Many challenges in finding funds for films

Own funds by producer: In this case, the film faces no issues, gets completed as planned and released without any problem as the producer is not dependent for funds to make, market or distribute it. 

Partly own fund and balance borrowed:  Here, the producer puts in a part of the film’s budget (ranging from 10 to 30 percent) and balance is borrowed on high interest, ranging from 28 to 48 percent from traditional financiers. This is a common scenario in Tamil cinema and most films are commenced with the hope of raising money from financiers. A lot of risk ride on these projects as interest costs are high and all rights are pledged with financiers. Unless the producer is able to pre-sell rights and recover his entire investment, including interest cost, the film will face release issues as all dues have to be settled before release. 

Corporate tie-up on first copy basis: This route was beneficial to many independent producers as they were able to sell at profit to a corporate house (like UTV, Fox Star, Reliance, Eros, Lyca) and de-risk their entire investment. It is the corporate house, which carries the burden of risk in case film fails. Most producers look for this route as they carry no risk in such projects. All that they have to ensure is producing the film within the first copy budget agreed upon. Many films like Vettai , Anjaan, Irudhi Suttru and recently Yeman were produced in this manner. However, as most corporate houses have exited Tamil cinema except Lyca, this is now a rare occurrence. 

Crowd funding route:  This is a latest trend wherein a number of investors support film production and become its producers. Kannada film Lucia (2013) started this  trend. But, it is difficult in Tamil cinema to get investors, who believe in the project profiting them and hence yet to take off. 

Funding by banks: IDBI and EXIM banks have funded film production if the producer is able to offer assets as collateral and invest at least 30 to 40 percent of the film’s budget on his own. The funding came at lower interest of around 18 percent, which was beneficial to producers. However, post some unpleasant experiences with Tamil film producers, this support is no longer there. 

Therefore, the last three routes (corporate, crowd and bank funding) is unavailable to Tamil cinema. The first route is followed by few big production houses like AGS, Red Giant, 2D, Vijaya Productions, who invest their own money. The balance 95 per cent producers, follow the second method (borrowed) to raise funds. 

Post demonetisation, financiers have become tough with their terms and are unwilling to fund risky films in their perspective. They have also hiked interest rates and brought in additional charges to lend. Due to many unpleasant cases between financiers and producers, financiers have become choosy. Hence, it is a challenge today to raise funds unless the film features a top artiste. For medium and lower value artiste based films, it is extremely difficult. Most films get delayed  due to this reason as producers commence the film with their own funds and get stuck when further funds are not forthcoming from financiers. 

The concept of believing in ‘rotation’ by borrowing money for one project and investing in another and then settling that due by borrowing on the third, will someday catch up on the producers, unless the films work out commercially. If one of them fail, then the past catches up and the producer gets stuck totally. This has happened to many producers. The solution is not believing in ‘rotation’ but working on each project separately, ensuring financial recovery in each, settling the dues and moving on to the next project. If each project is dealt independently and closed, it will sustain their business.