The Art Of Tax Credit Financing – Easier Than You Think!
Information on the financing of tax credits in Canada . Film financing, SRED research and Media credit claims can all be financed for cash flow and working capital finance solutions
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The good news is that you don't need any secret techniques to complete the monetization of tax credits in Canada. Frankly, compared to some comparable U.S. programs it could not be easier and more straightforward.
As we have noted, today we are primarily talking about 2 specific tax credits when it comes to financing - the first is the ' SRED' program, and , at the opposite end of the spectrum an industry fraught with excitement ( and frustration?) , film, TV and digital media projects.
Let’s do the SR&ED recap first! We can safely say that, more than ever, its all about the quality of your claim. The ' advisors' and ' SRED Consultants ' are a mini industry in Canada - in effect they are the brain trust preparing the majority of claims in Canada.
The majority of transactions completed by these consultants and advisors bill their work on a contingency basis, in other words they are assuming a large part of the risk on the acceptance and approval of the claim. It's of course up to you as a business owner/manager to source a consultant that’s capable and experienced, as different industries have different nuances.
It's their work that will be viewed by your CRA office when it comes to legitimacy and amount requested. The fact that the SRED credit is a non repayable cheque from the government allows thousands of Canadian corporations to access billions - yes that’s billions with a ' b ‘, of dollars that is used for further research , working capital, basically any general corporate purpose .
Timing is always a discussion point in SRED claims. First time claimants typically might have their claims audited from both a combination of technical and financial accuracy. That of course always comes back to the quality of your claim.
Let's move on to the subject of... ‘Cash '. Not all SRED claimants know their SR&ED claim can be financed. And the good news, it’s hardly a complex proposal. A basic business application that includes your firm’s financials, a copy of the SRED claim, and some supporting information on the claim and you company is all you need. SRED loans are typically done at 70% loan to value, simply meaning that for every $ 100,000.00 of claim your loan amount be in the 70k range. And the monthly payment? 0. Yes Zero. That’s because your loan is repaid when you receive your government chq - the remaining 30% comes back to you less financing costs.
One of the most dramatic changes in SRED financing is that fact that you can even get accrual financing these days. That simply means you can cash flow your claim prior to filing it, as you spend and recoup funds. Now that’s creativity.
Canada is a leader in film, TV and digital media incentives. And those incentives, aka the ' tax credit ' can be monetized. And that includes, as we have noted the digital media tax credits that are starting to be a huge part of the industry. The largest factor in the make up of the digital credits is the emphasis placed on recovering your actual labor expenses. Simply speaking, you're recovering, via a non repayable credit, a majority of your salaries on your projects.
Using Ontario as an example it is safe to say that your actual programmers, contractors, employees, etc must reside in Ontario. That makes sense, but the Media tax credit is available in pretty well all the provinces of course.
Generally speaking your film, TV and media claim has significantly less risk from an audit or claw back perspective. In other words, you just have to prove you spent the money which can easily be verified via your payroll records, etc.
The process for financing film, TV and media credits. Same as our SRED. A basic application, copy of your claim and supporting data, etc. And those same financing criteria remain intact, relative to amounts financed, etc.
Our bottom line today? Film tax credit financing, SRED finance, and Media tax credits are viable cash flow assets for any owner of the credits. Use them to grow your company, complete your projects, or start another project. Speak to a trusted, credible and experienced Canadian business financing advisor today.
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Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
