Is financing an indie film more difficult than ever? There’s so much content out there and so few companies that can pay real money to distribute films that we moviemakers need to get realistic… and creative.

Every day someone comes up with a new strategy to find money—a strategy you can use. Whether it’s your college best friend’s parents who want to invest in your career, a bank willing to finance a backstop deal, a production company which is putting gap or equity into the film, or crowdfunding and grants—if it means money in your pocket, it’s a valid, dammit.

You: But what is gap? Equity? Backstop?

Equity

Equity is a cash investment that an individual, company or group of individuals puts into your film. In exchange for that cash investment, they get an interest rate and often some sort of credit on the film. (Executive producer credit is the most likely if all they are doing is bringing money to the film.) If they actively produce with you, they may deserve a producer credit. These entities also receive backend points for their cash investments. These backend points are often pari passu to the amount they have invested in the film.

You: What the hell is pari passu?

Pari passu (Latin for “on equal footing”) is a legal term that basically means “dollar for dollar.” For example, let’s say your budget is $100. If Mom gives you $25 and Dad gives your $75, then Dad will get 75 percent of the income for investor profit and Mom will get 25 percent as each dollar comes in. Profit comes after their interest. So if you have a flat interest rate of 20 percent, they get their money and interest back dollar for dollar in the amount that the dollars come in to the percentage they have invested. I.e. you have to pay your investors back $120 before they begin making a profit. If you can only sell your movie for $50, they are both screwed. That’s equity.

Gap

Gap financing used to happen more than it does now. Gap means “last money in, first money out.” Because it is less risky than straight equity, the backend points aren’t worth what they are for equity players, meaning that gap investors often get little to no backend. But they get their money back first and their interest first. Returning to your aforementioned $100 budget, say this time Mom puts in $25 and Dad puts in $65. You still need $10. You go to your brother who says, “I’ll give you $10, but you have to give it to me ahead of Mom and Dad with interest.” That means your brother gets $12 back ahead of Mom and Dad. If you only sell your movie for $5, they’re all screwed. That’s gap.

Free Money

You: What? Did you say free money?

I did. Well—nothing is really free, but crowdfunding and grants sure feel like it sometimes. You just have to work your ass off for it and have something important to say.

Crowdfunding

Sites like Indiegogo, Kickstarter and GoFundMe are where you convince a group of strangers that they should donate or invest in your project based on how you incentivize them. Some people are happy to get a T-shirt; others want a $1,000 night out with the star of the movie. Some just want to give you the money because you are making a movie about a paraplegic who climbed Mount Everest and they’ve always wanted to climb Everest and their sister lost a limb.

Most of the time, crowdfunding targets… you guessed it: Mom, Dad, your brother, sister, “friends,” etc. Note: If you can get free money from these people, instead of equity money, it’s better for all equity investors. It’s very rare that a film project can bring in a large amount of money from strangers, though is has been done if you can target fans. If you have a big star (movie, TV or social media) in your film that’s willing to walk the talk, send emails and tweets, you probably don’t need to continue reading. Or, if you’re making a documentary about a cause that has a lot of followers, you might be able to tap into those followers and bring them into the fold. This takes a ton of time and work. But free money is very attractive to equity investors, because now their dollars are worth more!

Grants

There are so many grants right now for moviemakers, it’s awesome. Tons of nonprofits want to help female moviemakers, minority moviemakers, environmentalists, abuse-survivors, etc. So if you are an Asian female telling a story about an African American woman who escapes domestic abuse and finds herself healed by nature, I think we can find you several funds to support that effort.

If you are a white male who wants to make a sex comedy about losing your virginity to the prom queen, you’re gonna have more trouble. That said, there are also film festival grants. Look into those. Some of them give money to films that have gone through their writers programs, or money for music to those who have gone through their directors programs, and so on. So don’t give up. Apply to the programs. Everyone needs to laugh just as much as we need to cry and be educated.

Soft Money

This is when a film is shot in a state that offers a tax incentive—anywhere between 10 to 30 percent of the budget you spend in that state can come back to you. You could use this as reimbursement for your $100 movie, or you can bank it and have a budget of between $115 and $130. Soft money sometimes feels like free money. I love it.

Backstop Deals

Sometimes a distribution company will come on before you make the film, saying, “We promise we will buy this film for $25 for the U.S. market. If you want to sell it to someone else at a festival you totally can; you just need to give us $40 back to get rid of us.” Once you have that in writing, you can go to a bank and say, please lend us $22 against this $25 promise by this reputable distribution company.” (Banks won’t lend on a note that’s not proven already.) Or you can take it to Mom and Dad and say, “This is another reason for you to invest in my movie because we will at least get $25 back for sure and U.S. distribution of some kind.” (At this point, I would tell you to lower your budget to $50, by the way.)

If your movie works, you can decide to stick with the company who gave you a backstop deal or sell it to a better company, as long as you get $40-plus from the other company. Most of the time, the backstop company does end up with the film. Don’t kid yourself that the movie is worth more. If it were, they would have offered more.

Foreign Pre-sales

I personally hate foreign pre-sales. You must have a high-concept, star-driven film with a respected director to do any pre-sales. If you do go that route, just know that if your film doesn’t come out as brilliant as you thought it would, or maybe it’s too brilliant to be commercial, some foreign buyers will renege on their pre-buy.

You: So what?

If your foreign sales agent sells your $100 film to Germany before you start shooting, or during the shoot, for $200, you can go tell your equity investors they are already in profit, right? Yes… and no.

You: Why no?

This is what no one talks about in Hollywood: If you shit the bed on the execution of your film and it doesn’t get the kind of release Germany was promised by the sales agent, then Germany will come back and say, “You know what, we changed our minds. We only want to pay $30 for it.”

You: But aren’t they are under contract?

Yes. And technically you could sue them, but you won’t. Because it’s too expensive to do that and you already lost your shirt on the movie. So you’ll take the $30 instead of the $200 you were promised. Hopefully your sales agent will be able to get them up to $50—better than nothing. Yes, this happens. Yes, even when your sales agent assures you that it never happens. It happens. Welcome to making movies.

You: Well, that won’t happen to me. Anyway, my mom and dad aren’t really going to pay for my movie, so how do I find real equity investors, gap lenders, backstop deals or foreign sales agents?

Here are a few things that might work, and a few things that definitely don’t work.

Things that Don’t Work

Query letters: No one cares. If you don’t know the person you’re emailing or calling, or you don’t know someone who knows them, you might as well be yelling into the Grand Canyon, hearing only your own voice back.

You: It’s OK. I’m gonna sell my movie at the American Film Market; we have a whole pitch deck and everything.

AFM: Showing up at AFM thinking you will be able to generate interest in your film because you have a pitch reel and some postcards doesn’t work. You should go to AFM though—look around and see how crazy it is out there for buyers and sellers. Find out who’s who and what it is they do. Introduce yourself at the bar. Schmooze and try to meet people casually without pitching to them. Maybe, just maybe, someone might connect with you. Don’t pitch when you first meet them. The proper way to pitch your project at AFM is when you have a meeting set up where both of you understand that that’s what is happening.

Things that Do Work

Agents: The big agencies all have packaging departments and indie departments, and if you or someone in your movie is repped there, they can be very helpful sending the script out to reputable financiers, producers, actors who have value, etc. I love working with the agencies.

You: How do you get an agency to take you seriously?

I have no idea. It took me 20 years, and you have to make movies regardless. Meet people to work with, go to mixers, meet people’s assistants. The other thing that works is for you to get a respectable producer on your film.

You: How do you do that?

Get an agent. Kidding! (But not.) Actually, a lot of producers are looking for great undiscovered material. Lots of them find this material through agents, yes, but producers are also reading Black List and other-list scripts. If a producer likes your script, you could get a meeting. Now your foot is in the door because they know how to get it to agents, equity, distributors, etc. So submit to the lists. If you don’t find a producer, you will at least get great creative notes.

You: Can you wrap up? This is depressing.

Yeah, sorry I’m such a buzzkill. One more thing: Do your research. How much did a film like yours sell for at South by Southwest or Sundance? How much was it made for? There are a ton of moviemakers who make a killing keeping their budgets down. They make an awesome movie with a great cast, go to Sundance, and sell it for double the price they made it. Most movies don’t. Most movies get sold for less. Not because the movies are bad, but because the market price of indie films often don’t support their budgets. Yes, I know the numbers are all relative. I made a movie for $1 million that was considered far too risky; a should’ve-been-$500K movie. You know what? The people who told me that were right. Don’t make your movie for more than you can sell it for, unless you are using the free money model.

This article, I think, isn’t pessimistic—it’s realistic. I still love making movies. I don’t know how to do anything else, so I’m in this biz for the long haul. If you love making movies, none of these challenges will stop you. Stick to it. And if you have any other questions… don’t email me. MM

Miranda Bailey is the producer behind this year’s Swiss Army Man and Don’t Think Twice, and a co-founder of distribution company The Film Arcade.

Illustration by Nicole Miles. This article appears in MovieMaker‘s Complete Guide to Making Movies 2017.

