February 8, 2024

Gap Loans vs. Bridge Loans

Courtesy of Freepik.com

Securing funding for a film can be a tricky endeavor! However, if producers strive for a deeper understanding of the various film finance terms before seeking out investment, loans and other sources of funding, the endeavor becomes a bit easier. Filmmakers who encounter funding gaps have two crucial tools in bridging these gaps: gap loans and bridge loans.

Let's explore the key distinctions between these financing options:

• Gap loans: Fill in specific, smaller gaps within the final budget; these solutions close the difference between available funds and the total budget. Furthermore, gap loans are generally secured prior to the start of production and/or pre-production.

• Bridge loans: Act as temporary, short-term financing to cover immediate needs until permanent financing is secured. Common uses include covering pre-production expenses, payroll during production delays, or completing post-production while awaiting the close of distribution deals.

See below for additional information regarding the nuances of these two solutions:

The choice between a gap loan and a bridge loan depends on your specific financing needs and circumstances. Filmmakers should consider the following factors when determining between these two solutions:

• Size of the funding gap- Bridge loans address larger, temporary needs, while gap loans target smaller, permanent shortfalls.

• Timeline for securing permanent financing- Bridge loans work when permanent financing is imminent, while gap loans are suitable for longer-term support.

• Availability of collateral- Strong collateral secures bridge loans, while gap loans rely on specific rights like international distribution.

• Risk tolerance- Be aware of the interest rates and potential revenue impact associated with each option.

Choosing the right tool can bridge the gap between budget and reality, propelling your film from script to screen!