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What is Creative Financing?

Jessica Ellis
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Updated: May 17, 2024
Views: 4,836
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Creative financing refers to a process of raising money or financing a purchase through non-traditional means. This term often refers to unusual methods of financing a home or property purchase, but can also be used to describe different methods of financing films or business ventures. Creative financing can help people that do not qualify for ordinary means of financing achieve the funds necessary for their project. Although it requires thinking outside the box, creative financing is becoming more popular in a variety of financial fields, including real estate and film making.

Buying a home through traditional means is often more difficult than it sounds. Mortgage lenders shy away at a bad credit or bankruptcy history or inability to make a high percentage down payment. Even successful people who are self-employed may have a hard time getting a traditional home loan since their income may be variable and difficult to record. Creative financing offers a way to purchase real estate without having to meet the classic profile of a home buyer.

In real estate, there are several different means of creative financing. Some people, particularly those who are in the process of rebuilding credit, may choose to try a lease-to-own program. This allows a person to rent a property from a seller, with a contract that allows them to buy the property for a set amount at a later date. Lease-to-own properties may be a good idea for those saving money for a down payment. Another option for people with enough money to make payments but not a lump sum for a down payment is a no money down home loan. While these may carry higher interest rates, they can be a good opportunity for buyers with a low fixed income.

Creative financing in film has become a popular way to raise production and distribution costs for independent and small-budget films. With studio systems being notoriously difficult to break into, many filmmakers now opt to raise their own budgets and shoot their own movies without studio input or financing. One growing trending in creative film financing is crowd financing, which asks hundreds or thousands of donors for very small donations, often as low as $50 US dollars (USD). Crowd financing is often appealing to arts lovers and those that regularly donate to media or arts programs; investors can put money into projects that speak to them, while not having to assume tremendous financial risk.

Often the best spur to creativity is being told that traditional means are unavailable. Whether through garage sales, loans from family members, or even grant opportunities, creative financing allows people to create funds outside the traditional system. Depending on the financing method used, there may be greater risk involved in some cases, but there may also be a greater sense of ownership and personal satisfaction in the end.

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Jessica Ellis
By Jessica Ellis
With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica Ellis brings a unique perspective to her work as a writer for WiseGeek. While passionate about drama and film, Jessica enjoys learning and writing about a wide range of topics, creating content that is both informative and engaging for readers.

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Jessica Ellis
Jessica Ellis
With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica Ellis...
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