Financing Film Tax Refunds for Filming in Canada

Financing film tax refunds on Canadian productions is currently an integral part of the overall financing for projects in film, television, and animation in Canada. Those in the know are aware that typically a valid tax credit can be financing almost immediately after production has been completed.

An even more little know fact , (and we are surprised at the number of people that don’t know this ) is that if you tax credit is certifiable and you are somewhat experienced in the industry your tax credit can actually be financing during your production, bringing much needed cash flow and working capital to your project .

When we meet with clients we are not of course surprised to hear that a large part of their total project involvement in the 3 key areas (film, TV, and digital animation) is spent on sourcing financing for their project. While the overall financing environment has improved considerably in 2010 (and boy has those great government tax credit increases helped) it is still a challenge for most productions to cobble together financing for the entire project.

There are, of course, a number of options and strategies available to owners of any particular production. Our focus here in our information is primarily the monetizing of the increased and generous tax credits that come in the form on non repayable cheques from the government. Your ability to monetize, (we can say ‘cash flow ‘) those credits is a key part of the industry today.
Tax credit financing is usually done in conjunction with the other forms of financing in our three key focus areas. Those other types of financing of course include equity, pre-sales, etc.

In order to finance your tax credit certain key elements must exist. The one key area to focus on is certification and eligibility, with criteria being a bit different, but essentially the same, depending on which proving your production is domiciled in. Ontario and B.C. seem to garner most of the action...

Owners that surround themselves with solid accounting and legal partners and who have a clean special purpose entity set up are 90% of the way there! What we are really saying is that if your production is eligible, and you have documented your bidets and costs carefully, and they are cleanly with a separate legal entity (preferable) you are safe to assume you can have your tax credit financed.

We strongly recommend that you work with someone who is at trusted, experienced and credible advisor in this area who will work with you to maximize the total dollars that you can derive out of your tax credit. Naturally a clean tax credit represents 100% of the dollars due to your production. To err on the side of safety and conservatism tax credits are generally financed at 50-80% loan to value. (There are exceptions on the upside and downside as always!). No payments are made on your financing, and final financing costs come out of the final receipt of funds form the government, with any additional balances left over due to your production of course.

The ability to finance your production creatively, with the assistance of the monetization of your tax credit is a powerful strategy not available in all parts of the world , due in most part of course to the generous non repayable credits the Canadian government as deemed for the industry . Utilize tax credit financing to improve the overall success of your projects.

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