 |
|
      |
|
 |
|
|
Filling Gap Last Piece of Puzzle It always seems like the last piece of a film's financing is the hardest to get. If the financing for your film is almost complete and you have an international sales agent, one option available to complete the picture is gap financing. However, it does not come cheaply or easily. Gap financing is a loan of up to 20% of a film's budget that is secured against the anticipated sales of a film. Most banks will not provide gap financing as they require their loans to be secured by confirmed sources of revenue such as presales, distribution advances or tax credits. However, a small number of lenders in the world are willing to provide gap financing. These include the Allied Bank of Ireland, the Royal Bank of Ireland, the Royal Bank of Scotland, FIDEQ and Comerica. There are also several private lenders that will make this type of loan. To qualify for gap financing, your film has to be represented by a recognized international sales agent. The gap lender will rely on the sales agent to provide reasonable estimates of the film's revenue by territory. In addition, the gap financier will typically require two presales, at least one of which is in a major territory. In addition, those sales have to be in line with the estimates provided by the sales agent. If you can meet these initial criteria, there are other hurdles to overcome. Typically, a gap lender will not want your sales agent to take its full fees until after the gap loan has been completely recouped. Some gap lenders will not want a sales agent to take any fees at all while others will allow a fraction of the fees and expenses to be taken, recognizing that the sales agent needs to be motivated to sell the film. This initial reduction or elimination of fees is not going to make your sales agent very happy. Gap lenders will also want to take the majority or all of the revenue from a film until they have recouped. Some lenders will allow a small corridor or territories to be taken by an investor. However, by and large, your equity investors will be in second place after the gap lender. Again, this will make your investors less than enthusiastic, especially if one or more territories have been sold off to complete your financing. Finally, gap financing is extremely expensive. A gap financier will typically charge a much higher interest rate than that taken by your interim financier. In addition, they will charge a fee of 5 - 8% of the loan amount and require that a large interest reserve be set aside. And some gap financiers will penalize you heavily if you do not pay out the loan by a certain date. You can also expect to be billed heavily for the legal services that the gap financier uses. All in all, you can pay as much as 20% for the money that is borrowed through a gap financier. Gap
financing is a costly and difficult way to close the financing for
your film. However, it may make the difference between a film that
is fully financed and a film that never gets made.
|