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Starting an entertainment business can be exciting but challenging. It’s an exciting but competitive industry, often with high startup expenses. You can make a lot of money and start a fulfilling business, but that can take time and there are many risks that can present themselves along the way.
Globally, the entertainment industry is expected to exceed $50 billion within the next decade. To get into this growing industry, startup funding is often necessary. In this guide, we will go over the role that business loans can play in entertainment startups.
Initial Costs
Entertainment startups face high initial costs. Compared with other industries, the startup costs can vary more widely, but often include expensive professional equipment. Then, there are also the other common business costs like commercial property or leased space and talent.
Entertainment businesses often need term loan products to cover these initial costs. Regular business term loans and working capital loans can cover expensive purchases or initial working capital expenses.
Even if your business isn’t well-established, you can likely secure a loan. For example, in the US there are SBA loans that are meant for new businesses. Lenders understand that you need money to start a new business!
New Equipment
Most arms of the entertainment industry require purchases that seem like they cost you an arm and a leg. Entertainment businesses thrive off of superior production quality, which is a premium resource. This is true of film, music, or other digital content.
Some entertainment businesses can qualify for equipment loans where the equipment itself functions as collateral. For example, New Zealand businesses can use equipment as collateral to secure NZ$500,000 in expenses.
Ongoing Capital Expenses
Some businesses face seasonal fluctuations or need to inject working capital into their businesses during the earliest phases. As with quality equipment, access to talent is what helps entertainment businesses thrive. In addition to the stars of the show, skilled agents, managers, technicians, and others all come at a cost.
With a business loan, you can afford to keep your staff paid on time and hire the right talent when you need it. For example, in South Africa you can get a loan of up to R100.000.000 or R4.000.000 in revolving credit for temporary, seasonal, or other fluctuating expenses.
Promos
Marketing and promotions can kickstart a young entertainment business. But these kinds of expenses can come at a steep cost:
- TV/radio ads.
- Social media campaigns.
- PR events.
- Influencer/venue collaborations.
Take the example of Australia’s Venue Management Association, which found that venue-based live music generated $4.3 billion in 2019. If you want to promote your business with events and marketing campaigns but don’t have the funds, this is a completely valid reason to take a loan.
Production
As with any other kind of business, the costs of production and distribution can be covered with a loan. Development and distribution costs require funding but are profit centers for entertainment companies. So, you can take a loan to finance those costs, regardless of the ones that are relevant to your business.
Business loans tend to be in larger amounts, though you can find some for as low as $1000. You can use that kind of money to:
- Finance your production costs.
- Make distribution deals.
- Buy or rent out venues.
- Reach the right audiences through online platforms, theatres, or other institutions.
Scaling
Some entertainment businesses make a quick splash, while other times, they take some time while operating before finding success. But once you’ve gained some traction, you’ll probably want to scale your operations. This is particularly true of the often viral nature of entertainment industry successes.
This is a broad category because scaling an entertainment business can mean any mix of:
- Expanding to new locations.
- Starting new projects.
- Increasing production.
- Greater travel and lodging expenses.
- More.
When the time comes, you want to be able to afford those new expenses. That way you can make the moves you need to make to thrive and be able to pay for them over an extended period instead of all at once.
Emerging Trends & Technologies
The entertainment industry is evolving even faster than many others in the age of AR/VR and AI. New developments require businesses to adapt quickly and acquire new competitive edges. In practice, this often means investing a lot of time and money into new technologies and the training or talent to leverage them.
Business loans can grant entertainment businesses the leeway they need to keep up with new trends. End users, fans, and customers quickly come to expect more and more from their entertainment. So, building your business credit gives you a key resource to help you adapt when the time comes.
Conclusions For Entertainment Businesses
Business loans serve many purposes for entertainment businesses. The competition and dynamism of the entertainment industry often calls for business owners to seek financing.