You prepared your film business plan, pitched to film investor(s) and think you are just about to receive your film financing. The next likely step is the investor will request a Film Investor Agreement contract before they cut the elusive “independent film financing” check. So, how do you ensure nothing is standing between you and an interested film investor? One way is by using a Film Investor Agreement.
The Film Investor Agreement enables you to demonstrate you know what you are doing with regards to film financing. Investors are not only putting their trust in you as a filmmaker, but also as a business person. It is important to present your film investor a professional Film Investor Agreement outlining the basic terms designed to protect both their money and your film.
Low budget films are commonly pitched to passive investors who are not in or familiar with the film industry. Typically, they are successful business people with deep pockets, willing to risk a few thousand dollars to help an independent filmmaker. These investors know the chances of receiving a profit are slim to none, yet they still want assurance their money is being handled the best way possible, given the risky nature of the film business. At the same time, this is your film and you want to make sure you have control of your project. Do not forget the months of work you put into the project. YOUR film should be YOUR film until you decide to sell it to a distributor.
Filmproposals offers both a Film Investor Agreement Template and a PPM Template. As a general rule, a Film Investor Agreement is for active investors and a PPM is for passive investors. Read on to determine which might be a better fit for your film project, or if you possibly need both.
Do You Need a Film PPM (Private Placement Memorandum)?
Our Film PPM Template is designed (and legally required) for filmmakers who want to:
- Raise film financing of $100K-$5M from outside investors who will not actively participate in your film production (Passive Investors)
- Protect your project, your production company (LLC) and your investors and follow all legal requirements
- Raise funds from both Accredited and Non-Accredited investors
- Be able to publicly advertise your offering in order to receive investor funding
- Demonstrate to their investors how their investments will be paid back (distribution waterfall)
- Save about $10K getting a PPM made from scratch and use one already proven in the film industry
New! Film Private Placement Memorandum (PPM) Template
This complete Film Private Placement Memorandum was used by successful independent producers several times to raise money for full-length feature films at budgets ranging from $350K -$8M. Our Film PPM Template uses real-world current samples from an LLC production raising money right now in 2021 for Capture The Flag, with actor attachments Dick Van Dyke, Louis Gossett Jr and Barry Corbin. Previously, this same Film PPM was used to raise funds for:
- Raising Buchanan with Rene Auberjonois, M. Emmitt Walsh and Amanda Melby (2020)
- Locker 13 with Ricky Schroder, Rick Hoffman and Jon Gries (2014)
- Three Days to Vegas with Peter Falk, George Segal and Rip Torn (2007)
A new Film PPM will easily cost a filmmaker upwards of $10K, however, you can pay an attorney for a few hours of time to review a prepared document and suggest changes. Our Film PPM Pack includes:
- Feature PPM Template (Word) – a template for you to use with editable fields where you insert your own film production information. The template includes a complete Film PPM and Articles of Incorporation (your film company’s operating agreement)
- Feature Sample PPM (PDF) – a sample final PPM prepared by attorneys and used by producers (exactly like the Template above, but a final version to follow as an example)
- Subscription Agreement (Word) – the document used to accept money from your investors. This is signed when they write you a check.
Our Film (PPM) Contract is included with select Financing Bundles or can be purchased separately below.
Alternatively, we offer our Film Investor Agreement Outline which includes explanations, sample clauses and key sections geared towards active investors. It is not a complete legal agreement, like the PPM, but offers guidance and a lot of legal language that can be re-used.
What Goes into a Film Investor Agreement?
On a typical film production, the backend (net profits of the film) are split fifty-fifty between the filmmaker and the investor.
Net Profits are calculated by subtracting the total expenses from the total revenue. What are some of these subtracted expenses?
- Production expenses - the cost of making your movie
- Festival fees and screenings - costs associated with submiting and screening your film
- Print and Advertisement - your marketing campaign
- Distribution expenses - distributors may take an upfront fee to distribute your film
- Legal fees - you will need a lawyer to review some paperwork, including drafting a film investor agreement
An investor is entitled to a distributable share (defined as 50% of the net profits) in an amount equal to the percentage they contribute to the budget. In simpler terms: if the investor is funding 100% of the project, their return will be 50% of the net profits. The other 50% goes to the filmmaker, but before anyone receives any profit, the investor will always receive the money they put in first, after all production expenses have been paid. The order of reimbursement is also know as the Distribution Waterfall (also see an Example Film Financing Plan).
Who is the “filmmaker” based on the above statements? Any actor, director, producer or talent also promised a piece of the backend. As a producer, you may use your 50% as a selling tool in getting talent attached. You provide what the industry calls, “points.” Points are backend percentages and the Film Investor Agreement makes all this crystal clear to everyone involved in the film financing.
For example, Adam Sandler wants to be in your film but you cannot pay his rate, so his agent asks you for points. You then offer him a percentage from your 50% share. These “points” come from only your share, as the only time an investor’s share will be divided is with another investor. Multiple investors offer them a lower risk, but also a lower reward.
It is important to state in the agreement that the filmmaker (producers), shall have sole control and approval over all creative and financial matters with respect to the production. The investor is not buying the project from you; this is simply an investment opportunity for them. You, or the LLC, are the owner, the key decision maker and own 100% of the film. The reason we have independent films, is so we don’t have studios and “money people” telling the “creative people” how to do their job. Also, unless they are members of your LLC, passive investors have no say in budget or how you chose to spend their money.
Legal fees can cost more than your movie, but a simple Film Investor Agreement stating key points can protect you, the investor and the film. By presenting the investors with a Film Investor Agreement, you will show you know what you are doing and they can trust you with their money.
Film Revenue Distribution Waterfall
This image is included in our all our Film Financing Toolkits and the full article, with a detailed written explanation of the Film Revenue Waterfall, is offered in the Bonus Pack of select toolkits and bundles. It is in PDF format and is great to attach to a Business Plan or show your investors.
Purchasing the Film Investor Agreement Outline
Included with select Film Financing Toolkits - Our Film Investor Agreement Outline includes explanations and sample clauses, designed to protect both the Producer and Investor. Key sections and sample text are included in our outline and are generally geard towards active investors, not passive investors.
We use a simple revenue recoupment model in our actual Business Plan Template. We also offer three other options for the Distribution Waterfall in our Film Financing Manual, along with this visual chart showing how a $30M film recoups its money down to the net profit producer's pool (thank you Producer's Guild)! We highlight hurdle rates, producer's net profit, deferred talent agreements, profit participation and more. One of the waterfalls is also included in our PPM template, with all the legal-eze you need. You can choose one of our four scenarios, or combine them, for how you plan to payback your investors customized to your specific project.
FilmProposals always recommends you seek professional legal counsel when it comes to any and all paperwork discussing the exchange of funds.
2021 is YOUR Year - Make Your Movie
More Film Investor Agreement Templates
- Film Industry Contracts - Investor Financing Agreement strictly for qualified active investors, not passive investors
- Sample Movie Contracts - Strictly for a LOAN, and not an investment
Note: No articles or templates available on the FilmProposals website should be construed as legal counsel or advice. Before making any commitment to a specific format for any of the discussed matters, it is important to obtain professional legal counsel.
- Film Investor Financing Templates
- Film Business Plan Services
- What is an Independent Film Financing Plan?
FilmProposals Recommended Entertainment LawyerFilmProposals is looking for an amazing Entertainment Attorney to recommend to our filmmakers. If you want a steady stream of clients and you love indie filmmakers and all things PPM, Financing Agreements, Investor Agreements and more, please contact us.
How to Work with Film Investors
Film Investor Guide
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- Film Investor Primer (For Investors)
- 10 Things You MUST Do To Attract Film Investors
- Preparing for Film Investors
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- How to Find Film Investors
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- Film Investor Agreement Outline
- Film Investor Tip Sheet
- FREE Business Plan E-Course