Film Finance Canada – Tax Credit Film Financing

Producers and owners of Canadian content in the areas of film, television, and animation credits are not always aware that they have the ability to monetize or cash flow their Canadian tax credits in Canada.

The three types of productions that we have referenced are provided with solid financing assistance from the federal and provincial governments in Canada.Your ability to monetize these tax credits, and turn them into cash flow at time of filing, (or in some cases before) can make or break the overall financing success of your venture.

Successful results can be achieving by working with a credible, trusted and experienced finance partner for your tax credit financing in Canada.The financing of these tax credits creates, in effect premium additional cash flow to allow you to enhance your initial equity and debt and gap financing strategy.

Let’s use a simple example wherein a Canadian produce in film, TV, or digital animation is financing a venture through equity and debt, and let’s say it’s a 50/50 proportionate relationship. The non equity portion of these ventures is often balanced with some sort of distribution agreements in Canada or elsewhere in the world. One strategy you could consider is to of course ensure prior to commencement and production that you qualify for and are eligible for the maximum amount of tax credits related to your venture. Let’s say our example consists of a 1 Million dollar independent film, and there is a 500k equity and debt component respectfully. In our example, if properly qualified and document the film owner, producer, etc can qualify for a tax credit that might easily come into the 200k-250k range.

Is that the end of our example? Absolutely not – what we are saying is that you can immediately finance that claim, either at time of filing, or in some cases earlier, and utilize that cash flow for all sorts of purposes related to your venture / production.

As Canadian production and content continues to play a hefty role in the producing of Films, direct to video, pay per view, and digital products the ability to finance these ventures is always a challenge. Very few of Canada’s banks and large financial institutions play a role in this type of financing; we therefore recommend to clients that they seek out the expertise of a credible, trusted and experienced advisor in this area. Maximizing your claim value and eligible cash flow are of course the rewards of working with the right party.

Larger and well known studios require financing also, but the true challenge is for independent producers and their investors who have budgets that are often ten million dollars and under, sometimes quite significantly under that threshold we just referenced. The reality also is that the industry seems to be breaking all records in areas of growth and economic activity and new forms of content and distribution. The bottom line is that as demand increases and distribution structures improve the need for financing and tax credit financing in Canada is also increased.

If a production can be properly pre-sold and distributed, and tax credit financing utilized as an integral role in initial production cost financing – well, that simply creates a perfect formula for financial success.To be successfully financing a production must have the proper amount of leverage, different exit and distribution strategies, and the proper utilization of tax credit and tax credit financing.

Working with the proper parties can often achieve50-75% immediate financing of your tax credits in Canada. The remainder is of course simply a buffer for the lender to allow for financing costs themselves, and any time lapses in the final approval and cheque from federal and provincial players that regulate the new generous tax credits.

Tax credits are increasingly generous in Canada – just in the last year or so a number of enhancements have been made to the various programs at various levels of government. Take advantage of these credits, and further investigate monetizing those credits at time or filing of prior to maximize the cash flow and overall financing strategy of your film, TV, or animations projects.

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