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- Do You Know the Difference— Debt vs Equity: Financing Your Film
Do You Know the Difference— Debt vs Equity: Financing Your Film
Maximize your film's potential by understanding the pros and cons of debt and equity financing.
Word Count: #378 | Read Time: > 2 Minutes
Maximize your film's potential by understanding the pros and cons of debt and equity financing.
WHY IT MATTERS…
As an independent filmmaker with a budget between $100,000 and $5 million, understanding the difference between debt and equity financing is crucial in making the most out of your limited resources. Knowing which financing option is best for your project can mean the difference between a successful film and a financial flop.
THE BIG PICTURE…
One recent example of a low-budget film that made a big impact is "Honeyland", a documentary about a beekeeper in North Macedonia. The film was made on a budget of just $300,000, but went on to win numerous awards and even received an Academy Award nomination. However, the filmmakers behind "Honeyland" didn't just rely on a small budget to make their film a success - they also made strategic decisions about financing. By understanding the pros and cons of both debt and equity financing, they were able to secure the funding they needed to make their film a reality.
ZOOM IN…
For example, the filmmakers behind "Honeyland" chose to use equity financing, which meant they sold shares in the film to investors in exchange for funding. This allowed them to avoid taking on debt and incurring interest, but it also meant they had to give up some control over the film's creative direction.
On the other hand, if they had chosen debt financing, they would have taken out a loan to fund the film, but would have had more control over the project. Debt financing is a method of raising funds for a low-budget film by borrowing money from a lender such as a bank, credit union, or investment company. The borrower is then required to pay back the loan, plus interest, over a specified period of time. Debt financing can come in the form of a traditional bank loan, a line of credit, or a crowdfunding campaign.
ACTION ITEMS…
Research different types of financing, including debt and equity options, to understand which one is best for your film.
Consult with a financial advisor or accountant to help you make informed decisions about your film's budget and financing.
Look into grants and other forms of non-traditional funding to supplement your film's budget.