TAX CREDIT FINANCING – CANADIAN STYLE
Information on sred financing via the R&D Tax Credit Program as well as film and television production credits .
Two. Count 'em. Two, that’s essentially the two types of tax credit that can be financed in Canada, We're talking about SRED , of course, and hopefully we can be forgiven for lumping together film, television , and animation /transmedia credits into one category .
Let's do a quick recap of these two tax credits, with the focus on the ' benefits ‘and ' how to ' relative to the finance of these two non repayable credit government programs.
Sred first. We guess if Shakespeare were around today he might well analogize his play ' MUCH ADO ABOUT NOTHING ' as his succinct summary of all the brouhaha around the federal SR&ED program. For quite awhile there had been rumors, discussion, and innuendo (it almost sounds like a plot or storyline!) around changes to the program.
The SR&ED, aka ' SRED' program is of course the governments program to support research and development in Canada. For public companies that translates into some major tax deduction benefits; but for the private companies in Canada we're talking about Billions ... That's billions with a B ... in non repayable funds that are used by thousands of firms to grow and operate their businesses.
The heart of the matter seemed to be the actual consultants themselves, and when the dust settled it's these actual consultants and firms that prepare the claims that one could say were somewhat uncomfortably under the microscope.
That's an even more relative comment when it comes to financing you SRED claim, because typical SR&ED loans, when financed properly, focus a fair bit on the quality of the preparation of the claim, and the credentials of the consultant or firm that did the claim in conjunction with your year end tax filing.
SRED Bridge loans are a solid way for firms to immediately recapture valuable cash flow and working capital. A financing is typically structured as a bridge loan, with no payments being made until the claim is verified and or audited by the government folks. SRED finance is typically structured on a 70% loan to value basis, and you receive the other 30% of your claim when the claim is approved and monetized; less of course financing costs.
Whether your firm is an established SME firm, or even a start up the cash flow and working capital you can generate from your claim is, shall we say valuable!
On to something more exciting? We guess that puts us into movies, TV and transmedia / animation tax credit financing. Books are written, and stories are legendary, around how challenging it is to finance media projects.
A the end of the day the combination of owner equity, debt, and the film tax credit is a very recognizable way to finance projects, worldwide for that matter.
Similar to our comments on SRED, the discussion point in the government and press seems to be ' who benefits ' when the government in Canada provides these generous film, television and animation tax credit incentives? The answer - You won't catch us weighing in on that one! We'll leave it to the pundits to address that issue, whether is co - productions, or 100% Canadian projects.
Many projects, as we have alluded to have Hollywood or other ownership, but the federal government, through the ' FILM / VIDEO PRODUCTION TAX CREDIT ' provides generous non repayable funds for salaries, wages, and other costs associated with making a project complete.
And, back to heart of today’s matter, your film tax credit in Canada is financeable. If you have a legitimate project, as well as your debt and equity lined up you are in a position to cash flow your film tax credit. Similar to SRED it’s not uncommon for a completed tax credit to be financed in the 70% loan to value range - with the same financing mechanisms applying. The tax credit is the key collateral, and no payments are made during the duration of the tax credit until the matter is finalized; i.e. the cheque received from the government. Billions are spent on these productions in Canada, primarily in Toronto, Montreal and Vancouver, but elsewhere also.
So as esoteric as it may seem the reality is that your project is at the end of the day a commodity, and that commodity can be financed to assist in the completion of your current project or perhaps to start the next one. Over the years HOLLYWOOD AND VINE seems to look a lot like YONGE AND DUNDAS, and the film tax credit program, along with its financing, is key to that.
Bottom line, whether you have a SRED TAX CREDIT, of a FILM, TV, OR ANIMATION credit financing is available. Speak to a trusted, credible and experienced Canadian business financing advisor on financing your claim today.
SRED AND FILM TAX CREDIT FINANCING
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/tax_credit_sred_financing_film_television.html
I have been reading tons of crap posts from other blogs, but shows you have a more educated reader base.What is SRED?
ReplyDeletebusiness loans