News & InfoEP StoreAcademySupportCommunityProducts by Country
Blog Home

The Beginner’s Guide to Equity Financing

Expert advice to help producers secure funding for their next project
July 15, 2021

John Hadity

EP Blog_equity financing

When raising funding for your film or television project, the number one question to ask should be: What are you giving away in exchange for the equity?

In the film business, when you secure outside investors for your project, it’s important to keep in mind that you are giving away a piece of ownership to the rights of the project. Funding a film project is a high risk, high reward business, so you’ll need to look for sophisticated investors who will typically want to know:

  • How will I get my money back?
  • When will I get my money back?

Keeping these questions in mind will help you map out your funding strategy, so you can identify the right investors for your project.

How is funding raised?

Funding a project requires doing your homework and preparing as much as possible ahead of time. That way, when you’re pitching to investors, you have a clear picture of what you plan to make, why you're making it, and the project revenue streams.

The key document that you need to prepare first is often referred to as a prospectus. It includes all the pertinent information you’ll need handy to book meetings with potential investors or simply to get a hard “no.”

The prospectus sums up:

  1. What is the project you’re making
  2. How you’re going to make it

If you’ve never seen a prospectus, this example, courtesy of Producer Mary Jane Skalski, can help serve as your guide while you’re developing one for your next project.

Ready to start your prospectus? Download our handy prospectus checklist!

Who should you pitch to?

Once you have your prospectus to sell the idea, now it’s time to book meetings. Here’s a helpful strategy to find the right investors to meet with:

  1. Reach out to your immediate network first, especially friends and family. Not only could they be directly helpful in funding, but they also can expand your network by connecting you to an investor, organization, or business who might be interested in meeting with you about your project.
  2. Identify the right people to talk to when approaching businesses and organizations. Have a clear understanding that the person you are talking with actually has the resources to invest, or the clout to make the decision. 
  3. Find people who have a vested interest in your story. It helps to have a conversation with someone who appreciates the project you are making. For example, if your project is about Autism, you’ll want to reach out to Autism-related organizations. Partnering with these organizations can also help you from a marketing perspective to spread the word about your project. The community connected with that organization might be more willing to support your project if they see that you’re connected with the organization as well.
  4. Seek out patrons of the arts. If you are going to a non-profit event, theater, concert, or artistic performance, look at the back of the playbill or sponsor packet. There you will find extensive lists of people who have invested in the arts and might be willing to invest in a film project as well.
  5. Bring on an anchor equity investor who can partially fund your project. By having them on board, you can spark the interest of their colleagues who might be more willing to invest because of the connection. Sometimes actors or other talent will “soft” come on board a project as producers. You can then help leverage financing up front because they are connected to equity investors.

Ultimately, finding investors will be a tedious task, so stay focused on finding the right people who believe in both you AND the project.

What is the proper corporate structure to be used?

Once you have your investors on board, the next step is to set up an LLC for them to invest in, and create a legal and binding contract. If you don’t have a proper corporate structure set up, then investors are really just giving a gift and are less likely to fund your project.

Typically, 50% of the LLC is owned by the producer and the other 50% is owned by the investors on a Pro Rata Parri Passu basis, meaning, on an equal basis and also dependent on their level of investment. The ownership percentage can change depending on how the LLC is set up initially by your lawyer.

When revenue comes from your project, here is how it might work:

If the budget for your project is $10 million and you have 5 investors who each put in $2 million dollars, then each investor owns 10% of the entire enterprise which makes up half of the LLC. So if $100 flows into the LLC in revenue, $50 dollars will get split amongst the 5 investors and the other $50 goes to the producer.

What documentation needs to be prepared?

When you bring more than two (2) investors onto your project through an LLC, you’re selling securities, so you’ll need a legal document that states the objectives, risks, and terms of the investment involved. This document is referred to as an Offering Memorandum or a Private Placement Memorandum. For help creating your own memorandum, be sure you use our memorandum checklist.

The Offering Memorandum needs to be seen by a lawyer with securities experience, and EP can advise on referrals.

Your lawyer then holds the checks and signed documents in escrow until the required minimum financing is raised.

For example, if you’re making a movie for $10 million dollars, it’s possible that you could set the required minimum financing to $7 or $8 million to get you through principal photography. Once you have a rough cut of the project, you can use that to pitch investors and raise the rest of your money to reach your finance goal of $10 million.

What are the terms for recoupment?

Financing your project is a long-term commitment, and it’s pivotal to have a plan in place from the beginning that shows how you will pay it back.

Usually, any loans you secured will get paid back first, followed by the equity investors. It’s not until these investors get paid back completely that producers will begin to see a profit.

An example of a typical term for recoupment could include the following steps:

When a project is making net proceeds, 100% of the money that flows back into the LLC will go back solely to the investors (although it is prudent to have the LLC retain a small portion first to recoup its operating expenses).

Once the investors recoup their full amount back, then that recoupment will begin to split where a certain percentage, for example, 80% will go to the investors and 20% will go to the producer.

This split can continue to change until the investors recoup the agreed upon percentage (e.g. 130%) that was part of the deal when the LLC was set up.

What is the exit strategy for investors?

As a project earns net profits, the producer(s) have an obligation to report consistently to the investors, and update them on the status of the recoupment plan. Once the investors have earned the agreed upon amount (e.g. 130%), the rights can be assigned to the managing members of the LLC, typically the producer(s), and then the LLC is dissolved.

If you’re just beginning to secure equity financing or have already secured your investors, Entertainment Partners is ready to partner with you on your project. Our financing team is available to review your prospectus before you even begin pitching your project to investors, and we will also advise you on the best securities lawyers who can draw up the important documents needed for your LLC.

Do you have questions? Reach out to our financing team so we can help you get your cameras rolling and story told!

For a deeper dive into this and other finance options, be sure to check out our Master Series webinar on equity financing and our Beginner's Guide to Production Financing.

Related Content

Master Series Square Thumbnail-Film Financing-Crowdfunding

Film Financing Explained: Crowdfunding

9/8/2022
Emily Best (Seed&Spark), Stacy Bradford (Indiegogo), and producer Zach Fineblum join us to discuss the ins...
Watch
Streaming platform on tablet device

The Evolution of Residuals: How Streaming Changed the Model

8/11/2022
Understanding how residuals payments are calculated for new content on streaming platforms.
dollar signs representing digital crowdfunding

The Beginner’s Guide to Crowdfunding

7/26/2022
How filmmakers can leverage the power of social networks and online platforms to build buzz and secure...
Master Series Panelists-World Revenues, Foreign Sales, Senior Debt

Film Financing Explained: World Revenues, Foreign Sales, and Senior Debt

4/27/2022
Learn how working with agents, international distributors, and gap financiers can all factor into...
International Film Financing panel-featured

Film Financing Explained: International Financing

3/10/2022
International production experts discuss how producers can utilize financing systems outside of the US,...
International Financing-John Hadity-ft

The Beginner’s Guide to International Film Financing

2/15/2022
What to know before you begin an international financing plan

Film Industry Booms in Buffalo

9/20/2022
Western New York draws top filmmakers with expanded tax incentives, new soundstages, and architectural...
EP Webinar Panelists - US Production Incentives Update

US Production Incentives Update: New and Expanded Programs in 2022

8/19/2022
Film commissioners Colleen Bell and Sandy Lighterman, and production executives Jay Roewe and Ashley Rice,...
EP Blog_SQUARE_Wes Hagen

Meet the Location Manager

7/7/2022
A conversation with award-winning location manager Wes Hagen ('Ozark,' 'Hidden Figures.')
EP Blog_SQUARE-Pitching Reality Tv-2

Pitching and Financing Unscripted Television

6/7/2022
Ready to sell your big idea for a reality TV program? This guide will help prepare you for the road ahead.
EP Blog_SQUARE_World Revenues_global currencies

The Beginner's Guide to World Revenues, Foreign Sales, and Senior Debt

5/17/2022
Learn how shopping your project around the world to secure funding commitments for distribution rights can...
Oklahoma route 66 sign

A New Frontier in Filmmaking

5/5/2022
Oklahoma is becoming a production destination, thanks to new incentives and infrastructure programs.
KJ Lamb and Simon Donovan

Empowering the Next Wave of Production Accountants

5/2/2022
The EP Production Portal team was delighted to participate in the biannual Netflix Assistant Production...

Producing with Purpose

4/27/2022
Creative Producer, Kimberly Goodman ('Selling Sunset', 'Project Runway') shares insights on creating...
EP Blog_The Race to Net Zero is On for Big Studios

The Race to Net Zero is On for Big Studios

4/20/2022
Film and television studios are embracing the green movement in a big way. Here’s what you can expect to...
EP blog-square-tax day

Tips for Tax Day 2022

4/5/2022
Your ultimate tax filing checklist - the deadline this year is Monday, April 18th!
EP Newsroom-Thumbnail-Portland Business Journal

How Oregon’s updated film incentive law could boost the local economy

3/29/2022
A new Oregon film and media incentive law could draw more movie productions to the state.
EP Blog_Marge Dean

Opening Career Doors

3/29/2022
How WIA President, Marge Dean, is shaping the future of animation and empowering underrepresented genders
Master Series Women in Animation-thumbnail

Women in Animation: A 3D View

3/24/2022
Marge Dean, Mandy Tankenson, and other women leaders from across animation come together to celebrate...
Bradley Cooper-nightmare alley

Meet the Assistant Director

3/16/2022
A conversation with Myron Hoffert ('Nightmare Alley')
EP Blog_SQUARE-Sound Mixer-Lora Hirschberg

Meet the Sound Mixer

3/1/2022
A conversation with Oscar-winning re-recording mixer, Lora Hirschberg ('Inception', Skywalker Sound)
Digging Out of a Deficit-featured

Digging Out of a Deficit: What to Expect in the Second Quarter of 2022

2/25/2022
Federal and State Unemployment Insurance rates are rising. Learn how these changes will affect 2022 and...
meet-the-executive-producer-just-mercy-sq

Meet the Executive Producer

2/8/2022
A conversation with Mike Drake ('Just Mercy') on the path to becoming and EP, and the role of social...
EP Blog_SQUARE_Island Incentives

A Ticket to Paradise

1/26/2022
Island Incentives Bring Productions Ashore
Western Canada

Production Tax Incentives in Western Canada Every Producer Should Know About

10/4/2022
Alberta and Manitoba offer film and TV productions competitive tax incentive programs and versatile...
Changes to UK right to work checks

Important Changes to UK Right to Work Checks

9/20/2022
On September 30, 2022 the UK rules around right to work checks will change. Here’s what productions need...
Topic: UK
More
EP Blog_SQUARE_New York

NY Convenience Rule Impacts Remote Production Workers and Film Incentives

9/13/2022
How remote employee payroll taxes apply to New York-based productions and if an employee’s physical...
EP Blog_SQUARE_1st AC Matt Sanderson

Meet the First Assistant Camera

9/7/2022
A conversation with 1st AC Matt Sanderson ('Everything Everywhere All At Once')
EP Blog_SQUARE_US Expanded Incentives 2022-2

A Record Number of US States Expand Filmmaking Incentives in 2022

8/25/2022
Your guide to the latest news in production incentives and film programs to come from the 2022 legislative...
EP Blog_SQUARE_New US Incentives 2022

New US Film Incentives Introduced in Arizona, Indiana, Florida, and West Virginia

8/23/2022
As production continues to boom, new tax credits and other programs welcome industry to new locations...
Los Angeles Times logo-sq

Hollywood production in U.K. soars to record levels as crews complain of burnout

8/22/2022
Spending on film and high-end television shoots reach record-breaking amounts as production activity...
EP Blog_SQUARE-Atlantic Canada Expands Incentives

Atlantic Canada Expands Film Incentives in 2022

8/16/2022
Enhanced production incentive programs attract industry to Newfoundland & Labrador, Nova Scotia, and...
Los Angeles Times logo-sq

Explaining Hollywood: How to get a job as a production accountant

8/10/2022
Mark Goldstein speaks to the LA Times about the high demand for production accountants
EP Blog_SQUARE_Penka Kouneva-2

Meet the Composer

8/2/2022
A conversation with award-winning orchestrator and composer Penka Kouneva (‘Revenge,’ ‘Pirates of the...
Mount Hood, Oregon

Building on Oregon’s Cinema Legacy

7/19/2022
How improved tax Incentives, job training, and production infrastructure is expanding the filmmaking...
5 Master Series panelists discussing Atlantic Canada production incentives-square

Production Incentives Update: Atlantic Canada

7/15/2022
Learn how productions can benefit from newly expanded incentives in Nova Scotia, Newfoundland & Labrador,...
EP Blog_SQUARE_filmmaking in new mexico

Forging the Future of Filmmaking in New Mexico

6/29/2022
As the film industry expands in the Southwest, New Mexico leads the region as top destination thanks to...
EP Blog_Jesse Wente

Supporting Indigenous Storytellers of Canada

6/21/2022
How the Indigenous Screen Office (ISO) offers advocacy and funding for First Nations, Inuit, and Métis...
Topic: Canada
More
Sian Richards and Queen Latifah-square

A Face Kit for Every Skin Tone

6/14/2022
Hollywood makeup artist Siân Richards is transforming the makeup industry for actors of every shade.
Jennifer Liscio

Spotlight: Jennifer Liscio, VP of Tax Incentives and Legal Affairs

5/31/2022
Meet EP's Canadian legal affairs and tax incentives domain expert, Jennifer Liscio, and learn how she’s...
EP Blog_SQUARE-Historical content and new media

Residuals and the Streaming Model

5/24/2022
How residuals apply to historical content on new media platforms.
EP Blog_SQUARE_Fighting Hollywood Stereotypes-TTEI

Fighting Stereotypes and Rethinking Representation

5/10/2022
How TTIE is advancing authentic storytelling in Hollywood by empowering historically excluded writers and...
contracting-in-a-covid-19-world-LC

Contracting in a COVID-19 World  

5/3/2022
The pandemic has affected how UK production companies contract crew. Here’s how to reduce the impact of...
terms-to-include-uk-contracts-LC

Terms to Include in UK Crew Contracts

5/3/2022
Common terms which studios and production companies include in their UK crew contracts.
Topic: UK
More
uk-gdpr-and-how-productions-reduce-exposure-LC

The UK GDPR and how Productions can Reduce their Exposure - Q&A with Sheridans

5/3/2022
Sheridans’ Associate Krishan Neelendra answers key UK GDPR questions from production companies and...
Topic: UK
More
cell phone with sticky note stating sign here

Six e-Consent Myths (and Why They’re Not True)

5/2/2022
Sheridans Associate, Sarmad Saleh, debunks some common e-consent myths.
Topic: Legal
More
recycling conversation

Sustainability in Production: Q&A with Nikki Saunders

4/22/2022
Nikki Saunders on sustainable filming practices, COVID-19, and why carbon offsetting isn’t a...
EP Blog_SQUARE_meet the cinematographer-dan-laustsen

Meet the Cinematographer

4/12/2022
A conversation with Dan Laustsen ('John Wick', 'Nightmare Alley').

Georgia Proposes Capping and Prohibiting Sale of Film Tax Credits

3/30/2022
The changes, if signed into law, would cap the amount Georgia hands out in film and TV tax credits at $900...
Anthony De La Rosa-EVP-Residuals

Spotlight: Anthony De La Rosa, Executive Vice President, Residuals

3/8/2022
Meet EP’s resident residual domain expert, Anthony De La Rosa, and learn what inspired him to enhance and...
Los Angeles Times logo-sq

Why the Cherokee Nation is Offering Rebates to Film in Oklahoma

2/5/2022
Joseph Chianese speaks to the LA Times on new incentive
EP BLOG_Decoding-Your-Paystub-S

Decoding Your Paystub in 2022

2/2/2022
What deductions may look different in the new year

Payroll & Finances

PayrollResidualsSmartStartNew SmartTimeProduction PortalEP On LocationSmartAccountingEP LiveSmartPOCASHétPayPaymaster Rate GuideEP Residency

Manage Multiple Productions

AssetHubSmartHubSmartHub Vault
Subscribe now

Be an industry insider with EP's
newsletters and alerts

LegalPrivacy NoticeSecurity
© 2022 Entertainment Partners. All rights reserved.