The Filmmaker’s Guide to Debt Financing: What to Know When Taking On Loans
This no-nonsense guide to debt financing for indie filmmakers explains when to use loans, how to structure them, and common mistakes to avoid.
If you’ve ever tried to pull together a financing plan for an indie film, you know it can feel a bit like assembling a puzzle where half the pieces are missing. One minute, you’re chasing soft money; the next, you’re negotiating equity deals. Then, someone brings up debt financing, and you’re thinking—wait, we’re taking out loans now?
Don’t stress. This guide will walk you through how loans fit into a film financing plan, when it makes sense to consider a loan, and how to avoid traps that have tripped up many first-time (and even seasoned) filmmakers.
Primary ways films get financed
Generally, films are financed through some combination of:
- Soft money: Free money—grants, tax incentives, and rebates. You don’t have to pay this back. It’s the gold standard, but it’s often not enough.
- Equity: Money from investors who, in exchange, own a piece of the film and share in any profits.
- Debt financing (loans): Money you borrow and must pay back, usually with interest.
The best financing plans layer these options together. Soft money helps reduce risk, equity fills in gaps, and debt financing? That’s the tool you reach for when you’re close but not quite there, or when you’d rather borrow than give up more ownership of your film.
How debt financing works for indies
Debt financing is exactly what it sounds like: you borrow money to help finance your film, and you promise to pay it back later (with interest).
Think of it like buying a car. The bank doesn’t want a say in what color the car is or how you drive it; they just want to know you’re going to make the payments. It’s the same with film loans. Lenders aren’t interested in casting decisions or your shooting schedule. They care about one thing: getting their money back.
The beauty of debt is that once you pay it off, that’s it. Unlike equity investors, who get a cut of your profits forever, lenders walk away happy when their loan (plus interest) is repaid. If your film takes off? You don’t owe lenders a piece of your streaming deal or backend profits.
The flip side is that lenders also don’t care if your film underperforms. They still very much expect to get their money back. That’s why debt can be powerful—or dangerous—depending on how you use it.
When to consider taking on a loan for your film
In my experience, loans make sense when you’ve already lined up as much soft money and equity as you can, and you just need a final push to get across the funding finish line.
Here are some examples of when debt can be a smart move:
- You already have money committed to your project: Maybe you’ve pre-sold distribution rights or secured a tax credit, but the cash won’t hit your account until after production wraps. A loan can bridge that gap and keep things moving.
- You don’t want to dilute ownership: The more equity you sell, the smaller your piece of the pie. If you’re confident the film will perform, debt financing lets you keep more upside after the loan is repaid.
- You need to move fast: Raising more equity can be a slow, tedious process. A loan can get you over the line faster if you’re working against a tight schedule.
But—big but here—only take on debt if you have a realistic plan to pay it back. Hope isn’t a strategy, and lenders don’t accept IOUs. They want contracts and real collateral.
Who’s lending money to indie filmmakers?
There’s a whole niche market of lenders who specialize in indie films. These range from big banks with entertainment divisions (like City National Bank, Comerica, or East West Bank) to specialty lenders who focus exclusively on the industry (like Entertainment Partners, Three Point Capital, or BondIt).
Here’s what they’re typically looking for:
- Distribution contracts with minimum guarantees (MGs): These are gold. If you have a signed deal promising payment upon delivery, lenders love that.
- Tax credits and incentives: Shooting in an area with strong film incentives? This sweetens the deal for lenders, and they’ll often advance against anticipated rebates.
- Pre-sales: If you’ve pre-sold rights in foreign territories, those deals can be used as collateral.
Without substantive collateral, it’s all but impossible to secure a traditional film loan. Sometimes, this leaves producers wandering into riskier territory, like gap financing or mezzanine loans, which are higher-interest loans with more aggressive terms. Tread carefully there.
Looking for the best incentives for your project? Head over to our Incentives Map for a state-by-state, or country-by-country breakdown of who is offering what production incentives and how to qualify your film.
How are indie film loans structured?
- Interest rates: Production loans typically have interest rates between 8 to 12% if backed by strong collateral. Gap or mezzanine loans can climb into the 15-20% range. The general rule of thumb? The riskier the loan, the higher the rate.
- Fees: Expect origination fees (1-2% of the loan), legal fees, and sometimes closing costs (varies), and build these into your budget.
- Repayment terms: Most loans are expected to be repaid immediately when revenue comes in. If you’ve borrowed against a tax credit, the loan is usually repaid as soon as the rebate hits your account.
Always make sure the timing of your loan repayments aligns with your film’s revenue schedule. You don’t want a repayment to be due before the money actually arrives.
Common indie debt financing mistakes to avoid
Here are a few film financing lessons you don’t want to learn the hard way:
- Signing a loan agreement without legal review: This isn’t a handshake deal. Get a good entertainment attorney involved before you sign anything.
- Borrowing too much: Don’t use loans to plug every hole in your budget. Borrow the least amount you can, and borrow only against reliable sources of repayment.
- Ignoring the true cost of debt: Remember, loans come with interest and fees. Every dollar you borrow costs you more down the line.
- Neglecting to add a completion bond: A completion bond is a financial guarantee provided by a third-party company that ensures the film is completed and delivered according to the agreed-upon budget and schedule. It’s basically an insurance policy for the lender, and many lenders require it. Even if they don’t, it’s a smart safety net.
- Being over-reliant on a single sale: With streaming platform consolidation, it’s harder to count on one big sale saving the day. My advice? Have a backup plan.
- Over-collateralizing your loan: Pledging assets worth more than the loan value can help you secure better terms, but it’s a risky move. It limits your ability to monetize collateralized rights elsewhere and gives the lender first claim on a larger portion of revenue.
The best way to avoid making costly mistakes? Consult experts early and have them on hand to help you work through financing.
Debt can be a powerful tool—if you use it right
At the end of the day, debt financing isn’t innately good or bad—it’s a tool. When used properly, loans can help you keep control of your film and walk away with more profit. Used haphazardly, loans can bury your project before it’s even released.
Be honest with yourself about the risks, have a solid repayment plan, and surround yourself with people who know how to navigate these waters. And remember—sometimes the smartest financial decision you make is the one where you don’t take the loan.
If you’re feeling stuck or unsure, reach out. There’s no shame in asking for help. The smartest filmmakers I know ask a lot of questions before they sign on the dotted line.