Film Accounting Glossary
Interest expense
What is interest expense?
Also called financing interest.
Interest expense is the cost of borrowed money in the budget: production loans, gap financing, bridge loans against tax credits, and any discounting of presale contracts.
On an independent film it is a substantial line, easily several percent of the budget, and it grows with every week the schedule slips. Studio pictures charge notional interest against the negative cost as well, which is one of the mechanics that keeps net profits out of reach.
Example
A $5M production loan at 8% drawn over five months costs roughly $170,000, and a slipped schedule adds to it every week. On an independent picture, interest plus fees can be several percent of the whole budget.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
A financing line in the budget. Studio pictures also charge notional interest against negative cost, which is one mechanic that keeps net profits out of reach.
Common mistake
Omitting it from the budget because it is not a production cost. It is a cost of the picture, it grows with every week of slippage, and lenders expect to see it budgeted.
Related questions
- Do film budgets include interest?
- They should. Production loans, gap and bridge financing, and presale discounting all carry interest, and on an independent film it is a substantial line.
- Why is interest charged against negative cost on studio films?
- Studios charge notional interest on the cost they carry, which is one of the mechanics that keeps net profits out of reach for participants.