A studio with a £1m game to make has three ways to pay for it: a publisher, an investor, or a lender. Each one looks like money on the day it arrives. They look very different three years later, when the game has sold and someone is working out who keeps what.
This post is for founders weighing up game studio funding UK options and trying to compare them on the same page. We model a £1m budget under a publisher advance, an equity raise and a VGTR/VGEC loan, show what the studio keeps at £3m of net revenue, and say plainly when a publisher deal is the right answer. Finstock lends against tax credits, so read our bias accordingly.
The three game studio funding UK routes, side by side
| Feature | Publisher advance | Equity | VGTR/VGEC loan |
|---|---|---|---|
| What you receive | Milestone-based funding for the game, usually plus marketing and distribution | Cash into the company | Up to 80% of the expected tax credit, in advance |
| What it costs | Recoupment of the advance, then a revenue share; often the IP or long exclusivity | A permanent percentage of the company | Interest in the teens per annum, for months not years |
| Who owns the IP | Often the publisher | The studio | The studio |
| Who owns the studio | You | You and the investors | You |
| Repaid from | Your share of the game's revenue | Never | HMRC, when the credit is paid |
| Speed | Months of pitching and negotiation | Months | Days to weeks once the certificate and letter are in |
| Covers the whole budget? | Usually | Usually | No: roughly a fifth of qualifying spend |
The last row is the one studios skip. A tax credit loan only ever funds the credit, so it sits alongside other money rather than replacing it. What it replaces is the slice of equity or publisher share you would otherwise sell to cover that portion of the budget.
How each route works, with the numbers
Publisher advance
A publisher funds development against milestones, typically £1m here, and takes the game to market. The advance is recoupable from the studio's share of revenue, often with 100% recoupment before any royalties flow to the studio. After recoupment the revenue is split on agreed terms. Publishers frequently take the IP, or long exclusivity over it, and control the release. If the game fails, the studio does not repay the advance.
Equity
An investor puts £1m into the company for a percentage decided by the valuation. Take an illustrative £4m post-money, which gives away 25%. That 25% applies to this game, the next game and the eventual sale of the studio. The money is not repaid, and the investor usually gets information rights and sometimes a board seat.
VGTR/VGEC loan
At the time of writing, VGEC pays 34% of qualifying UK core expenditure, capped at 80% of total core expenditure, and the credit is taxable at 25%, so the net cash value is about 25.5% of the capped spend. On a £1m game where all £1m is qualifying UK core expenditure, the capped base is £800k and the net credit around £204k. A lender advances up to 80% of that, so about £160k, once the interim BFI certificate and an accountant's letter confirming the expected claim are in place. Interest in the teens per annum runs for the months until HMRC pays, and the credit repays the loan. No equity, no warrants, no share of revenue. Our VGTR and VGEC loan facility has worked this way since 2018, and the switch from VGTR to VGEC changes the credit's arithmetic but not the structure.
Illustrative, round figures, ignoring platform fees, tax and timing. The studio spends £1m and the game generates £3m of net revenue.
Publisher advance. The publisher recoups its £1m from the first £1m of revenue. The remaining £2m is split, say 50/50. The studio keeps £1m; the publisher has received £2m in total. In many deals the publisher also owns the IP, so the sequel starts from the same negotiating position.
Equity. The company keeps all £3m of revenue, but the investor owns 25% of the company. The founders' economic share of this game is £2.25m, and the investor's 25% carries forward to everything the studio does next.
VGEC loan plus a smaller raise. The loan covers £160k of the budget for roughly £25k of interest and fees. The remaining £840k is raised as equity at the same valuation, which now costs 21% rather than 25%. The founders' share of the £3m is about £2.37m, less the £25k of loan cost, and they own 79% of the studio instead of 75%. Four points of ownership on a £1m game is a modest gain; across three games and an exit, it is not.
Where the loan does most. If the studio can cover the other £840k from its own cash, work-for-hire, grants or a platform deal, it keeps £3m less £25k, 100% of the company and the IP. That is the case where non-dilutive is the whole story rather than part of it.
What the numbers leave out
Four things change the answer and are not in the table.
- Risk of failure. If the game nets £300k rather than £3m, the publisher has lost money and the studio owes nothing. The equity investor has lost money and the studio owes nothing. The lender is still repaid by HMRC because the credit is on spend, not sales. The loan is the one route where the funding does not depend on the game succeeding, and also the one where the studio has to fund the rest of the budget itself.
- Marketing. A publisher brings a marketing budget, platform relationships and a launch team. Self-publishing means funding all of that, and the launch runway is where many studios that kept their IP run out of money.
- Timing. Publisher milestones and equity arrive on their own schedules. The credit only exists once qualifying spend has happened and an interim certificate is in hand, so a tax credit loan is most useful mid-production and near the end, not at the start.
- Control. A publisher may control the release date, platforms and price. An investor may control the board. A lender controls nothing about the game.
When a publisher deal is the right answer
Often. If you have no track record, no cash and no marketing capability, a publisher that funds the whole budget, absorbs the risk and takes the game to market is a good deal even at a heavy revenue share, because the alternative is not making the game. If the publisher brings platform access or a franchise you could not reach alone, the same applies.
Where it goes wrong is when a studio with a credible team, a partly funded game and a receivable from HMRC hands over IP and a majority of revenue to cover a gap that a loan of a few hundred thousand pounds would have closed. That studio should, at minimum, price the loan before it signs.
The same applies to us. If a bank will lend to you on workable terms, take it; we are cheaper than equity but more expensive than a bank. And if the credit is small relative to the budget, the loan is a supplement rather than a plan.
What a lender needs from you
For a VGTR or VGEC loan the file is short, because the receivable is defined by the tax rules rather than the sales forecast:
- The interim BFI certificate, or the cultural test application with its current status
- An accountant's letter confirming the expected claim value and the accounting period
- The production budget split into qualifying UK core expenditure and everything else
- A cash flow through to the expected payment date
- Details of any publisher agreement, investor or existing lender, since their rights over revenue and IP affect the security
- Company accounts and, for a second or later claim, the history of prior claims and payments
Decisions on these facilities are made by Edo and me directly. Send the budget and the certificate status and we can usually say within days what the advance would be, so you can put it next to the publisher term sheet and the equity offer and compare every game studio funding UK route on the same page.
If you are holding a publisher term sheet, an equity offer, or both, and want to know what a VGTR or VGEC loan would look like next to them, send us the budget and the status of your BFI certificate. We will give you a number to compare within days.
Frequently asked questions
Can a VGTR or VGEC loan fund a whole game budget?
No. The loan is an advance against the expected tax credit, which at the time of writing is worth around 25.5% of qualifying UK core expenditure after the 80% cap, and lenders advance up to 80% of that. On a £1m game that is roughly £160k. It replaces a slice of equity or publisher share rather than the whole budget, and works best alongside the studio's own cash, a smaller raise, grants or work-for-hire income.
Is a publisher advance a loan?
Not in the legal sense. A publisher advance is recoupable from the studio's share of the game's revenue, often with 100% recoupment before royalties flow, but if the game does not earn enough the studio does not repay the shortfall. The cost is paid in revenue share, IP and control rather than interest. Whether that is cheaper than a loan depends entirely on how well the game sells.
How does equity compare with a tax credit loan on cost?
Equity is permanent: an investor who buys 25% of the studio owns 25% of this game, the next game and any exit. A tax credit loan costs interest in the teens per annum for the months until HMRC pays, and then it is gone. On a successful game the loan is far cheaper. On a failed game, equity does not have to be repaid, while the loan is repaid by HMRC because the credit depends on spend rather than sales.
Can I take a publisher advance and a VGEC loan at the same time?
Sometimes. It depends on what the publisher agreement says about the tax credit and about security over the company's assets. Some publishers require the credit to be assigned to them or treat it as part of the budget they are funding. Send the lender the publisher agreement early, since the rights it grants over revenue and IP determine whether there is a receivable left to lend against.
What does a lender need before advancing against a VGEC claim?
The interim BFI certificate, or at least a cultural test application that is in progress, plus an accountant's letter confirming the expected claim value and accounting period. Add the production budget split into qualifying UK core expenditure, a cash flow to the expected payment date, and details of any publisher, investor or existing lender. With those in place, drawdown can be within a week or two.