Film Accounting Glossary
Equity financing
What is equity financing?
Also called equity, or film equity.
Equity financing is money invested in a production in exchange for an ownership share of the picture and a position in the revenue waterfall, rather than a loan to be repaid with interest.
Equity sits behind debt in recoupment, which makes it the most expensive and most at-risk money in the capital stack. Equity investors typically negotiate a premium, often twenty percent, that is repaid before profits are split.
Example
An investor puts in $2M for a share of the picture plus a 20% premium. Before any profit is split, the waterfall repays $2.4M. Equity sits behind all debt, which is why it is the most expensive and most at-risk money in the stack.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
The financing plan and the interparty agreement, which fixes exactly where equity recoups relative to lenders and deferments.
Common mistake
Modelling equity as if it recoups at par. Most deals carry a premium, commonly twenty percent, that has to be repaid in full before profits are shared.
Related questions
- Where does equity sit in a film waterfall?
- Behind all debt. Senior and gap lenders recoup first, so equity carries the most risk and is the most expensive money in the stack.
- What is an equity premium on a film?
- An agreed uplift, often around twenty percent, repaid on top of the original investment before any profit split begins.