Saturday, April 10, 2010

Film Tax Credit Financing in Canada – Accelerating Payment of your Tax Credits

Film, television, and digital multimedia financings are always a challenge to Canadian based productions, but recent trends in the industry allow for a number of new and aggressive ways to finance your ongoing productions . For many participants the playing field is somewhat complex, as it is a mixture of industry, government and private sector financing that ultimately bring financing and cash flow to the success of your work . No one seems to be disputing the tremendous growth in the industry , particulary in Canadas major entertainment centres of Toronto, Vancouver , and Montreal .


Canadian content is king when it comes to financing strategies . As the industry if financed on a much larger scale in the U.S. there is always a challenge for Canadian productions in all entertainment sectors to find both short term working capital and significant long term capital and equity . The support the industry is getting from both provincial and federal sectors continues to be quite overwhelming .



The financing of tax credits in film, tv , and digital media , either through the Scientific Research and Experimental Development program, of the various other supported programs is one of the strongest ways to achieve interim working capital and help to balance your debt/ equity investments in any particular production .
The good news is, that with the experience of a trusted and credible financing advisor in this area even accrual financing can be applied to these sorts of tax credits . That only means one thing of course – getting your funds immediately, and not waiting for the ultimate tax credit refund under the particular program under which your production is domiciled .



We are often asked if Canadian chartered banks play a role in these types of financing, and the answer is – yes, but very selectively . We have met and worked with specialized personnel from the banks in the area, and they clearly are ‘ boutique functions ‘ of the bank as a whole . Naturally though access to funds themselves is not a problem, as Canadian banks continue to be a world leader in liquidity, tier one capital levels, and access to funds .


So how do entertainment entrepreneurs access this capital . We simply believe that you must seek and search out experienced, trusted and credible advisors in this area . Financial people tend to be somewhat unable to predict ‘ hits and misses ‘ in the entertainment and media sector, we’ll let the creative type do that , but if there is access to financing available through areas such as tax credit financing, gap financing, accrual financing, etc its safe to say lets let the financial people handle that!


In our experience tax credit financing tend to be a minimum of 200k+ and up in Canada, and can of course go into the millions of dollars , so access to capital and who you are working with is very important . Naturally since out tax credit system and the financing of those credits infers a ‘ Canadian content ‘ ‘Canadian Equity ‘ requirement the additional pressure of having to finance just in Canada by virtue of the tax restrictions places just a bit more challenge of financing .


When does tax credit financing work best – In our opinion its when current programs are maximized and monetized simply from a timing perspective, accessing your capital now, not at some later point in time .


Your ability to discount now that future receivable or revenue stream is one of the greatest tools you have in financing prodcutons and content from a debt perspective . Actually its not even really debt, because you are simply monetizing or discounting an asset such as a tax credit receivable . You are raising cash flows against current receivables .


In Canada there is several billion dollars of tax credits awarded annually to the industry, so the ability to monetize these prior to final approval and audit , subject of course to your certification eligilbility , is one of your greatest assets from a financing and cash flow perspective .


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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/Film_Tax_Credit_Financing_in_Canada.html


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