Behind the Scenes w/ David Brown - A Cautionary Tale of Film Lending and the True Cost of Capital
Behind the Scenes: A Cautionary Tale of Film Lending and the True Cost of Capital
The world of independent filmmaking shimmers with the promise of creative freedom. We dream of bringing our stories to life, sharing them with the world. But behind the camera, a less glamorous reality lurks: film finance. Not all money is created equal. The true cost of capital can extend far beyond interest rates and loan repayments. It's about the people you partner with and the deals you make.
David Brown, a film producer, has navigated the turbulent waters of indie film for years. He knows the thrill of success and the sting of betrayal. He's sharing his story to shed light on the potential pitfalls of working with lenders. This is a cautionary tale about trust, contracts, and the unexpected costs of chasing your filmmaking dreams.
Building Trust, Then a Pandemic: The Initial Partnership
It all started with a connection. Brown was introduced to a lender through his production counsel, someone he'd worked with since 2017. The lender seemed great. They bonded, chatted, and even did a deal together: a traditional bridge loan that converted to mezzanine financing.
Their relationship grew. The lender came to Brown's baby shower with his wife. He even joined Brown and his employees at the DJ Awards. Things were looking up.
The lender called Brown after finishing a new raise. He had capital to deploy and wanted to know what Brown had in the pipeline. They teamed up and made a movie for less than a million dollars. It was a quick, non-union shoot in LA.
Then came "The Fallout," their fourth project together. This time, the lender was going to bankroll the whole $1.5 million.
The financing structure was traditional. Instead of a lump sum, the lender provided weekly cash flows. About $380,000 had been financed when the pandemic hit. Production shut down. What they thought would be a two-week hiatus turned into six months.
The Term Sheet Twist: When Friendship Turns Sour
Then came the email. The lender's production council sent a revised term sheet. They wanted Brown to sign it. The changes were significant. The term sheet reduced the lender's obligation to the $380,000 already funded. But they would still get their original profit share and credit obligations.
Basically, the lender wanted half ownership of the movie for a fraction of the promised investment. It didn't seem fair. If they weren't going to provide the full $1.5 million, their share should be reduced proportionally.
Then came the threat. The lender's attorney said that if Brown didn't sign, they would use the power of attorney to amend the term sheet on his behalf. A power of attorney is usually for administrative tasks like signing refund checks, not for altering core contractual obligations.
Brown's producing council was clear: "Yeah no, they can't do this."
Finding a Solution and Resuming Production
Brown decided to reject the revised term sheet. He needed to find alternative financing to finish the movie.
A bridge lender stepped in, providing $500,000 to get production going again. Brown secured the rest of the financing through his own revenue streams.
Brown's attorney drafted a letter outlining the lender's breach of contract. It proposed a prorated ownership share based on the actual funding provided.
The lender responded aggressively. They claimed Brown was in breach of contract.
Film contracts usually include mediation and arbitration provisions. This means disputes are resolved privately, without jury trials or public forums. Brown filed for arbitration. He wasn't seeking money. He simply wanted to adjust the contract to reflect the actual investment.
The Fallout's Success and the Lender's Demands
Despite the arbitration, the lender refused to approve distribution deals for the two earlier films. He was holding the distribution hostage until Brown conceded on "The Fallout."
But "The Fallout" became a success. It won awards, got press coverage, and landed a $5 million deal.
The lender resurfaced, demanding a share of the profits. Even though he hadn't fully funded the film.
Brown gave the lender credit on the film to avoid further conflict. He even credited him in press releases.
Legal Battles and Unreleased Films
The lender tried to get the arbitrator to freeze the $5 million deal. He wanted half of the proceeds. But each film is its own LLC. "The Fallout" had no financial obligation to the other films.
Brown spent hundreds of thousands of dollars in legal fees to remove the lender from the film. He honored the initial contract by paying the lender back for the $380,000, with a 20% premium.
The two earlier films, though completed, remain unreleased. The lender refuses to approve distribution deals. When the loans came due, the lender charged default interest. The contracts didn't have a pandemic clause. The lender has the hard drives of the finished movies and still refuses to release them.
The one arbitration led to four different complaints and disputes Brown had to resolve.
Lessons Learned: The Cost of Capital and Choosing Your Partners
How do you balance passion and creativity with the realities of business? It's not easy. Film is a business, and disputes will happen.
Some people are only looking out for themselves. Don't let their negativity hold you back.
The lender in this article has been involved in numerous lawsuits with other filmmakers.
Not all money is created equal. The true cost of capital includes potential legal fees, delays, and emotional stress. It's more than just the numbers.
Build strong, transparent relationships with your investors and lenders. Get to know them on a personal level. Foster trust and collaboration. When you have honesty and transparency, you can push through problems together.
Final Thoughts and Call to Action
Film financing can be tricky, can't it? Share your own experiences with film finance in the comments. What have you learned?
Stay creative. Keep moving forward. Don't let anything stop you.