An independent film typically raises finance from a number of sources from Pre sales (a financial guarantee to the rights to a film) to Private Equity such as direct loans and private investment.
Pre Sales is a financial guarantee to the rights to a film, sold to various windows (theatrical, DVD, video-on-demand, pay per view etc) to distribution companies who then exploit theses rights into their markets such as Spain, France, Latin America etc. The payment is usually due once the film has been delivered to the distributor. These rights are usually handled through a sales agent.
There is a number of publicly funded bodies who support British film by providing funding to certain film projects. In the UK there is the British Film Institute (BFI) as well as a number of regional agencies such as Creative Scotland and Creative England who finance a number of British film projects each year, however funding is subject to an application process.
The UK government provide financial assistance in the form of a Film Tax Reliefs to benefit British films. The Creative Industry Tax Reliefs (CITR) are a group of 5 Corporation Tax reliefs that allow qualifying companies to claim a larger deduction or in some circumstances claim a payable tax credit when calculating their taxable profits.The government tax reliefs available to UK film are Film Tax Relief (FTR), and Animation Tax Relief (ATR). For more information on this, visit HM revenue and customs.
Gap financing is a short term loan secured against the films unsold territories and rights to cover a gap for the finance of the film. The loan is usually covered by either a bank or a financial institute but will only amount to the value of the unsold rights; this will be valued by a reputable sales agent.
A Sales Agent may make an investment in a film or take the place of a senior lender or Gap financier in order to secure the sales agency agreement.
Private funding can be in the form of direct loans, post production companies, co-productions and private investors.