I’m sure everyone is feeling the pinch and challenges of the current economy. Ironically, institutional lenders are cash heavy and willing to lend money for qualified film projects. What’s the catch you ask? All institutional lenders require collateral. Basically at the end of the day, all they want is principal plus interest on the money that they loaned to your project. A lot of filmmakers don’t know the difference between an Equity Investor and an Institutional Lender.
Equity Investment means that a wealthy person(s) is willing to “share the pain and share the gain” of your project, and understand that their investment is 100% at risk of being lost. This is an advantage to the filmmaker. The disadvantage is that an Equity Investor will typically want 100% of first dollar in until their investment is fully recouped and 50% or more of back-end/profits in perpetuity of the project. “Proof of funds” is a MUST, because there are a lot of “money-people” out there who claim to have money but really don’t.
An Institutional Lender on the other hand, does not take risk at all. They want to make sure that your Collateral can pay back 100% of the Loan (at the end of the Term), plus the annual interest rate of the loan amount. This is a disadvantage for the filmmaker. The advantage is that once your project satisfies 100% of the loan plus the interest rate, any profit generate beyond that is all yours. Plus, proof of funds is easy and often not necessary, because Institutional Lenders often use major U.S. Banks as the custodian of deposit.
