Being a part of the entertainment industry can have its highs and lows because as a business owner, you are always looking for the next best way to keep your patrons happy and amused.
In this blog, we will cover what is entertainment business, how to evaluate the right funding source, and how it can be used to continue providing enjoyment for your target audience. We explore 6 different funding opportunities that are available today that could create an impact on your businesses’ growth.
The challenges for creatives in getting entertainment business loans
The entertainment industry encompasses a wide range of operations– from a business that makes feature films to a music production company, a venue for hosting events, and even magicians. Producing a final product requires more than just talent and skill, it also takes financial investment.
Getting small business loans can help you upgrade your equipment, hire additional employees, make improvements towards your working space, and much more to grow and maintain your business. In the world of films, television, and music, having the right equipment comes at a high cost, but without it, your final product could be missing what it needs to be the next great thing.
However, a challenge for some business owners may be meeting the minimum eligibility requirements to qualify for financing. Banks and alternative lenders may have criteria around how recently you started your business, how much revenue you make on a monthly basis, as well as what the funds are being used towards.
Many lenders will also have restrictions on providing financing for certain industries such as gambling and adult entertainment.
While these may be a factor in receiving your funding, ultimately lenders look at your whole business financial health to determine what they can provide for you.
There are multiple ways to obtain the entertainment finance your company would need. Let’s take a look at what you should look for in a financing partner.
What you need to look for in entertainment financing companies
The first step is to take some time to review your business’s finances and understand patterns in your cash flow, your credit score, and similar financial metrics. Entertainment financing companies will often look at your monthly revenue as an indicator of your overall business health.
Having a pulse on your business’s financial health will be important as you choose a financial provider, as different organizations will have different requirements. For example, traditional banks might require a higher credit score and larger monthly revenue, while alternative lenders will often have lower barriers to entry and look at your overall financial business health to determine what they will be able to provide to you.
You should also review your own goals in getting financing. Do you need to cover general operating expenses? Do you need expensive equipment? How fast do you need the financing? The answers to these questions will help you understand if a financing provider will be able to provide the right kind of financing in the time frame you need it.
A few key things to consider before taking financing are: the cost of borrowing (i.e. interest or factor rate), the term of the funding and any additional costs or fees that may be added.
Take the time to carefully assess your cash flow and be realistic about what you’ll be able to pay off.
The top 6 entertainment business loans
1. Working capital loan
Also referred to as a cash flow loan, working capital loans are short term loans that can be used for a multitude of purposes including marketing expenses, cash flow management, and daily operations of your business. These loans have a quick approval and funding timeline. You can sometimes receive the funds on the same day, if not the very next day.
The terms can vary depending on the lender. At Credibly, you can receive a working capital loan from $25,000 to $400,000 with a term length from 6 to 15 months. Repayment of these loans are done in either daily or weekly batches. An added benefit to some working capital loans is that you can build your credit as you make payments.
2. Small Business Administration (SBA) loan
SBA Loans are a good choice for entertainment business owners because they offer lower interest rates and have longer repayment terms.
While the repayment and interest rates are attractive, if you are looking to receive funding quickly or have a lower credit score, this may not be the best option. Not only does the application require more paperwork, but the approval process for an SBA loan can take weeks, if not months. If you need your funds fast, you may want to consider some of the alternatives listed here.
3. Business line of credit
A business line of credit is similar to a credit card, as you only pay interest on the amount you have used. Lines of credit have a flexible use of funds, which can help cover costs like office rent, payroll, and other day-to-day expenses.
Business owners can also use a line of credit to build up their business credit score and be eligible for larger funding amounts with better rates in the future.
When you are approved for a line of credit, instead of receiving a lump sum up front that you pay back over a predetermined amount of time, you instead receive access to borrow up to a certain limit. This can be beneficial to you as you don’t need to overextend the business cash flow and only borrow the exact amount you need when you need it.
4. Merchant cash advance
A Merchant cash advance (MCA) is not a loan, but an advance on your businesses future sales. This product is great for those who have fluctuating cash flow as remittances will be based on your revenue. You can use these advances to do anything from increasing inventory, making emergency repairs, or completing a short term expansion project.
Credibly’s MCAs can have remittance terms as short as 3 months and can go up to 15 months in term length. The size of the loan can vary from $5,000 to $400,000.
5. Equipment financing loans
As a business in the entertainment industry, you will need the most up-to-date equipment in order to stay ahead of the competition. This could include the newest video camera on the market or a state-of-the-art sound board for your venue. Equipment financing loans are perfect to be able to upgrade all your equipment to meet the industry standards while not disrupting your cash flow.
A benefit to equipment financing is that once the loan is paid off, the piece of equipment is yours to keep, unlike an equipment lease where at the end of the repayment period, the equipment is returned. Owning the equipment can help your business continue to produce high quality productions and reduce the need to take on additional film finance.
Grants for entertainment businesses are a great way to get the funding you need without needing to repay.
The downside to this is that grants are highly sought after, meaning the selection process will be rigorous. After a lot of effort, you may not get the financing you need. Grants also come with strict rules on how the funds provided can be used.
How to get your entertainment business loan
Traditional banks, alternative lenders, the SBA can all provide entertainment business loans. However, they each have their pros and cons. A traditional lender often has a lower approval rating and stricter requirements to receive funds. An alternative lender will have more flexibility to meet your needs and can provide you with multiple options like the ones listed above.
Eligibility requirements for entertainment financing will vary from lender to lender, but they may include requirements on:
- Time in business
- Deposit revenue in a business bank account (rather than a personal bank account)
- Credit score of 550
- Average monthly deposits
As you go through the process, you may need to provide additional documentation such as bank statements, tax returns, or other forms of documentation.
|If you are in need of an entertainment business loan, Credibly’s financial experts can help guide you through the process. With Credibly, you can get funding in as fast as 24 hours.|
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