If you have invested in a film, your primary concerns are likely: Where is my money? When will I see it back? And who gets paid first? As an investor, you want to ensure that the receivables you’re owed are not getting “stuck” anywhere along the way. This is exactly where an independent collection agent becomes crucial.
What Is a Collection Account?
A Collection Account Management Agreement (CAMA) is essentially an escrow-like account that manages all the revenue from the film once it’s produced and sold. It ensures that all parties with a financial stake in the film get paid according to the agreed terms. Setting up a CAMA is done during the financial closing process, which occurs before production begins, ensuring that all funds are in place and ready to be used for production.
Financing a Film: Where Do the Repayments Go?
Once the film is financed, you often have a complex mix of funding sources, including senior debt, mezzanine debt (gap), deferrals, subsidies, and equity. After the film’s delivery, will the producer focus on paying back all these investors? Or will they move on to their next project? It’s no secret that filmmakers want to move forward quickly—this is where a collection account (CAMA) is invaluable.
The CAMA ensures that the cash flow during and after distribution is transparent, managed correctly, and automated, so investors know when they will get paid and that no funds will go missing.
Payment Hierarchy: Who Gets Paid First?
One of the most important aspects of the CAMA is that it outlines the order of repayment. Different types of financing come with different risks and priorities. Typically, the repayment structure looks like this:
1. Senior Debt – First in line to get repaid.
2. Mezzanine Debt – Second tier.
3. Subsidies and Equity – Third tier.
4. Deferrals – Last in line.
This hierarchy matters because investors at the top of the list are exposed to less risk (and usually don’t have profit participation in the film), while those at the bottom (such as equity investors) take on more risk, but potentially enjoy higher returns. Understanding this hierarchy is critical for investors as it directly impacts the timing and likelihood of getting their money back.
Transparency and Risk Management: The Role of the Collection Agent
Your investors are putting up significant money, and they will want full transparency of how that money flows back. This is the collection agent’s job. They ensure everyone gets paid based on the priorities laid out in the CAMA agreement, minimizing the risk of funds being mishandled.
Moreover, the collection agent plays an important role in risk management. They ensure that no party, including the producer, has control over the revenue without oversight, which is especially important in complex financing structures. This offers peace of mind to investors that their receivables won’t get lost or delayed along the way.
Negotiating Recoupment and Payment Order
Sometimes, governmental grants or subsidies may want to be repaid before or alongside private equity investors. However, considering that private capital often takes on more risk than government-backed funds, this repayment order doesn’t always make sense. These are negotiations that the producer must handle, and whatever is agreed upon is documented in the CAMA.
Tax Optimization and Global Reach
Once the film starts generating revenue, the collection agent disburses the receivables automatically, providing each investor with a detailed financial statement. However, their importance goes beyond just transactional automation.
A collection agent can also help reduce withholding taxes, leveraging bilateral tax treaties that may exist between countries. Since major collection agents often operate internationally, they have the capability to collect royalties from the most tax-friendly jurisdictions—something that neither a producer nor a financier can typically achieve on their own.
The typical cost of hiring a collection agent is around 1% of the receivables, but considering the potential tax savings and the peace of mind provided by their services, this is a cost well worth incurring.
Due Diligence for Investors
As an investor, it’s crucial to review the terms of the CAMA before committing. Ensure that you fully understand the payment order, the risks associated with your particular investment position, and how the revenue flow will be managed. This will help you make informed decisions and safeguard your investment.
Conclusion: Why You Need a Collection Agent
In the complex world of film finance, having a collection account management agreement (CAMA) and an independent collection agent is not just recommended—it’s essential. They provide transparency, automate disbursements, mitigate risk, and optimize tax obligations, ensuring that your investment is safeguarded and that you get paid in a timely manner.
If you’re investing in films, securing a collection agent early in the process will save you time, money, and a whole lot of stress. Producers, if you want to ensure a smooth financial process and protect your investors’ trust, setting up a CAMA should be at the top of your priority list before production begins.
At True Media Capital, we require a collection agent for each film we finance to ensure all investments are handled with transparency and efficiency.
