The Beginner’s Guide to Soft Money Financing
Ready to start financing your project? One of the first ways to begin is through something called “soft money”. Soft money is an umbrella term encompassing a variety of different funding options and is sometimes considered “free money” meaning money that doesn't have to be paid back. But, like most things in life, especially when it comes to financing a project, you have to spend money to get money.
Let’s dive into all the soft money financing options, so you can decide the best production finance plan for your next project.
Types of Soft Money
There are three main categories of soft money funding options that are available, and you can finance your production with a blend of them, depending on the type of project and where you decide to film:
1. Tax Incentives and Rebates
In order to qualify for a tax incentive or rebate, you need to spend a certain percentage of the production budget, or a minimum number of dollars, in a specific jurisdiction. This kind of soft money is set aside by cities, states, and countries as a way to boost the local economy, and the percentage of the incentive fluctuates depending on the location. For example, filming within the metropolitan area of New York City qualifies a production for a tax credit of 25%, and that rate can increase to as high as 35% when you travel upstate.
Tax Incentives come in two categories:
- Refundable Tax Credits: Similar to a rebate, but requires a production to file a tax return after the award certificate is issued. To the extent the production company does not owe any taxes in that jurisdiction, it will receive a refund check in the amount of the tax credit.
- Transferable Tax Credits: Any credits that are unused after a production has been completed can be sold at a discounted rate (or transferred) to other companies or individuals with a related state income tax liability.
Rebates: Rebates are funds paid to the production company directly from a respective domestic or international film office (or other state agency), and do not require the production company to file a tax return in the jurisdiction.
To learn more about where the best location for your project might be, visit our jurisdiction comparison tool.
Of all the soft money options, grants are considered gifts from specific film funds set up by:
- Government Organizations (typically lottery-based)
- Companies, Non-profits, Film festivals, and Film institutes (typically merit-based)
While grants don’t have to be paid back, they do often come with requirements, restrictions, regulations, and reporting obligations, and often require an application for you to share details about you and your project. Grants are given out from film funds can be based on very specific criteria. This criteria could include filming in a particular location, or be reserved for women filmmakers or diversity initiatives, such as the Lynn Shelton "Of a Certain Age" Grant offered by the Northwest Film Forum, which awards funding to a US-based woman, non-binary, or transgender filmmaker, age 39 or older, who has yet to direct a narrative feature.
Grants can be utilized for development, production, post-production, and distribution, are typically between $5-10K, and can offer easy access to funding right away, as long as your project is aligned with the mission of the entity that is backing the film fund.
Here are additional some additional examples of film funds for you to research grant opportunities.
3. Government Funds
The United States is one of the few countries in the active production space that doesn’t offer a federal incentive, other than tax breaks for investors.
Federal funding is given out by many countries for filmmakers to access, and can cover different parts of a project, including development, production, and visual effects. In addition to federal funds, some countries, such as Canada, provide provincial and federal credit, meaning, every dollar you spend on the ground in Canada for a production earns you 16 cents back from the Canadian Federal Government. Furthermore, depending on the province in Canada that your production is shooting in, you can earn between 10-40% back in an additional credit as well. To learn more about Canadian incentive programs, visit our Production Service and Canadian Content pages.
Accessing Soft Money
There are three important questions to ask when scouting locations that should inform you on how to earn soft money, and what to do once you get it.
1. What do you want to shoot?
Some jurisdictions may not allow funding for certain types of projects, such as documentaries or video games. Check to make sure your project type is the right fit before you decide on a jurisdiction to film in.
2. What’s the proper structure for accessing soft money?
In order to access soft money financing, you may need to work with a local production service company that can access the incentive for you, or you may need to set up a company in that jurisdiction. In either case, it could require you to have officers or shareholders who are residents in those jurisdictions.
As you research filming locations, be sure to also research what local service providers are already established in the jurisdictions to determine what kind of legal structure you must establish in order to access the funding they have available.
EP can help your production set up the appropriate corporate entity in Canada, as well as advise on the proper corporate entity to use in all of North America. However, many foreign jurisdictions may not allow you to just set up a company and start a production right away. For assistance with this process or to learn more about your options, contact our team of experts.
3. What are the rules to qualify?
Every soft money opportunity has certain requirements. It is vital for you to understand the deadlines involved, and what the application process looks like. Many jurisdictions have helpful film organizations that can guide you in the right direction on who manages the funding programs. For more in-depth details of soft money access requirements based on jurisdictions around the world, refer to our interactive Production Incentives Map.
Best Practices on Legal Structures and Hiring
Setting up the appropriate legal entity to utilize soft money financing is dependent on how the incentives were designed. There is no one-size-fits-all legal structure and this can vary depending on the jurisdiction you decide to film in.
For example, say you decide to film in Germany. To access the federal funding (which gives away the most money) and/or regional funds, your distribution rights may need to be held by a German distributor, with a possible shared copyright owned by them for at least two years.
Additionally, you’ll need to secure work permits, and in some countries, visas. Canada, for example, must approve outside crew members that are brought into their jurisdictions, and may limit the number of work permits they give out. This means if you bring an American grip into Canada to work on a production, Canada may want you to match that position by hiring a local grip to work alongside the American grip. And before crewing up your production, you will have to prove to the DGC (Director’s Guild of Canada) that you’ve exhausted the list of available Canadian crew members before you can bring crew in from the United States. Stipulations like these are put into place to ensure that productions are supporting the local economy and hiring local workers first, and something you should be prepared to navigate.
Doing your homework ahead of time on the rules of a jurisdiction will help you judge whether or not the soft money financing options available in that location are worth the tradeoffs; this will also allow you to adjust your production plan accordingly, before you start filming and spending your money there.
To learn more about your project’s eligibility for soft money financing, legislation that could impact it, and stipulations on how to hire crew or spend your money locally, put our production incentive tools to work and learn all you can about the jurisdiction you are looking to film in.
Did you know that changing legislation could impact your access to soft money opportunities? Stay up to date with the latest developments by signing up for the EP Production Incentives newsletter so you never miss a thing.