Film financing agreement: money for your production
A financing agreement is the contract in which a financier undertakes to invest in a film or television production. Film financing rarely comes from a single source: most productions have a complex financing mosaic involving several parties.
Which sources of film financing are there?
The main sources in the Netherlands are loans (the Netherlands Film Fund, regional funds), broadcaster contributions (NPO, commercial broadcasters), VOD platforms (Netflix, Amazon, Videoland), distributors paying an advance on royalties (minimum guarantees), co-producers (national and international), private investors, sponsorship, and economic and tax incentives (the Netherlands Production Incentive).
The Netherlands Production Incentive (NPI)
The Netherlands Production Incentive is a government tax incentive scheme that reimburses a percentage of the production costs incurred in the Netherlands. For most film productions that forms an important part of the financing. Specific conditions attach to the NPI, among them a cultural test and requirements on spending in the Netherlands.
What does a film financing agreement contain?
Depending on the type of financier you arrange the amount and the payment moments (often tied to milestones), what is given in return (delivery, rights, recoupment position, credits), the conditions for payment (green light conditions), and the producer’s reporting obligations.
Green light conditions
Green light conditions are the conditions you have to satisfy as a producer before a financier actually releases the money. Think of a signed distribution agreement, a completion bond, errors and omissions insurance, or evidence that the rest of the financing is in place. Only once all the green light conditions have been met does the light turn green and can the production start.
Recoupment and the waterfall
A crucial question is the order in which financiers get their money back out of the exploitation income. You record this in the recoupment waterfall. Different financiers often want as favourable a position as possible. Negotiations on this can be complex.
Alongside the order of repayment there is also the question of which rights a financier receives in return for its investment. Some financiers want exploitation rights for particular countries, others are content with a recoupment position without rights. You record those arrangements in the financing agreement, and it pays to negotiate hard on them, because rights once given away are not easily recovered.
Gap financing
Gap financing is a form of risk-bearing investment in film. Where you have financed 90 per cent of your project, a financier sometimes steps in prepared to cover that last 10 per cent (the gap). The condition is usually that this financier is repaid out of the proceeds first, ahead of every other financier.
Cashflow financing
The timing of financing flows rarely matches the outgoings perfectly. Producers often use cashflow facilities to bridge this. That too has to be recorded contractually.
International co-productions
In international co-productions producers from different countries work together on a single production. That brings specific legal questions with it: which law applies, how do you divide the exploitation rights by territory, and which treaties or fund schemes can you draw on? Roland and Merel have extensive experience with international co-productions and guide producers through structuring and recording collaborations of this kind. More about this on our page about the co-production agreement.
A lawyer for your film financing agreement
Working on the financing of your production? We review and draw up financing agreements, negotiate recoupment positions and check whether your green light conditions are achievable. Roland Wigman and Merel Teunissen guide producers through the entire financing process, from the first commitment to the last signature. Prefer to call first? That is fine too: 020 675 88 21.
