recision
is distinct.
Precision Theatre Fund has been designed to modernise theatre investment and improve the durability of this world-class and highly respected industry.
By opening the sector up to institutional finance, we aim to alleviate the burden on producers and creatives to raise money, allowing them to focus on both their business and their art.
Precision is focused on transforming how theatrical productions are funded, in a way that benefits producers and provides better incentives. By offering a way for producers to retain more of their profits and spend less time fundraising (as Precision can deliver the bulk of a production’s capital), the new structure gives Precision a unique role in making the very best deals possible in the industry.
This stronger position with producers allows Precision to influence certain terms of investment, such as transferring capital when needed for production expenditure rather than all on signature, optimising the use of the Fund’s balance sheet cash.
The Current Challenges
of traditional theatre investment
Challenges for Producers:
It is time-consuming to approach, convince, contract, and manage a large number of individual angel investors for each production
Giving away too much equity in order to attract investors, which leads to poor incentives for managing revenues and costs
THE EFFECT: Unable to prioritise business over fundraising efforts, so creating and selling productions often receive less attention
Challenges for Investors:
Requirements to assess each individual production based on asymmetric information
Lack of consistent diversification to smooth out investment risk
Funds are held for too long, worsening returns against competing use of cash
Assets are not tradable and markets are completely private
THE EFFECT: Institutional investors don’t participate despite positive returns in the aggregate, because they don’t have the ability to assess, pool, and diversify risk
The Solution:
A structured fund can allow producers to raise larger volumes of capital with less effort by receiving the majority of funding from one source and for investors to enter the sector at a lower risk-level, widening the possible reach of theatre to institutional finance in the future.
DISTINCT FROM OTHER LENDERS
While tax credit and mezzanine financing is common in the film sector, with many competing organisations and banks, few financial institutions regularly lend against Theatre Tax Credits.
Precision’s detailed knowledge of the sector enables us to offer an efficient and straightforward onboarding and lending process to specific productions.
Precision’s management company offers prospective clients bookkeeping services including verification of TTR claims for the loan security.
Precision has a floor of £25,000 for a single loan,
making it open to the majority of projects.
Precision offers mezzanine finance
and priority loans for theatre.
Precision is run by theatre-makers, being more approachable to producers and connected to the industry.
Traditional Theatre Investment
Traditional lenders are subject to hefty regulations and thus must put clients through onerous processes to be approved as a borrower.
Banks’ knowledge of the theatre sector is limited, meaning they have no in-house ability to assess a prospective Theatre Tax Relief claim for the security. Borrowers must go through laborious efforts to be approved by a third-party auditor at their own expense.
One traditional bank currently will not offer a loan below £500,000 against 80% of the expected claim.
This implies production costs in the region of £2 million, making it accessible to fewer than 6% of productions in the UK in any year.
There are no traditional lenders advertising to specifically make unsecured production-based loans in the theatre sector. Precision will likely be a completely unique service in the sector.
A producer applying to a traditional lender for a loan can be met by incomprehension from bankers with little understanding of the sector.
Precision is heavily competitive with any traditional lenders in the space with a process for borrowing that will be easier, faster, and more welcoming for most producers, with greater optionality.
Image credits: Scott Rylander (Spring Awakening 2018)