Independent film finance
the capital stack.

The layers of the stack

A working independent capital stack is usually senior debt, gap, sometimes a mezzanine wedge, soft money (tax credits and rebates), and equity — repaid in reverse order out of the film's revenues. The debt layers:

• Senior debt

  First position, first repaid

  CollateralPre-sold distribution contracts, tax credits, minimum guarantees from creditworthy distributors

  CostLowest — typically SOFR + a modest spread

  RoleThe backbone of the stack. Discounts contracted receivables to cash the production can spend now.

• Gap financing

  Second position, repaid after senior

  CollateralUnsold territories and rights, valued against a sales agent's estimates (ask / take / low)

  CostMeaningfully higher than senior — priced for the risk that the gap doesn't sell through

  RoleBridges the difference between what's already contracted and what the film needs to close. Usually capped as a percentage of unsold estimates.

• Mezzanine / super-gap

  Behind senior and gap, ahead of equity

  CollateralBlend of unsold rights, soft money, and producer / equity guarantees

  CostHighest debt tranche — often coupon plus participation or fees

  RoleThe last dollars of debt before equity. Closes the final wedge of the budget when senior and gap alone don't get there.

Senior debt in practice

Senior lenders don't underwrite the film. They underwrite the counterparty on the other end of a distribution contract. A minimum guarantee from a well-capitalized distributor, a signed streamer license, or a certified tax credit is a receivable the lender can advance against — usually at 80–90 cents on the dollar depending on the counterparty's credit and the delivery risk. Senior sits first in the waterfall, gets paid first, and prices accordingly.

Gap financing, honestly

Gap loans discount a sales agent's estimates for territories not yet sold. Lenders typically advance a percentage — often around 10–20% of the "ask" or "low" estimates — against those unsold rights. The film is expected to close enough of the gap during sales at markets like Cannes, AFM, and Berlin to service and repay the loan. Because the collateral is a forecast, gap costs more than senior and is capped to a fraction of the total budget.

The credibility of the sales agent matters as much as the estimates themselves. Lenders lean on agents with a track record of closing at or above their "take" numbers on comparable titles.

Mezzanine and super-gap

When senior and gap don't reach the budget, mezzanine — sometimes called super-gap — fills the last wedge before equity. Collateral is thinner: deeper into unsold estimates, soft-money assignments, or producer guarantees. Pricing reflects that: a higher coupon, sometimes with fees or a share of upside. Mezzanine is the tranche that gets a difficult budget to close, but it also compresses equity's return, so it's used deliberately.

Principles that hold across every deal

1. Every dollar of debt is collateralized by something contractual — a distribution deal, a tax credit certificate, a sales estimate. If the collateral doesn't exist, the tranche doesn't either.
2. Waterfall discipline is what protects lenders. Senior gets paid before gap, gap before mezzanine, mezzanine before equity — and everyone before profit participants.
3. Sales estimates are not receivables. Gap lenders discount them heavily because a 'take' number on paper is a forecast, not a signed contract.
4. Completion bonds are non-negotiable. No senior lender funds a picture without a bond guaranteeing delivery on schedule and on budget.
5. The capital stack should mirror the distribution plan. Theatrical-led, streamer-first, and hybrid releases each generate different collateral — and each supports a different debt structure.