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The Right Way to Raise Money for a No-Budget Film
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Honesty and Ethics 101
From an ethical, legal and business standpoint, honesty should be the foundation of your business plan. Many independent film proposals I’ve seen have been appallingly dishonest, some promising returns in the millions. Yours will be different: you’re going to promise investors that you’ll likely lose all of their money.
Since there is an excellent chance that you’ll only be screening at festivals, most of which are equipped to screen DV, there’s no reason to spend the money to shoot on—or transfer to—film. Many films get stuck for years (or forever) in labs because the moviemakers run out of money from dealing with film transfers and processing.
For less than $10,000, you can own a complete broadcast-quality DV rig, including audio and a G4 equipped with Final Cut Pro—a complete no-budget studio at your permanent disposal. If your film gets picked up for theatrical distribution, your distributor will pay for a transfer to film. Shoot tape and tell a good story for $20,000, and you’ll be miles ahead of any moviemaker with a slick but boring $100,000, 35mm film—especially if their film is stuck in a lab.
Incorporation: Yes or No?
People often ask “Should I incorporate?” A good rule to follow is: if you’re planning to raise more than $25,000, yes. Incorporating provides a legal separation of your personal funds from your film’s funds, and legal protection if anyone sues the film company (provided you yourself have not done anything negligent or criminal). Incorporating also gives you legitimacy and limits your contributors’ liability to the amount of money they’ve invested. It can also offer tax advantages.
If you’re raising less than $25,000 from friends or family members, you might feel comfortable setting up a “Doing Business As” (DBA) account, which can usually be done with a certificate from your local county clerk’s office. Just be advised that a DBA does not offer protection from lawsuits, nor does it offer any tax advantages.
The Business Plan
The best business plans I’ve seen are around 12 pages and include frequent reminders that this is an extremely risky investment. What follows is an outline based on proposals that have successfully raised money for no-budget films.
Pages 1–2 Introduction and Summary
These first two pages are an “Executive Summary” of the rest of the plan. A contributor should be able to read these two pages and have an immediate sense of what s/he is getting into. You should include: 1) A quick introduction to what the project is: who’s making it and how much it’s going to cost. 2) A short and punchy synopsis of the film. 3) A summary of the investment opportunity, explaining the corporate structure and how monies will be distributed if there is a profit. 4) A summary of the film’s intended audience. 5) In 5 or 6 paragraphs, you should explain your moviemaking process. Can your script be shot quickly? Will it be shot on DV? Do you have free equipment? What experience do you have? Who have you recruited to fill in the gaps in your own experience?
Page 3 Include biographies of your key creative personnel such as producer, director and director of photography.
Page 4 Take this opportunity to flesh out the synopsis from the introduction.
Page 5 Explain your intended production of the picture: when and where you plan to shoot, and for how long. You should also sketch out a post-production timetable here.
Page 6 Your budget should be broken down into four categories that include only actual expenses. These should include: salaries and fees (up-front costs for writer, producer, director, cast, crew, composer, casting director and legal and accounting services); production expenses (production office supplies, telephone bills, film stock, catering, sets, props, costumes, location fees, cameras, lighting and transportation); post-production expenses (editing, music, publicity, cast and crew screening, video dubs, festival entry fees and festival travel costs); and insurance and contingency (a contingency is a reserve fund, usually around 15 percent of your budget, to cover any unpredictable costs).
Page 7 This page describes your anticipated markets and the audience you hope will be interested in the film.
Page 8 What is your publicity strategy? Options include film festivals, Website reviews, favors from publicist friends, guerilla marketing, college and special interest screenings.
Page 9 A typical distribution approach is the classic distribution pyramid, which starts with domestic distribution (theatrical, home video, pay-per-view, cable) and is followed by foreign markets. You could also include a proposal (not a promise) to self-distribute, if you think it’s a possibility.
Page 10 This is where you will explain the funding of the picture, or the legal and business structure of your company. Let potential contributors know what sort of corporation you have formed and what state you’ve formed it in. Let them know how much you plan to raise, and at what level you will begin shooting. If you plan to raise $85,000, but only need $60,000 to get through principal photography, there’s no reason not to start shooting when you have $60,000—but let your contributors know that this is your intention.
Include an anticipated total of deferred expenses (any expense that will not be paid until the film generates income).
If you plan to invest personally, you should mention that here. While by no means a requirement, it demonstrates your commitment to the project if you are invested both artistically and financially.
You should also explain what will happen in the event of generating a profit.
The last thing you should include on this page is a dire warning as to why this should be looked at as a contribution rather than an investment.
Page 11 Your deferred expenses can be roughly broken down into cast, crew, post-production and miscellaneous (which would include music clearances, location fees and anything else you have yet to determine). You should state that deferred amounts could vary based on the actual needs of the production.
Page 12 Give a profit participation sample, where you explain how money from a sale would be distributed. This page should state that these are purely hypothetical numbers and are not intended to represent the actual sale or profit of the film.
Final Thoughts
Don’t buy fancy paper, make corporate stationery, use FedEx or otherwise waste money that belongs on the screen. You’re not fooling anyone if you pretend you are doing anything other than making an incredibly cheap movie for the hell of it, so don’t spend your precious dollars on anything but essentials. Go to your local office supply store and purchase some glossy folders: they look nice, are cheap and have two pockets—one for your business plan and one for your supporting materials (photos, relevant articles, etc.).
Finally, make sure that all agreements are in writing, including your own agreement on how you will be compensated. Make one-page agreements with your contributors that explain the investment structure and include a statement to the effect that they understand they will lose their investment. You should also have written agreements with your cast and crew that spell out what they will be paid during production and what their deferred pay will be.
Raising money for an independent film is not easy.
But with patience and determination you will do it. Be diligent,
attentive and honest and you will be well on your way to making
a film that you and your team will be proud of. Now go raise some
money and make a good movie. MM
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COMMENTS | POST A COMMENT 
- Comment by Jennifer on 11/09/07 at 3:47 pm
One important thing this article does not mention is that whenever investors contribute money with the expectation of a profit (whether there ends up being an actual profit or not), Federal and state ("blue sky") securities laws apply.*
You are required to either register your investments as securities with the SEC and your state securities agency, or qualify for an exemption to registration, such as Reg. D and similar state laws.
If you are doing a “no-budget” film as the article suggests, you should have no trouble qualifying for an exemption. However, in either case substantial disclosure and legal documents are required, much more than simply telling investors that there is a risk of losing their money. These documents are very complex and must be prepared by a securities attorney.
For a good overview of this topic, read “Securities Regulation in a Nutshell” by David L. Ratner, available on Amazon.com or eBay.
*State securities laws were named “blue sky” laws in a Supreme Court case from the early 1900s stating that these laws are designed to protect investors from “speculative schemes which have no more basis than so many feet of ‘blue sky’”
This story was published in the Spring 2003 MovieMaker Magazine. The headline was:
The Right Way to Raise Money for a No-Budget Film
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