FFUSA offers debt and mezzanine financing to producers looking to make their films in the US. On any given film, our funding to a production can include the cash-flowing of a US state incentive, such as a rebate or a transferable tax credit, the discounting and cash-flowing of pre-sale contracts entered into by distributors, and a loan “secured” against unsold distribution rights (i.e., a so-called “gap loan”). With all the right elements in place, this could result in a loan to the production of as much as 50% or more of the budget for a film.
Many US states now offer generous film and television incentives in order to keep production from migrating to Canada and Europe, as has happened in the past. These incentives, coupled with a very weak dollar, make the US (and more particularly certain US states) a very attractive film destination for both foreign and domestic producers.
In states that offer cash rebates - for example, New Mexico and Michigan - a producer can opt for the state to send them a check, the amount of which is based on a percentage of the qualifying in-state spend on the applicable production. In states that offer transferable tax credits as an incentive - for example, Connecticut, Illinois, Louisiana, Massachusetts, Arizona, New Jersey, Pennsylvania, and Rhode Island - the tax credits can be used to reduce a tax payer's in-state tax liability, often with the option of carrying forward unused tax credits for a number of years. Furthermore, the transferable nature of the tax credit in certain states enables the out-of-state producer, who most likely does not have material tax liability in the state in which the production is being shot, to monetize the tax credit by selling it at a discount from its face value to an in-state tax payer(s).
The benefit of these valuable incentives is only realized after the producer's money has been spent on the production in the applicable state and the relevant auditing process has been performed, allowing the state to issue the tax credit or rebate. However, most producers require these funds at the start of principal photography, and this is where FFUSA can provide funding.
Structurally, FFUSA provides cash directly to a producer at the start of production in the form of a loan secured against the receipt by FFUSA of the applicable state incentive(s). These funds are advanced to the producer on a discounted basis based on the forecasted value of the cash rebate, or in the case of a transferable tax credit, the predicted end user (in-state tax payer) purchase price. FFUSA charges interest on the loan and, to the extent that the cash rebate or the tax credit is worth more than the loan repayment plus interest (which will be the case with the vast majority of loans), the producer keeps the upside.
Alternatively, FFUSA can either buy the right to the transferable tax credit, or guarantee their value by way of a letter of credit.
FFUSA has the knowledge and experience to enable producers to capitalize fully on these new benefits. FFUSA can help you to decide where would be the most appropriate location for your project, and what makes the most sense economically depending on your finance plan and specific requirements. We always look to maximize the value of the incentive wherever possible.
FFUSA offers loans secured in a priority position against the future licensing/sales of film distribution rights. We work with the sales estimates provided by a select group of trusted sales agents who are known to be the best in the business. If your film does not already have a sales agent attached, FFUSA can help you to find the most appropriate company for your particular project.
We would take the “low” or “take” estimates provided by the sales agent for the unsold territories (or unsold rights) and apply a discount to achieve the amount of “coverage” for the loan we deem appropriate on a case-by-case basis. FFUSA would usually look for coverage of between 150% and 250%. So by way of example, if the low estimates for the unsold territories are $5m (with no other party having an interest in these rights), and we determine that we would need a minimum of 200% coverage, we would look to lend a maximum of $2.5m, which would include an amount to cover our anticipated interest charges (interest reserve) and facility fee, as well as our legal fees in transacting the deal. Once those sales are eventually made and the license fees are received, FFUSA stands in a priority position to recoup its loan, including interest and costs..
FFUSA would generally look for projects with a trusted director who has a proven track record. FFUSA requires two significant pre-sales to be made in order to confirm the market interest in the project, as well as the reliability of the sales estimates provided by the foreign sales agent. However, as we assess each project on a case-by-case basis, we have the flexibility to judge what is realistic in each situation.
FFUSA is also able to cash-flow the pre-sales already made, providing money that can be used for the production as part of the overall budget. We would lend money at a discount against the contracts already signed by distributors before the film has started principal photography. The level of the discount would depend on the identity and reputation of the relevant distributor in the territory in question. This loan would ordinarily mature within nine to twelve months.
Aside from financial support, FFUSA brings with it the production and legal expertise that has been built within the Future Film Group since its inception. The joined-up approach offered by the London and Los Angeles-based offices allows you access to what is right for your project practically anywhere in the world.
FFUSA is a company that cares about the projects with which it is involved, understands the challenges a producer faces, and provides a hands-on approach in bringing a project together. Our mandate is to provide a transparent, producer-friendly financial service that will attract repeat business and foster long-term relationships with producers.