Media Math: To Finance Your Film, You Must Consider Real Numbers and Realities

Budgeting Real Finance Numbers

Many financing arrangements require financing costs and steep banking arrangements. These elements are not taken into consideration.

Let’s be clear: The topic of Film Finance is a very complex topic to cover.   In this section, my concern is that film finance complexity is simply not accounted for in the budget.  Gap Financing? Debt? Equity? Pre-Sales? Production Loans? Bridge Loans? Sales Agent Advances? Tax Credit Loans? Finishing Funds?

Each of these financial components represent a substantial piece of the film finance puzzle. And each component will require financial and legal oversight to conclude correctly with critical timing.

Gap Financing

Gap Financing is the single loan which is over existing pre-sale guarantees and usually the final step for completing the film’s final finance package. In addition, each phase of this financing ‘pipeline’ has various risks and rewards.

Consequently, bank loans and its attendant legal work have certain budget minimums in terms of films that are budgeted at $10M and higher. Gap financing for a low budget film may not be cost-effective for the banks – legal fees and bank fees are about the same not matter the budget. Ultimately, this situation means that a low and modest budget film might underestimate the cost for bank and legal fees for their particular financing structure.

Putting Numbers Together

What are the numbers for banking for your budget process?

First of all, check the London Interbanking Offer Rate. This is the LIBOR which is used throughout the world for many financial transactions including home mortgages. You need to check the ‘spread rate”.

Second, figure out your budget. If your film is budgeted at $10 Million and that’s the loan, then your bench rate will be about 0.25 percent. Your bank loan would be at the interest rate of LIBOR (find the rates here: and add one or two percent to that rate.

The bank fee is about 2%. The legal costs are estimated between $60k to $85k.

Furthermore, your project requires a bank loan against pre-sales, gap financing, etc., then you can see the toll such interest, fees and legal costs can take against your overall budget. In the above calculation (which will vary with rates and legal fees), the Grand Total cost for the loan is $820,000 or 8.2% of your overall budget. When you add in the standard contingency of 10% and a Completion Bond fee of 2%, then a little over twenty percent of your budget is already accounted for. No, you haven’t YET spent your contingency but that is a Contingency fund.   Contingency is not meant for planned production. The Contingency is meant for exactly what it means:




noun: contingency; plural noun: contingencies

  1. a future event or circumstance that is possible but cannot be predicted with certainty.

“a detailed contract that attempts to provide for all possible contingencies”

synonyms: eventuality, (chance) event, incident, happening, occurrence, juncture, possibility, fortuity, accident, chance, emergency

“we’ve tried to imagine and provide for all possible contingencies”

  • a provision for an unforeseen event or circumstance.

“a contingency reserve”