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Tips of the Trade:

Blocked Escrow Accounts

The production budget should not be available to the Producer until it is raised. For the safety of the investors it is necessary to place their funds in a blocked escrow account. I usually recommend that my clients prepare two production budgets; the first budget is a lower budget that a Producer could produce the movie for if all the funds cannot be raised; the second budget is the higher budget that the Producer would prefer to utilize. I then prepare or have the bank prepare an escrow agreement where the bank will hold the investors' funds in escrow, until the minimum amount is raised. I also coordinate the Offering as a "high/low" Offering to match the two budgets that are prepared by the Producer/Client.

As a general rule, the bank will charge a fee to act as escrow agent. Many times the fee may simply consist of the "float" on the interest. These accounts are usually non-interest bearing.

If the minimum funding is raised, then the escrow agent releases those funds to the Producer. As funds continue to be placed in escrow after the minimum amount is raised, then those funds are likewise released to the Producer by the escrow agent. If a completion bond is required, the release of funds may be subject to a drawdown schedule, monitored by the completion bond company. If the minimum threshold is not met, then all funds should be returned to the investors without interest, directly by the escrow agent.

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