Financing Basics

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Posted by Charles on June 22, 1999 at 02:12:57:

Now that things seemed to have settled down a bit, it's as good a time as any to start talking about methods of finanacing for personal projects. Some do's, some dont's, some hazards to watch for. Anyone with experience in this area is by all means welcome to contribute.

Ten years ago, financing a short episode of an independent animated pilot was a tall order. Production costs for a few minutes of animation were prohibitive and out of the range of most animation artists to say the least. The most ambitious players were scratching up $100,00 to $200,000 to get something going. I remember an artist fifteen years ago who put together a minute of animation for a property of his. He raised the money, had to sell the rights and got Don Bluth's Studio to animate it when it was still in L.A. It was impressively done, but it cost a fortune. By the way, it never saw the light of day.

The problem stemmed from the fact that animation artists had to go through a production process that required a reliance on a variety of support services. These services included copying drawings on to cels, hand painting each cel then taking everything to a camera service. The cost of non-animation labor and materials was just too much and the process was daunting. Few could get anything going that would allow them to see their concepts come to life.

The digital revolution in animation changed all that. I recall first seeing production software for animation on a personal computer in the early 90s. There it was, sitting right in front of me. The world of limitless creative possiblities. Desktop animation production, the quality of which was far greater than the old process could ever attain. The great equalizer. The future.

It was nothing less than the absolute liberation of the production process. Animation camera and ink and paint services soon shut their doors for good. Multi-plane cameras and store rooms full of cel vinyl paints couldn't be given away.

Since that time, computer hardware costs have declined dramatically while the power of the technolgy continues to leap forward. Today, anyone who has a really good idea for an animated story can see that idea come to life with a much lower finacing threshold than those doing the same thing ten years ago. Whereas before, a second mortgage on your home was needed, now it can be done on a credit card.

The other day, I went to the bank to close out a business line of credit that I had. It cost me $150 a year to keep the account open and the interest rate was 10.75%. I had a bigger line of credit with my credit cards and the interest rates were much lower.

I know guys who've been shopping properties around for years, attaching $50,000,000 budgets to them, trying to get someone to give them that kind of money. Nobody's going to plop $50,000,000 into your lap so you can make a feature, especially if you don't have anything in the can that you've done before. In most cases, it's much more realistic and sensible to start developing and producing your project independently, on your own and establishing yourself as a filmmaker, if that's what you really want. At no time has it been more accessable to those who do.

If you're just starting out and you have long term plans, it's vital to establish and maintain a first rate credit history. It will allow you to purchase the equipment you need without having to dish out too much of your savings. More importantly, it will give you a good degree of autonomy. You won't have to run to someone, get them involved as a business partner, then pay the price after the honeymoon is over. Maintaining good consumer credit means no annual fee credit cards with an introductory rate of 2.9% to 3.9%. Good consumer credit means you'll have a steady stream of credit card applications coming your way, so your balance can easily be transferred to another card for 6 months at a time at similar low introductory rates when the rates on the ones you have are about to be bumped. This is an excellent way of maintaining small business expenses associated with your project.

It goes without saying that it's important to keep a lid on these cards, as well. You don't want to get in debt unless you have to. If you do, then stay on top of it. Don't let it get to a point where your monthly payments are such that you can't take a healthy bite out of the principle each time.

Remember to think big, but start out small. Take it a step at a time. Build it up, slowly but surely. Control the financial risks involved in independent concept production for animation early on and you'll be able to keep the machine going and your chances of success growing.

To be continued.

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