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The Entertainment industry is undergoing massive transformation right now and that’s where we come in with our film and entertainment industry financing. Streaming services—like Netflix and Hulu—are treading a new path, and creating challenges for the traditional industry stalwarts. Where television once posed the biggest threat to the film industry, streaming has overtaken both as the major contender for the entertainment throne.
Millennials are driving these major market changes, but they’re not the only influence on a waning film industry. People, in general, are able to spend less time at the movies, less money on traditional cable television, and more of both on streaming service subscriptions.
What’s shaping these changes?
For one, the way people are consuming entertainment is different.
We’re on the go constantly. Our computer screens and mobile devices receive more attention than our televisions do. Consumers have less time to sit in a cinema, and a more limited attention span than we used to. Our attention is a commodity for marketers. Given that our attention span has shrunk to a microscopic 8 seconds, finding ways to capture—and hold—our attention is the key to streaming media’s success. We can watch from anywhere we have our mobile device and WiFi. We can watch short videos on YouTube or Vimeo if we’ve got a few minutes.
Or we can binge-watch entire series’ if we’ve got a free weekend. The second reason streaming sites are gaining the lion’s share of the market is because they offer freedom. We are no longer restricted to regular network programming, or what national cinemas are screening. We can choose what we watch, and when we watch it. With streaming platforms, we are in total control of our viewing experience.
Third, we are simultaneously more and less social than ever before. We value authentic content over sterile, staged production. We are drawn to diversification in our casts and storylines, better social commentary and awareness, and smaller budget films over blockbuster excess.
This is where companies like Netflix—which has over 90 million subscribers globally—shine. They offer everything that old bricks ; mortar giants like Blockbuster Video do—best-selling video and TV series rentals. But they also offer independent gems and documentaries that tell the stories the new generation of viewers want to hear. Couple this with the fact everything is available on demand right now, wherever you are, and you can see why streaming services are quickly overrunning more well-established players in the entertainment industry.
With this advancement within the industry, a new trend has emerged. The indie film sector is experiencing a moment.
Independent film labels and film makers have an advantage over the industry giants—they can switch focus fast. They can cater to viewer demand, and embrace trends while the industry giants are weighed down with contracts and commitments. They have their finger on the story-telling pulse, and they can tell the stories they know need to be told. They have access to stories and people that might fall through the cracks in a major production company.
What they may not have, however, is funding. Independent labels, historically, have done small budget films because they are small budget labels. Times haven’t changed so much that indie labels have blockbuster budgets.
But what the indie film sector lacks doesn’t need to be an obstacle in getting your stories told. And with demand for independent movies at an all-time high with streaming services, confidence within the lending sector is high, too.
If you’re ready to capitalize on the emerging trends within the film and entertainment industry, there are lenders ready to help fund your label, or your next project.
It’s time to unpack the various sources of capital for the film and entertainment industry. We explore what your funding options are, how they work, and how to tell which form of lending is best for your needs.
Those in the film and entertainment industry could be looking for funding for any number of reasons. The most common reason is to cover expenses—expenses involved in paying staff and contractors, paying vendors, marketing and advertising campaigns, and the purchase or rental of equipment and space. Less commonly, you may require entertainment industry financing for a project or operation. Generally, though, projects will be funded through equity investments.
Whatever your reasons for searching out funding options, we’ve lined them up for you here.
With SBA loans, the Small Business Association effectively acts as your guarantor, guaranteeing repayment to the lender that underwrites your loan. This encourages traditional lenders to be more open to lending you capital, and helps stimulate the small business sector.
These loans generally have a higher borrowing limit due to the SBA backing your worthiness as a borrower.
An SBA loan will often have more manageable repayment terms, and require a lower deposit amount. Further, SBA loans generally offer better protection against balloon payments than some other lending types.
Your business pays a fairly hefty price for these benefits. An SBA loan charges high fees, has a stringent—and time consuming—application process, and requires candidates to have a strong record of financial performance. Be prepared to demonstrate solid numbers on your P;L report, and to provide more detailed reporting and data than with some other lending types.
Rates 5-8%
Terms 3-25 years
Funding amounts $50,000-$5,000,000
Collateral Required
Fees Medium to high fees
Turnaround Up to 90 days
A business line of credit is a type of pre-approved financing—very similar to a credit card. Once you are approved for a specific amount, you can tap into this and pay it down as needed without going through the underwriting process again.
As an example, if your line of credit is $100,000 and you use part of this amount, you can pay down the amount in full and still have access to the capital without going through the application process again. With traditional loan types, once you’ve repaid the loan, you no longer have access to those funds.
A business line of credit is an excellent source of financing for business owners who can forecast their income in the short- and long-term. A line of credit often offers more competitive repayment terms and interest rates than traditional lending, although your business will incur heavy penalty fees for exceeding your line of credit limit. Another benefit to using a line of credit to acquire funding is that it may be unsecured.
Rates 5-8%
Terms 3-25 years
Funding amounts $50,000-$5,000,000
Collateral Required
Fees Medium fees
Turnaround Within 24 hours
This is your traditional lending institution’s funding structure—the entertainment industry business loan. You present collateral—your guarantee to the lender that you can service the loan, borrow a lump sum, the capital is deposited directly to your account, and you repay it over a specified period.
Closing fees and interest rates are generally higher than that of a business line of credit, but can be considerably lower than other types of funding.
Rates 5-10%
Terms 1-30 years
Funding amounts $50,000-$5,000,000
Collateral Required
Fees Medium fees
Turnaround 1-4 weeks
Instead of purchasing your equipment outright, many businesses are making the move towards leasing equipment. With technology advancing at lightning speed, it can make more sense to lease the most up to date equipment, rather than purchase plant that dates itself so quickly. Most equipment lease contracts allow you the option to renew the lease when your contract runs out. Interestingly, they may give you the option to buy the equipment outright. As the contract terms may be between one and ten years, this may not be the best option in terms of depreciation.
Rates 8-15%
Terms 1-10 years
Funding amounts $50,000-$5,000,000
Collateral Required
Fees Medium fees
Turnaround N/A
Often called an MCA or merchant cash advance, selling your company’s future receivables is a way to obtain fast capital easily. In a business cash advance structure, your business sells its future bank deposits to a lending company, in exchange for a quick—within 24 hours, usually—lump-sum capital injection. Once your business receives the capital, repayment is made as a percentage of your daily income until the balance is paid in full.
Factor rates 1.10-1.50
Terms 3-24 months
Funding amounts $5,000-$2,000,000
Collateral Not required
Fees High cost
Turnaround Within 24 hours
If you are part of the savvy set capitalizing on market demand for a new, authentic kind of entertainment industry, these are the lending types available to your business right now. Whatever your reasons for sourcing capital, we’ve got the financing solutions that work well for the film and entertainment industry.
By exploring our top 5 solutions, it’s easy to see that there is more to lending than the traditional lending institutions of the past. Established alternative lenders can offer appealing terms and fast application processing times, and best of all—they can be available online, right now.
Got questions about your entertainment lending options? Click here to talk with one of our lending experts right now.
