Financing Films – Use your Tax Credits for Film Cash and Working Capital

Despite several major positives on the 2010 horizon financing films, the job of getting film cash and working capital is still a challenge for Canadian productions. Utilizing your tax credits in a creative and timely fashion is one method of raising capital in three of the main entertainment segments in Canada; they include film, television and digital animation credits.

Owners of productions in these segments can be forgiven for feeling lost or having difficulty in moving a production forward.
The challenge is even keener when as an owner of creator of a production you don’t necessarily have the ability to finalize distribution or pre – sales in today’s complex global environment. More than ever it is necessary to align yourself with a trusted, credible and experienced advisor in this unique business and financing area of the entertainment industry.

Let’s focus on how you can in a straightforward yet creative way ensure that you are maximizing capital, and cash flow via the utilization of the current generous tax credits available in Canada. When you think of the various sources of financing for your production you should always consider tax credits, and the financing of them, as a key source of film financing and film cash. And as we noted, this applies to both televison productions as well as digital animation, which is fast coming up from the rear as a major entertainment and business segment in the industry.

Tax credits should be an integral part of your overall financing strategy, and we clearly need to emphasize the need for an overall ‘strategy ‘in order to get your project completed. Identifying your tax credit financing partner will assist you in raising valuable capital and eliminating potential financing gaps in your production.

A reputable tax credit financing advisor will help you navigate the maze of financial organizations that participate in financing of your tax credits – these include independent finance firms, private funds, and in some cases organizations related to accountants and lawyers in the industry .

Many Canadian production owners do not realize the financing of your tax credits can be done at two different times in the life cycle of your project. Naturally once your credit has been filed and certified it is financeable at that time – generally we can say that you can received from 60-80% of the tax credit value in immediate cash and working capital, allowing you to recover a significant portion of your expenses. If we use 40% as a broad guideline (it varies between type of tax credit and type of production) you can see the cash flow and working capital power that immediate capital brings to your production.
However, did you know that in many cases you can receive a type of pre- financing for your tax credit? This allows you to generate often needed working capital immediately after it has been determined that you have an eligible project , as well that its ability to be properly document re budgeted expenses and ‘ points ‘ required to be properly certified .

Your ability to present a proper financing plan, demonstrate a realistic budget, and ensure that you have a team in place to document all that can generate a major part of your initial financing . Pre-financing of such a tax credit could often achieve immediate financing of at least 40% - if not more, in upfront working capital. Those funds, in connection with your other resources are often what can take the financing of your project to the goal line.

Talk to an advisor in this area, ensure you understand the power and benefits of tax credit financing, and the fact that these claims can be financed prior to and during your project! That’s a winning film / TV, and animation financing strategy!

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