agency for the Western Cape. Monica Rorvik, who manages Film and Production, agrees that films are difficult to sell to investors. “When matching projects to prospective investors, there is the challenge of getting the film project to speak the language of equity finance.”

Step 2: Plan Ahead

how to finance fund film guide callsheet

Applying for funding of any sort can be a long and laborious process, so be sure to plan ahead for it. “For funding, in my experience, the greatest challenge is time,” says Galant, “It takes lot of time to do, and applications can become quite costly – especially if you are running on nothing. Then, once submitted, and even successful, it can take a long time to be realised, to get the money into the bank.” Galant goes on to say that the timing factor is particularly difficult because most film projects have an ebb and flow – a momentum that as a creative you might not want to lose. “The way I try to counter this is to know what to apply for, and when,” Galant says. “As a producer you need to do the research, you must know what funds you qualify for and what sort of projects those funds are looking for. Then you need to structure how you are going to apply for things and know how you will use the wins or the losses for your next decision. So there’s always a plan for how you are going to get to 100% funded.”

Step 3: Get Help

how to finance fund film guide callsheet

Rorvik says that Wesgro offers filmmakers help during the funding application process. “There is a project mentoring facility that helps projects plan their approach to regional, national and international funding markets,” she explains. “Some projects are considering approaching equity funds and that can be an area where Wesgro’s experience can help. Wesgro also offers a number of upskilling programmes to companies wishing to become more export ready such as EDP2, 3 and EDP PUM, as well as Wesgro Connect, which is a significant mentoring project.”

A number of production companies like Moonlighting and ZenHQ also offer support and help throughout the application process, particularly for filmmakers who are on their own. The South African Revenue Service (SARS) has also recently issued a tax guide to film production incentives. It provides for the exemption from normal tax of income derived from the exploitation rights of approved films. Simply put, the filmmaker’s receipts and accruals of income are tax exempt if the NFVF has approved the film as a local or co-production, or if the income is received by or accrues to an investor.

Step 4: Apply, apply, apply

how to finance fund film guide callsheet

This is the point that’s arguably the most gruelling – the official paperwork. There are a number of government initiatives in South Africa that offer funding, the main ones being the Industrial Development Corporation (IDC), the National Film and Video Foundation (NFVF), and the Department of Trade and Industry (DTI). There are also film commissions in Gauteng, Cape Town, Durban, KwaZulu-Natal and the Eastern Cape that offer some finance or can facilitate various funding options.

The DTI offers industry-specific incentives to encourage local content generation and to attract international productions. These consist of the Foreign Film & Television Production and Post-Production Incentive, the South African Film & Television Production and Co-Production Incentive and the South African Emerging Black Filmmakers Incentive, which aims to assist, nurture and grow local talent.

“It is important for producers to appoint an experienced production account as poor financial management could result in the DTI not paying out the full rebate amount,” Andre Pietersen, Organiser of Film Finance World Conference warns. He has a similar warning for non-governmental applications: “Basically, the devil is in the fine print,” he says, “It is important that producers pay attention to the small print in the agreements they sign. Financiers require a completion bond to be in place before committing funding and therefore it is important for producers to know that completion bond agents have the right to take over a production and replace key talent like the director should they feel it is in the best interest of the production and the financiers.”

Paul Raleigh of Hollard Film Guarantors says that these bonds or completion guarantees essentially ensure that the film is finished and delivered in terms of the contract. “Hollard will provide finishing funds if required, but we are not a blank cheque,” he says. “We are a safety net for the producers when production problems outside of their control cause cost overruns. The bulk of these films have budgets under R10-million and we underwrite internally.” Hollard has a checklist of required documents which changes depending on the finance structures for the film, Raleigh explains. “Finance structures should be in place before we proceed, however in the spirit of growing the film industry we try to stay close to the producers while they build their production.”

Hollard isn’t the only company offering completion guarantees and other funding. A number of companies such as South Africa Media Capital (SAMCAP) offer interim or bridging finance, rebate finance and gap finance, while renowned companies like Film Finances provide financiers with a service that gives them assurance that the film will be delivered on time – and that over-budget costs wouldn’t be the financier’s responsibility.

Types of Funding Available

Soft Money – This comes in the form of grants offered through various agencies like the NFVF and others. Soft Money generally does not require repayment by filmmakers.

Rebates – This is the biggest financier in SA. The DTI offers 35% rebates for local productions and co-productions that fall under a treaty. Emerging black filmmakers can receive a 50% rebate for the first R6-million of qualifying expenditure.

Crowd Funding – This is a very popular avenue for low-budget films. Here, producers raise funds through public offerings, family and friends.

Equity Funding – These are investors who put money in a film to have a stake in the production. There is very little equity or debt finance available to filmmakers in SA, although it is a widely recognised phenomenon internationally. Unfortunately this is mainly due to the lack of commercial viability of most SA films.

Pay TV Windows – Filmmakers can fund a portion of their production by pre-selling the pay TV rights to broadcasters.

Commissioning – Certain channels such as SABC1, eTV and Mzansi Magic fund films by commissioning them – although the broadcaster will retain all the film’s rights.

Investment – These are equity investors who invest money in a film to have a stake in the production.

Loan – Not a popular option for filmmakers as it carries high interest rates and often requires collateral.

Bridging Finance – This is a loan taken against funds guaranteed such as DTI rebates, pre-sales to distributors or product-placement funding.

This article was first published in Callsheet Issue 12 2014