Loan Agreement
(Financing Motion Picture)

Summary

This template is a motion picture production loan agreement between a production company (the borrower) and a financier (the lender) for proceeds to fund a theatrical motion picture. This template includes practical guidance, drafting notes, and optional clauses. Most motion picture financing is done on an investment basis. The risks involved usually mitigate against the type of asset based lending which provides a comfort level to those who require the ability to compute a return based upon a predetermined interest rate. Moreover, someone who is willing to risk their money on an enterprise as risky as the motion picture business is not likely to be satisfied with the limited returns available from a loan transaction, and will instead want the ability to participate in the unlimited upside potential of a motion picture investment. Nevertheless, there are various circumstances in which loan transactions play an important role in financing a motion picture. One common instance in which a loan may be sought involves a form of "gap" financing; that is, the lender provides funds for production or completion of the motion picture for a short term (perhaps one or two years or less) with the objective that the loan will be repaid and the lender "taken out" upon completion of the motion picture and delivery to one or more distributors. This type of financing is an important component of the type of transaction commonly referred to as a "negative pick-up." As with any loan transaction, of critical importance to the lender will be the security which the borrower can provide. While there is a typical list of security which will be provided to the lender (as set forth in the separate security agreement), the lender will want to evaluate the security. While the elements attached to the production (such as stars) will be important, the lender will look closely at the distribution commitments which the production company has been able to obtain. Thus, a commitment from a strong distribution company will be very meaningful to the lender in its evaluation of the security being provided by the production company. For a collection of content related to motion picture production, see Motion Picture Production Resource Kit. For additional guidance on motion picture production and financing agreements, see Motion Picture Production Agreements and Documents and Entertainment Industry Contracts P 13.01; see also Laboratory Pledgeholder Agreement (Financing Motion Picture).