Canadian Film And SRED Tax Credits Aren’t Financed With Bitcoin: Here’s The Real Deal On Bridge Loan Financing For Your Tax Credit The Scoop Behind Film & SR&ED Tax Credit Loans

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YOUR COMPANY IS LOOKING FOR TAX CREDIT FINANCING!

FINANCING FEDERAL TAX CREDIT INCENTIVES - SR&ED AND FILM

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

Canadian film and SR&ED tax credits are the ' real deal ' when it comes to your ability to both access, and finance these two pre-eminent tax credit funding programs from the Canadian government, both federal and provincial.

 

These are not government grants but actual refundable credits for cash. These government programs are federal and provincial or a combination of both.

 

Oh, and by the way, they have nothing to do with 'BITCOIN  ! ‘, the internet's newest peer-to-peer electric money system which we're quite frankly still trying to understand! So trust us on this one, financing your SRED or Media credit is done with real money! Let's dig in.

 

SR&ED TAX CREDIT FINANCING

 

FINANCING SR&ED CREDITS IN CANADA / SR&ED FINANCING CANADA

 

Let's move on to our ' scoop ' on SR ED  Program tax credits. This funding program allows companies to access valuable tax credits after they have spent capital on R&D. The actual name of the program is Scientific Research And Experimental Development / via the federal government via Canada Revenue Agency /CRA. No, it’s not a grant, you spend the money first, and they claim your credit, which as we have noted, can also be financed if you want to bridge the timing gap in the whole process.

 

THE IMPORTANCE OF A SRED CONSULTANT / WHAT IS A SRED CONSULTANT?

 

Maximum success in the area of SR&ED typically comes when you use  SR&ED funding consultants, sometimes known as an ' SRED engineer' who prepares your claim. Let's recap who they are and discuss sr&ed consultant fees.

 

A SR&ED consultant helps a business work through the Scientific Research and Experimental Development (SR&ED) program - The role of the consultant is to ensure the company has identified eligible r&d work - At that point, they help to prepare and submit your sr&ed claim, ensuring that your are compliant with the terms and spirit of the program.

 

The majority of sr&ed consultants seem to work on contingency, meaning they are willing, at their time and risk, to prepare your claim in an effort to share in the proceeds. Other firms typically charge hourly or engagement fees to prepare the claim.

 

BILLIONS OF DOLLARS EVERY YEAR ARE REFUNDED VIA SRED R&D CREDITS

 

In past times the SR&ED consultants have come under attack for aggressiveness in claim amounts for these tax incentives, as well as having their own fees determined to be somewhat aggressive also! 

 

At 7 Park Avenue Financial, we won’t weigh in on the merits or non-merit of SRED consultants, we will say that as a business owner involved in R&D, you're entitled to your share of the 3-4 Billion dollars every year doled out in this longstanding program. Sred funding is a great way to monetize our claim.

 

HOW DO TAX CREDIT LOANS WORK

 

If your business or project accesses Canadian film or SRED tax credits, consider this - your claims can also be financed.

Bridge loans for SRED or media credits are typically 75% loan to value, no payments are made during the duration of the loan, and you receive the final 30%, less financing costs when your credit is adjudicated by the feds and provinces.

That can take weeks, months, or a year depending on various factors, so the appeal of financing via a bridge loan can be very attractive.

 

Key Point - We'll ensure that no personal guarantees are required for the loan, and the typical time to fund takes only a couple of weeks - Talk about a tax incentive program that really works!

 

PEOPLE ALSO ASK:

 

What is sr&ed financing?

SR&ED financing is a financing option for companies who utilize the federal Scientific Research and Experimental Development (SR&ED) program that provides a refundable tax credit for r&d claims. Banks and the government do not finance these claims - they are financed via private commercial financing companies. A company can choose to 'self-finance their claim and wait for the refund, or it can monetize the claim when filed or on an accrual basis. Funds received from the financing can be used to accelerate further r&d and other general company purposes.

 

Are sr&ed credits taxable /are sr&ed refunds taxable?

Sr&ed refunds are income and taxable in the year the funds are received .

 

How do sr&ed tax credits work

 

The sr&ed program is a tax credit for companies who are spending on research and development (' r&d")  under the guidance of the Canada Revenue Agency's sred program - the key benefit of the program is to help companies with the costs of r&d, which can often be a large part of a company's expenses.

Companies must ensure they are eligible, and the work in r&d  must be spent in Canada - the three key areas of this r&d are experimental development, research and applying the research of SR&ED, which includes experimental development, basic research, and applied research.

A claim is prepared by the company for the Canada sr&ed tax credit, which has typically engaged a Sred consultant to detail basic information on the research, as well as costs related, such as employees and subcontractors. A typical claim includes reports and documentation and verifies sr&ed eligibility under CRA's sr&ed eligibility criteria around sr&ed eligible expenditures.

The claim is submitted with the company's annual filing of financial statements - CRA/Canada Revenue Agency reviews claims and determines the final amount of the refundable investment tax credit.

 

 

How Do You Apply for Sr&ed

 

Applying for Sred refundable tax credits is different based on the type of r&d work a company is performing.

Companies must determine basic eligibility around the type of r&d they are performing, where they are doing the work and the basic business activity of the company. The business must ensure that all proper information and documentation on the cost and expenses are available- such as technical reports and write-ups, etc.

The actual claim is submitted on the company's T6661 tax, which CRA uses to process claims - that allows CRA to review and process the claim.

 

What does sr&ed stand for?

The term SR&ED is the acronym for Scientific Research and Experimental Development. The SR&ED program is an investment tax credit and incentive program for businesses conducting research and development / r&d. The government's focus on the program is to stimulate economic development and Canadian innovation via these tax incentives.

 

Who is eligible for SR&ED?

 

 

A business claiming sr&ed must be doing work around advancing scientific knowledge to further technological advancment. Sr&ed funding for non-ccpc (' Canadian controlled private corporations ')  receive a lower tax creidt on eligible expenditures.

 

Government sr&ed credits are used by every industry in canada , inlcuding technological firms, software firms, biotech, manufacturing, etc - A  startup business  and all small businesses are still elgiible fo rhte program.

 

CCPC firms get approximately 35% of their eligible qualified expendirure based on federal and provincial formulas.

 

 

 

FILM TAX  CREDIT FINANCING 

 

 

 

FILM/TV/DIGITAL MEDIA  AND SR&ED TAX CREDIT IN CANADA 

 

Let's take a look at film and media-type credits first. These credits, at the provincial level, provide producers and project owners with a valuable form of funding that makes their projects, from a financial perspective, more achievable.

 

 

 

WHAT IS FILM TAX CREDIT FINANCING 

 

Financing film tax credits in Canada allows a company to generate cash for the production by financing the refundable film tax credits the production is eligible for.  Owners of productions apply for film tax credits from a provincial jurisdiction, and these tax credits can be financed via a bridge loan structure.  While some banks finance large projects, the majority of financing is via independent commercial finance firms,

 

 

 

 

COMPETITION AMONG THE PROVINCES FOR YOUR FILM AND DIGITAL MEDIA TAX CREDITS 

 

There is strong competition among the provinces to have your project fall into their hands.  Using British Columbia as an example that province in recent years has provided tax credits to the tune of close to 300 million dollars. As an example, BC offers a 33% refund of legitimate labour expenses. Ontario and Quebec predominantly compete with BC, and as an example, the tax credit for production costs is 25% in Ontario.

 

 

TAX CREDITS PLAY A KEY ROLE IN FINANCING FILM PROJECTS 

 

While the tax credit isn’t the only reason a film, television, or media production goes to any one province (geography, talent, and production facilities are other reasons), Canadian film tax credits do nevertheless play a huge part in the overall financing model of any project. 

 

CO-PRODUCTIONS ARE ELIGIBLE

 

Not known to everyone, but certain qualifying foreign-eligible productions of non-Canadian content can also qualify for refundable tax credit programs. These typically are known as 'co-ventures'. These co-ventures must still have a Canadian producer, and certain 'points' around areas of content must be met.

 

FINANCING DIGITAL MEDIA TAX CREDITS  

 

The gaming industry in Canada continues to become a large part of the new economy - employment in the industry and industry revenues are at an all-time high - Innovation and large production budgets require a significant amount of r&e around physics, AI, Graphics, etc.,   Game development is available for funding via digital media credits which are refundable. Some gaming research and development qualify under SR&ED also. Canadian provinces such as Ontario offer significant credits to the industry to encourage new interactive digital products and the development of games. 

 

 WHAT IS A FILM TAX CREDIT 

 

A film tax credit is a government tax incentive offered by governments to promote the production of film and tv in a specific province/geography. The refundable film tax credit helps offset the cost of production around qualified labour expenditure and other expenses such as equipment and materials and facility rentals.

 

 

   

How do film tax credits work?  

 

   

Film tax credits work via government assistance because they allow productions to receive a portion of production funds as a fully refundable tax credit which offsets production costs. Different jurisdictions in Canada offer different types, and amounts of credits - Productions apply in advance and are required to provide information about spending and labour.

 

Credits vary by province and type in Canada, and refundable tax credits can be financing to monetize claims - Canada is a leader in film tax credits as a way of encouraging entertainment products in film, tv, digital media and gaming.

 

   

 

HOW DOES THE  CANADIAN PRODUCTION TAX CREDIT WORK?   

 

The Canadian Production Tax Credit (CPTC) is a film and video production tax credit that is a refundable tax credit that funds a portion of labour costs incurred in production.  The type of production and the geography where the filming is done determines the amount of the tax credits, - Factors affecting the amount of these investment tax credits include the amount of spending, as well as Canadian content qualifications. A ' CAVCO ' certificate must be approved and claimed to validate the production tax credits.

 

 KEY TAKEAWAYS -  SR&ED & FILM TAX CREDITS 

 

SR&ED AND Film Tax refundable credits are Canadian government incentives to provide cash refunds to firms conducting R&D or engaged in the production of film, tv, and digital media /gaming. Unlocking cash flow by financing these credits helps to fund Canadian businesses and is a non-dilutive funding strategy around ownership.

 

CONCLUSION - FINANCING CANADIAN FILM AND SRED TAX CREDITS

Canadian businesses should take advantage of every tax incentive available to fund your company or project, whether its research and development in Canada in digital media or products and processes via the SR&ED program. Seek out and speak to  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with the real scoop on accessing financing for SR&ED and Media projects.

 

  

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION  

 

Is debt financing better than equity financing - Why use debt financing?

 

Debt financing is typically viewed as better than equity financing because a business can leverage capital in the business to grow revenues and profits. Financing costs are also tax deductible in a business, and a company borrowing money does not have to relinquish equity control as it would in equity financing. The advantage of equity funding is that it does not require repayment and brings no debt to the balance sheet.

 

 

Click here for the business finance track record of 7 Park Avenue Financial

Is This The Golden Age Of Business Capital In Canada? Financing And Funding Your Company Credit Needs Unlock The Secrets To Business Capital In Canada

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YOUR COMPANY IS LOOKING FOR  BUSINESS CAPITAL!

YOUR GUIDE TO CANADIAN BUSINESS FUNDING

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

 

NAVIGATING THE BUSINESS CAPITAL LANDSCAPE IN CANADA

 

Business capital in Canada. Is this in fact the  ' GOLDEN AGE ' for Canadian companies seeking financial capital and business credit and funding?

 

 

WHAT IS  BUSINESS CAPITAL  

 

While most  business owners and entrepreneurs think of  ' money ' as being capital, and  cash that is in the business for generating a profit and return on investment, in general terms capital is actually the value  and financial assets of the business which might mean everything from hard assets to patents and intellectual property in the business

 

While your business can generate a return on capital from the ongoing operations of the business a company also has the choice of raising more equity as well as taking on debt to fund the business.

 

So capital can come from a number of sources:  owner investment, equity via angel investors, VC's, and private equity firms as well as traditional or alternative financing firms such as banks and alternative finance lenders - the new kid on the block in the Canadian business landscape.

 

Working capital and debt capital are often the most sought-after Canadian business financing solutions

 

We're not 100% sure ourselves; we read that rates are low and capital is abundant - while at the same time clients tell us it's never been as tough to satisfy lender criteria or access innovative capital solutions for their business needs -  especially for the small business owner as well as medium-sized corporations looking for information for funding needs.

 

The reality is that many business owners who aren't in the Financial Post top 1000 in Canada spend a lot of their time ' finding ' financing. The goal seems kind of easy - find enough financing for your business at a cost that makes sense and gives you the amount of risk that the Canadian business owner and financial manager are prepared to live with. At 7 Park Avenue Finanical we want to provide the help that business owners and their financial managers are looking for in their search for funds.

 

That ' risk ' of course comes with the fact that too much debt, and might we add the wrong kind of debt can cripple a firm.

 

5 WAYS TO FINANCE YOUR BUSINESS 

 STRATEGIES FOR SECURING BUSINESS CAPITAL

 

At the end of the day, we can maintain there are essentially 5 ways to finance your firm when it comes to business loans and your capital structure  - two of them, raising equity and issuing a bond or debenture are NOT the subject today.

 

What we're talking about is innovative ways of supplier financing, lease and asset financing for capital assets , and business lines of credit from banks or independent commercial finance companies.

 

 

DON'T FORGET SUPPLIER FINANCING! 

 

Many businesses don’t fully realize of focus on the fact that supplier credit is in fact a key driver of your firm’s cash flow. Just negotiating long terms with your key vendors allows you to generate positive cash flow - That’s a fine line though as you ultimately need the support of suppliers. The last thing you want is for them to turn the ' credit tap ' off.

 

EQUIPMENT LEASING FOR ACQUIRING NEW AND USED ASSETS

 

Yes, you can buy the fixed assets you need for your firm - but over 80% of companies in Canada in fact lease their assets. Whether its trucks, cars, computers, telecom equipment and heavy machinery the business owner has the option of leasing assets for anywhere from, typically, 2-5 years. That allows you to use up the ' useful life' of your equipment and match it to cash outflow vis a vis the payments.

 

Accounting has specific rules around the type of leasing arrangements that you enter into, primarily revolving around whether you are entering into a capital lease ' to own', or an operating lease ' to use '.

 

 

 

THE BUSINESS LINE OF CREDIT IS A KEY FUNDING TOOL FOR DAY-TO-DAY OPERATIONS  

 

Bank and commercial credit business capital in Canada supply businesses with revolving lines of business credit and funding. A credit line allows  your firm to draw down and pay back up, based on pre-set limits, the amount of funding you need for your business. The security of course is the assets of the business, allowing you to constantly replenish working capital

 

 MONITOR YOUR DEBT-TO-EQUITY RELATIONSHIP  

As a business owner, you have to choose the right amount of debt and equity. The finance guys call that your ' capital structure’. Is there a perfect mix or ratio for that?  The answer is... not really; it depends on the risk, flexibility, and amount of control you have in any particular financing.

 

 SOURCES OF BUSINESS FINANCING 

 

So, is it the Golden Age of business borrowing?  Our opinion is... not really. But you do have options and there are probably many innovative ways to finance your firm and achieve access to capital that you have not contemplated ; from government programs to commercial financing.

 

These include:

A/R Financing

Inventory Loans

Access to Canadian bank credit

Non bank asset based lines of credit

SR&ED Tax credit financing

Equipment / fixed asset financing

Cash flow loans

Royalty finance solutions

Government Of Canada Small Business Loan Program  - Guaranteed federal business loan -  Arguably the best financing program for a startup and franchise acquisition

 

THE STARTUP FINANCING CHALLENGE - STARTUP TO SCALE UP!

 

Financing a new business start-up in Canada is always a challenge - In connection with their own savings and investment into a business many entrepreneurs recruit friends and family type investments - as well as explore crowdfunding options.

 

The majority of start-ups in Canada, if not 99% or more do not qualify  or meet the criteria for business capital from  venture capital or angel investors

 

Many startups can benefit from local ' business incubators ' that are more often than not in the high-tech sector. These organizations don't provide financing per se, but they will often provide mentorship,  job creation, and sharing of facilities and hosting.

 

While ' grants ' are often sought after funds from the federal and provincial government in Canada this can be a time-consuming process, and often assistance from grant writers is required to source funds in areas such as r&d, productivity, etc. Talk to the 7 Park Avenue Financial team about grant financing strategies when grants require matching funding.

 

Business loans are available for the majority of small and medium-sized established businesses in Canada the startup has a large challenge in accessing financing. Good credit ratings and solid personal net worth will often attract some bank financing, but the best program by far, from a business loan perspective for startups is the Canada SBL loan - Recent changes to the program in 2022 increased the loan cap to over 1.1 Million dollars, and several different types of the financing were added to the program. The loan guarantee is provided by the federal government to the bank or credit union. A business plan should be provided with your financing request. SBL loans are one of the best financing solutions for small businesses in Canada, and the government loans out billions of dollars every year to thousands of firms.

 

 CONCLUSION - TAKING YOUR BUSINESS TO THE NEXT LEVEL 

 

Talk to the 7 Park Avenue Financial team - we know that the majority of businesses can access venture capital and Angel investments - Government funding and grants can consume management time - Let us show you how debt and cash flow financing solutions are available to your business today can work to take your business to new heights.

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor for small business owners, who can assist you with your business capital and funding needs in Canada.

 

  

 

  

 FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

 

 

 

What is the most effective form of business for raising capital?

 

Although a sole proprietorship or partnership can raise capital and borrow money the best form of business organization is the corporate legal entity. Equity capital can come from venture capital firms but venture capitalists or private investors will want a sizeable portion of the ownership of the business - as the goal and exit strategy of the VC is an initial public offering. Financial institutions prefer to deal with corporate entities as opposed to individuals when business lending is required. Economic growth is often easier to achieve by a company versus a private individual.

 

 

What is business capital in finance?

Capital in business financing is value creation and is often primarily identified only as cash and business assets. The financial statements of a business complete a full picture of balance sheet assets and profits.

 

What are some types of capital in business?

Different types of capital in business include debt financing, allowing companies to borrow from different sources such as banks, alternative lenders, and the government at interest rates commensurate with overall credit quality and type of financing.

Business owners have the choice of selling equity in the business via private financing or public equity offerings versus additional personal investment.

Working capital finance funds current assets such as accounts receivable and inventories and profit-generating assets can be financed on a long-term basis.

  

Financing Your Canadian Film or Video Production Tax Credit

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YOUR COMPANY IS LOOKING FOR INDEPENDENT FILM, TELEVISION AND

ANIMATION FINANCING  VIA TAX CREDITS IN CANADA! 

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the biggest issues facing businesses today

                              ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

                                 EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

 

THE KEY TO FINANCING TAX CREDITS FOR FILM AND DIGITAL MEDIA IN CANADA

 

It certainly might look like somewhere in Hollywood, but the reality is that many films and television projects are produced and filmed in Hollywood North, a.k.a Canada.

 

FINANCING INDEPENDENT FILM TAX CREDITS IN FILM/TV/MULTIMEDIA

 

 

The Canadian government at both the federal and provincial levels has moved to significantly enhance the generosity around tax credits. Business owners of film, television, and yes animation also can utilize these tax credits to form an integral part of their overall project financing strategy.

 

Independent film producers/project owners recognize the importance of efficient financing and the challenges around raising money and funding for film and animation projects in Canada - Tax credits are a key factor in any film or television or digital multimedia budget.   Federal and provincial tax credit incentives can be a key factor in funding your project in the most efficient, and expedient manner.

 

 

FILM FINANCING WITH TAX CREDITS 

 

Why tax credits? Simply because the federal and provincial governments in Canada recognize that the film tv and multimedia industry in Canada is a strong economic stimulus and creates jobs as well as the promotion of tourism associated with these same projects and productions. Canadian refundable tax credits in film and multimedia are some of the most generous and sought-after in the world.

 

UNDERSTANDING FILM TAX CREDIT FINANCING

 

A very significant portion of your project expenses can be recovered via the appropriate use of tax credits. Moreover, you can finance these claims prior to, or at the time of filing. This generates working capital and cash flow for the current project, and in many cases, we speak to clients who intend to use these funds for their next project.

 

It can be very realistically stated that many projects in film, tv, and digital animation in fact could perhaps not be funded or completed without the effective use of tax credits. When you can ‘monetize‘ or ‘cash flow‘ those credits now you have just taken advantage of a powerful overall project financing strategy!

 

As a result, all areas of Canadian entertainment in our three aforementioned market segments continue to generate box office revenue in Canada. What was a new and innovative strategy in years past now becomes a priority ‘ job 1 ‘ in the financing of almost every project.

 

 

Entertainment projects in film, tv and animation clearly ‘follow the money' and that money has been followed to Canada in a number of different provinces – primarily Ontario and B.C., but in other provinces also.

 

While there is great pressure in many of the U.S. states to reduce, or in some cases eliminate tax credit incentives Canada has in fact increased incentives in every area – the government has essentially based its case that there is a huge economic windfall to Canada by virtue of the tax incentives offered. The term ‘domino theory‘ might well be mentioned, because the way the Canadian government sees it, additional revenue comes into Canada in the form of hotels, food, carpentry, etc.

 

So how are these tax credits financed? In any business your probably are ahead of the game when you work with an expert, and certainly, tax credit finance is no different. We recommend to clients they work with a trusted, credible and experienced advisor in this area. When your project is well documented in the form of a project finance plan and has solid Canadian content in key areas such as Director, Writer, Performers, Art, Music or Animation you have a very significant ability to enhance your total claim for the credit. (Other key areas of your total project are of course: Equity contribution via owners or investors, foreign pre-sales, etc.).

 

Your eligible tax credits can be financed as soon as they are filed – if you have a strong management team – i.e. a good entertainment accountant, lawyer, etc, your credits can even be financed before you file them. That’s a total cash flow strategy that provides valuable cash flow and working capital to your project.

 

  

MAXIMIZE YOUR PRODUCTION BUDGET WITH CANADIAN FILM TAX CREDITS   

 

Let’s look at a quick example – let’s assume your production is budgeted at 1.04 Million dollars, and your labour component is 571k.  Your labour-to-production ratio is 54%. Using Ontario as a current example, the tax credit on this project would come in at 45% of your labour budget – That nets you 257,000.00$ in capital funding. If you finance your claim you could receive a significant portion of those funds almost immediately.

 

 KEY TAKEAWAYS - CANADA'S FILM TAX CREDITS 

 

In Canada, refundable film tax credits play a key role in the independent entertainment production industry - allowing production companies to reduce total production costs.

 

Tax credits by film, tv and multimedia type can vary by province and allow projects to claim a certain amount of labour and production costs

 

Tax credits can be financed and assigned

 

Governments like tax credits because they create jobs and are economically positive

 

CONCLUSION - FILM FINANCING & TAX CREDITS

 

The financing of film, tv and multimedia projects often involves tax credits that play a key role in financing the success of projects. The ability of a producer/owner to understand the tax credits available and how to finance them is key to success.

Utilize the services of a film financing expert to investigate the financing of your tax credits. Prepare a solid project finance plan and let the cash flow from monetizing your credits enhance the viability of your project. Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing advisor who can assist you with Your refundable tax credit financing needs

 

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

 

What are film tax credits?

 

A film tax credit is an incentive offered by governments at the federal and provincial level in Canada to offset production costs - Projects that  provide employment and utilize resources locally are viewed as being a positive aspect of economic development.

 

Federal and provincial tax credits are key aspects of film, television tax credit, and digital multimedia productions and help to finance production costs for film and television productions. - The government refunds tax credits in the form of a  fully refundable tax credit. Third-party financing is available for assigning these credits - payments to actors, directors and producers are a part of the tax credit formula. around qualified labour expenditure - Certain provinces in Canada allow for higher tax credits for production companies based on the shooting of productions in certain areas. Tax credit financing will typically have a 75% loan-to-value ratio on financing approval for the production company financing these assignable tax credits,

Key issues in tax credits revolve around areas such as how much funding might be available in certain jurisdictions as well as the amount of employment attached to any project in areas such as independent films.  Below-the-line costs are typically the largest part of a film budget and are eligible for certain credits under the formula - projects typically also have above the line costs also as part of a budget. The potential refund on any project, such as a video tax credit can bring an excellent potential tax refund. Tax refunds can significantly lower financing costs attached to any entertainment project.

Other key issues are around when and where principal photography occurs.

The Canada Revenue Agency website has information about film tax credit data and income tax regulations around tax credits.

 

What are completion bond fees?

Many independent entertainment projects are required to provide a completion bond to secure certain aspects of a financing package. That bond is essentially insurance to lenders and others involved that the project will be delivered on time and on budget.

 

Click here for the business finance track record of 7 Park Avenue Financial

Juggling Acquisition Finance Solutions? Financing A Business Purchase In Canada

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YOUR COMPANY IS LOOKING FOR BUSINESS FINANCING

FOR AN ACQUISITION!

HOW TO FINANCE A BUSINESS ACQUISITION IN CANADA

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the biggest issues facing business today.

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

 

 

FINANCING TO BUY A BUSINESS IN CANADA

 

  

Financing a business purchase in Canada often has the business person juggling various acquisition finance solutions. Which solution makes sense, and how do you access that capital properly? Let's dig in.

  

HOW DO YOU FINANCE A BUSINESS ACQUISITION 

 

Although bank financing will typically be the most sought-after business financing solution to buy a business in Canada numerous other financing solutions can provide more or additional capital to purchase a business, It's about ensuring you have the right business lender and focusing on the right amount of business acquisition financing suitable for your acquisition needs.

Aligning your strategy with the right amount of financing helps ensure long-term success - the optimal capital structure for your purchase should become job #!

 

That main tranche of financing, known as the ' senior debt ' of the business will typically have the lower cost of financing while other components to your financing will have different costs and structures and risks. Owner equity in a purchase will often be in the 15-20% range.

 

ASSESSING YOUR BUSINESS PURCHASE FINANCING  NEEDS

 

The ability to properly arrange your financing to match the  needs of the business purchase will revolve around:

 

- ensuring that the business has enough, and proper post-acquisition financing in terms of working capital and business lines of credit that will allow sales to grow

- Financing new assets and technology or repairs required to  business assets - in some cases leasehold improvements might be required

- Many business acquisitions revolve around management buyout scenarios -

 

- Refinancing strategy to restructure existing debt and creditor obligations

 

 

WHAT TYPE OF BUSINESS FUNDING SUPPORTS YOUR VALUATION / PURCHASE PRICE OF THE TARGET COMPANY

 

When you buy a business and consider financing a takeover, it's all about a proper valuation and moving forward with a source or sources of financing and loan terms that make sense for your acquisition price after you have performed an appropriate amount of due diligence.

 

LOOKING TO SECURE FUNDING FOR YOUR BUSINESS PURCHASE

 

In determining business value there are a number of 'common sense ' considerations  around valuing the business purchase

 

Financial statements of the business, both from a historical and interim perspective should be reviewed from a viewpoint of sales revenue growth,  profit, and operating cash flow - Every industry has different dynamics around supply and demand, key competition and how the company behaves in the overall general economy. 

 

The ability to determine growth potential will often be a key factor in the final price determinant when the buyer considers a purchase.

 

Asset-intensive businesses are dramatically different than service-based businesses - In many cases assets should be valued, potentially with the use of a third-party appraiser when considering key assets such as equipment and technology. In the new economy, many business valuations focus on intangible assets around patents, intellectual property, and the ability to generate recurring revenues.

There are a number of standard business formulas around valuation, including projection of cash flows and profits, or in some cases comparing valuations with other companies in the same industry if that information is available.   Replacement costs must be factored into any valuation decision as it relates to depreciation, etc.

 

  

PLAN YOUR BUSINESS CAPITAL STRUCTURE IN ADVANCE   

 

Suffice it to say, but often forgotten by many in business acquisitions, it’s critical to start assessing financing solutions for a business purchase well in advance of when funds are needed. The analog we could also use is getting '  pre-qualified ' for a home mortgage, which then gives the buyer both security and negotiating power when it comes to price, or in our case, ' valuation.' That final financing structure will dramatically affect the future growth strategy of the business.

 

MANAGEMENT & BUSINESS EXPERIENCE ARE REQUIRED!

 

Management depth and experience is also critical to your financing in a business acquisition loan search. Your lender/lenders, whether that is a bank or a commercial finance firm / asset-based lender, will want to know the ability you can demonstrate to properly manage and run their business - with their focus on getting repaid!

 

That goes for both traditional and alternative sources of capital, as both are used to finance a company's purchase. Whether it's leveraged buyouts or a management buyout, your ability to demonstrate business expertise to banks or commercial finance firms in your industry is key.

 

  

DEBT AND EQUITY COMBINATION  

 

Without getting too technical on some higher-level business concepts and jargon around ' debt ratios '  and financing acquisition with debt it needs to be clear that you understand the capital structure and debt and equity. Those latter two points are of course your 2 sources of finance to properly execute your transaction. It's critical to demonstrate in your business plan and projections of cash flows that repayment of debt can be addressed properly.

 

SOURCES OF DEBT FINANCING FOR YOUR ACQUISITION

 

Debt financing in your acquisition deal will come from commercial sources such as banks and finance companies. In the case of banks, many smaller transactions can be financed under the Government Small Business Loan's auspices. Major changes to the program, including removing previous borrowing limits, make this option, aka, the 'SBL ' very attractive. The Canada Small Business Financing program is our Canadian version of the popular U.S. ' sba loan' with an attractive interest rate and repayment flexibility combined.

 

THE EQUITY FINANCING COMPONENT - YOUR DOWN PAYMENT/PERSONAL INVESTMENT IN YOUR TRANSACTION

 

The other side of debt in your transaction is equity. Family, Angel, and private investors will demand ' shares’, diluting your own ownership. This then becomes the difficult balance act of sourcing the right amount of debt and equity. Naturally, if your own investment into the firm, along with debt will cover the transaction no ' dilution' of your investment will be required. Entrepreneurs invest from their savings, retirement accounts, or other sources of personal investment.

 

  

ASSET SALE OR SHARE SALE?  

 

By the way, ' share sales' are difficult, if not impossible to finance given the bank or finance company has no way to liquidate or monetize their loans. Going public is of course a whole different story.

In some cases real estate might be a key component of your deal - typically real estate is held in another company under some holding company scenario.

 

FUTURE FINANCING NEEDS POST-ACQUISITION!

 

While many owners focus on closing the acquisition, they sometimes forget to focus on the newly acquired business's working capital and cash flow requirements. That’s a recipe for failure with a proper focus on cash reserves on an ongoing basis for day-to-day funding needs.

 

7 WAYS TO FINANCE A BUSINESS ACQUISITION AND SUCCESSFULLY BUY A BUSINESS IN CANADA

 

As we have said the senior lender is a key focus of your acquisition strategy.

 

Debt financing from acquisition financing lenders  can come from:

 

Canadian chartered banks - bank loan, term loans, operating lines of credit -

 

When considering a bank term loan for the acquisition the senior lender will typically take the first position on all the assets of the business - bank interest rates offer the lowest interest rates in Canada.

 

Banks tend to be the ' go-to' for many business people/entrepreneurs looking to purchase another company. Bank loan approval will focus on key financial metrics in the business such as sales revenues, profits,  and cash flows required to pay down financing and fund day-to-day operations

 

Banks also place significant emphasis on the financial background of the buyer, including areas such as net worth, personal credit history,  and business experience. In certain cases, the bank will ask for external collateral as well as personal guarantees.

 

A solid business plan will usually be required - 7 Park Avenue Financial prepares business plans for clients that meet and exceed bank and commercial lender requirements,

Every industry has its own operating dynamics and the bank lender will focus on general industry conditions.

Many business people often express concern about the complications and delays that might come from a bank term loan acquisition so buyers of a business should be prepared typically for a total time commitment of several months when it comes to bank financing/loan approval.

 

Government Loans

 

The Canada Small business loan program is offered by Canadian banks and credit unions and can be used to facilitate a business purchase for small transactions in the  500k -1 Million dollar range

 

The government allows a participating financial institution such as a bank or business-oriented credit union to help small businesses finance or acquire a business venture with a limited personal guarantee and a smaller personal equity investment. It is a great way to purchase an independent business such as an existing business such as a franchise.

 

The credit report of the owner plays a key role in credit approval on government loans. The federal government loan guarantee eliminates the need for raising capital as many smaller businesses can't access angel investors or approaching firms who only wish to make significant investments. The program also finances real estate as an alternative to commercial mortgages and secured loans from traditional lenders- Guarantees and safety measures for the banks are in place under the program

 

Asset-based lending/leveraged buyout-

 

Acquisition financing via an asset-based lender will typically be a combination of a term loan and a revolving loan tied to the business's assets  - The revolving loan will fund current assets such as inventories and accounts receivables. Typical term loan structures from the bank and asset-based lenders will carry a 5-year amortization with potential refinancing/renewal flexibility.

Interest rates will vary based on considerations such as your transaction's overall credit quality, type of financing needed, amount of financing and repayment terms structure, the appraised value of the asset base on the balance sheet, etc.

 

Equipment Financing -

 

Equipment financing is used by 80% of  North American companies purchasing assets - All types of assets and technology can be financed under capital leases and equipment loans where the lessee chooses to own the assets at end of the lease term - Companies also have the ability to enter into operating leases which is a better method of using assets versus owning them.

 

Acquiring business assets through lease financing preserves existing credit facilities and helps a business maintain cash reserves.

 

Term acquisition loans from Canada's crown corp. bank -  bdc offers acquisition funding solutions for the business transfer of  ownership financing - Talk to 7 Park Avenue Financial about bdc loan requirements

 

Mezzanine Financing -

 

Mezzanine finance is cash flow financing for firms that do not have the amount of business assets to secure additional financing. Cash flow loans have higher interest rates as they are unsecured loans.

 

 

  

Mezzaning finance soltuions are cash flow loans that rank behind senior debt - so they will come at a higher interest rate / financg cost - They can complenent the capital structure of a businss and the financing focues on the cash flow generation ability of the company, as cash flow loans are unsecured . 

SELLER FINANCING

Financing the purchase of an existing business might include a seller financing component via the target firm. The seller finance/vendor takeback part of your transactions reduces the amount of debt you are required to take on, and, if properly structured, is viewed positively by banks and commercial lenders as part of a loan to buy a business. A lot of creativity can go into a seller's note to help fund a final transaction.

 

KEY TAKEAWAYS -

 

Often business purchase transactions will include a combination of different types of funding to form the optimal debt structure.

Purchasing a business is often considered a better strategy than the start p process and often offers more opportunities and less risk with additional flexibility.

Collateral and cash flow play a key role   in securing the right amount of business purchase financing

Government business loans can be utilized to fund the purchase of  a business

 

CONCLUSION

 

Acquisition financing requires a combination of the right financing structure and a cost of financing that makes sense for your transaction.

 

As potential business owners weigh their financing options traditional financial institutions as well as alternative finance firms offer a number of financing solutions based on term loans and lines of credit. Criteria for credit approval will vary based on the type of acquisition financing the lender chose, as well as the overall structure required to complete the purchase.

 

Talk to the 7 Park Avenue Financial team for information on what structuring and criteria work best for your business purchase. The right combination of debt and equity will properly support your new venture.

 

If you're focused on putting the proper' fix' in place for a financing strategy in financing a business purchase and are looking for ways to properly finance a purchase of a business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you ‘juggle ‘ those solutions into a successful business acquisition with financing advisor expertise you need.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION  

 

How do you finance a business purchase?

Acquisition debt financing used for buying an existing business / legal entity can come from a number of different lenders such as traditional financial institutions or alternative lenders as well as Government loans when trying to achieve the optimal financing structure - Seller financing for acquisition purposes can also be a component of the final finance structure but is less common in corporate mergers. Typical reasons to buy a business and gain control include market share and the ability to achieve economies of scale via the purchase of the target company.

 

Click here for the business finance track record of 7 Park Avenue Financial

Tax Credit Loans For SR&ED Credits In Canada: Finding Your Way In SR ED Financing

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FUNDING YOUR REFUNDABLE TAX CREDIT SR ED CLAIM IN CANADA

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

SR&ED FINANCING FOR R&D PROJECTS IN CANADA

 

 

SR&ED Debt Finance Loans In  Canada for SR&ED Tax Credits - Canada's R &D refundable credit system seems to pose challenges for some clients looking to monetize, via SR ED financing, their SR ED claims.

 

Does there have to be a problem? We don't think so.  Want to learn more about how you can fund your r&d and how sr&ed financing can revolutionize your r&d spending? Then let’s dig in!

 

 

 

UNDERSTANDING THE GOVERNMENT OF CANADA'S SR&ED PROGRAM  - HOW CAN SR&ED FINANCING HELP YOUR BUSINESS

 

Of course, SR&ED credits are available via the government's Scientific Research and Experimental Development Tax Credit program.  Although federal budgets in recent years have changed the program significantly from the viewpoint of streamlining the process, certain portions of the allowable refund were also cut back, i.e. capital expenditures relating to the actual R&D capital investments your company makes.

 

STRUGGLING TO FIND FUNDING FOR YOUR R&D 

 

The goal of  Industry Canada's SR&ED program is to reinforce the commitment of the government to support and motivate Canadian businesses to conduct r&d . That r&d  can come from many areas, including improving or inventing new products and processes or solving technical challenges in new or old technologies.

 

 

 

IS A SR&ED LOAN REALLY DEBT FINANCE? 

 

The term debt finance is really a misnomer, as no debt comes on the balance sheet when you monetize your sr ed claim via 7 Park Avenue Financial  - in effect you are financing an account receivable, with your client being the federal and provincial government - that receivable is turned into cash loan proceeds.

 

The irony of SR&ED is that many, in fact almost all banks don't recognize sr&ed receivables - they view your claim as an ' intangible asset ' or an unqualified asset  in many cases -  that might be partially understandable but certainly less so if your firm regularly files claims or has a claim prepared by a competent consultant - Larger SR&ED preparers are sometimes more than willing to provide opinion letters on the quality of the claim.

 

 

HOW CAN SRED FUNDING HELP YOUR BUSINESS 

Along the way, in the sr&ed process, your business is accruing  sr&ed  tax credits as you spend on materials and incur operating expenses on your r&d project/projects.  While Canada Revenue Agency has improved its commitment to review and audit ( if necessary)  claims the reality is that extended wait time can significantly impact a company's cash flow.

 

So how does the company secure funding for their claim while they are in the work and waiting process - The answer is sr&ed accrual loans which you can draw down regularly based on your cash flow needs and accrued spending.  That ' smoothing process' in your cash flow is a major financial benefit to any business, particularly early-stage firms, some of which are even in the pre-revenue stage.

 

Naturally monetizing your sred tax credit does not in any way dilute equity ownership - That allows the company to not have to take o more expensive financing that might be in the form of long-term debt or more expensive alternative financing such as short-term working capital loans, also known as  merchant cash advances/ 'mca's"

 

  

 

SR&ED FINANCING IS THE LOGICAL SOLUTION TO MORE EQUITY FINANCING - HERE'S WHY    

How does sred financing differ from other types of Canadian business financing? 

 Debt financing is almost always a lower cost of funding a business versus owners having to give up additional equity - Even though loans or credit lines have interest rates and financing costs, new equity holders have a claim on the ownership of the business and all future profits.  Payments on loans are tax deductible, and the reality is that many firms working on r&d do not have the financial strength to successfully receive additional business financing - In a red loan the collateral of the loan, which is just a short term loan, is.. the SR&ED claim itself!

 

Companies do not have to be profitable in order to qualify for sred funding, and no personal guarantees are required. If your firm qualified for sred tax credits you are eligible to finance your claim - SRED financing for international r&d qualifies if the work is performed and funded in Canada under CRA guidelines. Sred financing is different from other grant and loan programs because it is a monetization of an asset and brings no long-term debt to the balance sheet - A common misconception about sred financing is that it is expensive but it is a low-cost business financing in a number of ways - Talk to the 7 Park Avenue Financial team about why sr&ed financing makes sense.

Companies can get 75% of their filed or accrued claim and claims can be funded in a matter of a couple of weeks - Very basic company info is required to apply, including information on your business and the actual claim.

Are there any difference between SR&ED and other governmental funding options? The other similarly large government funding solution is the Canada Small Business Financing Program, which is a lump sum term loan program which funds equipment, leasehold improvements, technology needs, as well as new changes ot the program which includes working capital and lines of credit - Talk to the 7 Park Avenue Financial team about SBL loans.

 

 

WHO PREPARES  SRED CLAIMS? WHAT IS THE ROLE OF THE SR&ED CONSULTANT?

 

In Canada, the majority of tax credits/claims are prepared by independent consultants - they are known as ' sr&ed consultants'.These sr ed claims are filed, of course, in conjunction with your year-end tax return.   Retaining a good preparer for your claim is one part of the financing process of a claim. In the past couple of years, a lot of focus was placed on the way consultants bill and prepare claims - the majority of which are on a ' contingency' basis, which in hindsight probably caused some bad behaviour by a small few.

 

There are many advantages to using a sr&ed consultant - they are typically very experienced in your industry and can propose the right strategy on filing a claim and what supporting material and write-up will be required to support the claim approval - Sred claims are typically positioned uniquely to each firm and its work in research and development and claims will reflect payroll records and purchase invoices and proofs of payment from the company accounting records.

 

While some consultants charge regular fees for their time and work many works on a contingency basis at competitive rates which furhter enhances their belief around the approval and credibility of your claim - Canada revenue agency reviewers are aware of the role of sr&ed consultants.

Because of the nature of the breadth of  r&d in the Canadian economy, many consultants specialize in  certain industries such as software development, agriculture, manufacturing, oil and gas and multimedia/

 

We encourage all clients to consider whether they are eligible for the SR&ED  refundable tax credit and focus on filing the claim promptly as there are some deadlines in place under the program.

 

 

BILLIONS OF DOLLARS ARE REFUNDED TO CANADIAN BUSINESSES ANNUALLY UNDER SRED 

 

Refundable credits return billions of dollars to Canadian corporations each year.  Your ability to cash flow or monetize your claim makes the program complete in some way. Your company is in effect ' fast-tracking ' the cash flow return to your company by filing and financing your claim.

 

WHAT TYPE OF COMPANIES CAN APPLY FOR SR&ED

 

The majority of businesses in Canada that apply for s&ed are private firms, aka ' Canadian-controlled private corporations (CCPCs)", but even foreign-owned firms that do the r&d in Canada are eligible - Applicants can also be proprietorships and partnerships.

 

  

HOW DOES A SR&ED BRIDGE LOAN WORK?  

 

How then are the claims financed? It certainly doesn't have to be problematic if you have some expertise backing the process.  A simple business application starts the whole process - typical info needed here is a copy of your claim, information on who prepared it, as well as your business financials.

 

As you are accruing your spending and qualifying for sr&ed tax credits you have the ability to accelerate funding of your claim, smoothing out the cash flow process and continuing to not have to consider alternative equity or long-term debt finance solutions. Business owners and financial manager can plan their accrual loan advances as they forecast their cash flow needs - as an example, a company can choose to access funding on a quarterly basis for example.

 

 

WHAT IS THE COLLATERAL REQUIRED FOR A SR&ED BRIDGE LOAN?  SPOILER ALERT - IT'S  YOUR SR&ED CLAIM!

 

We note here that many firms that complete claims range from start-ups to firms that are still in the early stages of revenue. So it's important to understand that the key collateral under SR&ED financing is in fact, just the claim itself. In effect, you've created a (government) account receivable and are only financing /monetizing that specific A/R.

 

 

  

CONSIDER A SR&ED CREDIT LINE TO PRE-FUND YOUR CLAIM  

 

The newest trend in tax loans for SR&ED financing is the ability of your business to, in effect, pre-finance your claim - you are reimbursed for funds you are spending during your spending. That fast tracks the return of R&D capital even faster. Talk to the 7 Park Avenue Financial team about how the process to get sred funding has never been faster

 

 

 KEY TAKEAWAYS IN  SR&ED LOAN FINANCING   

 

Any business spending in r&d  is eligible to apply for sr&ed financing for their sr ed expenditures

Small businesses can apply for sr&ed refund also

Many firms applying for sred are startups or in pre-revenue, although medium size and larger firms also qualify for sr ed tax incentives

SR&ED loans are a financing option for the refundable tax credit

Almost every industry in Canada can qualify for r&d, including  IT and software development areas of the economy, biotech, manufacturing, oil and gas, and those focused on  the new economy such as carbon credits

 

 

  

  

 CONCLUSION  

 

     

Take your company to the next level by accessing sr&ed funding for r&d projects - Keep growing the value of your business and unlocking the full potential of your business's value!

 

  

Does your firm qualify for sr&ed finance? If your firm makes investments in research and development and if you're looking to avoid any ' problems ' associated with financing SRED CREDITS, seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor at 7 Park Avenue Financial and let us help. Our specialty is helping you fund refundable tax credits -  The probable result is - Problems gone!

 

 FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

 

What is the SR&ED Program In Canada

Formally called the  Scientific Research and Experimental Development (SR&ED) tax credit sr ed tax incentive for work done in the area of scientific or technological uncertainty delivers a refundable investment tax credit for companies who conduct research and perform basic research and systematic investigation for the purpose of scientific or technological advancement. In some cases, this might mean products for new or improved material during the tax year at which point eligible expenditures are filed by Canadian businesses under the reporting deadline. SR ED eligibility criteria are determined as set out by Canada Revenue Agency and there is income tax payable on the sr&ed claim.

 

Most companies will have third-party technical consultants called ' sred consultants' who determine eligible material costs as well as eligible salaries and subcontractor fees and overhead costs related specifically to the R&D project. There is a reporting deadline that is the same as the fiscal year tax filing. Canadian businesses can take advantage of SRED as well as other corporations that are foreign-owned.

 

Federal and provincial tax credits are combined under the Sr ed program to encourage Canadian businesses to perform r&d for innovation and advance scientific knowledge - Companies claiming Sr&ed must ensure their market research qualified for this tax incentive program and work is reviewed by financial reviewers at CRA under the income tax act in Canada. Companies that wish to finance sr&ed claims through commercial finance companies take advantage of non dilutive funding.

 

HOW CAN  A BUSINESS BENEFIT FROM SR&ED CREDITS

 

Companies performing r&d can claim a refundable investment tax credit for qualified sr ed projects and expenditures set out in the program via their sr ed project, regardless of whether the r&d was successful as a final outcome around the scientific knowledge the company was pursuing.