Independent Film Financing via a Film Tax Credit Finance Strategy

One of the best lines we have ever read on our subject of film financing for Canadian productions is as follows, and we attribute it to on of Hollywood’s more astute observers and reporters on this subject - the line is as follows:

‘Have you ever wondered why the U.S. looks like Canada in the Movies? ’!!

We love that line and the answer to that question mostly revolves around 3 words - Tax Credit Financing.

Whether or not you subscribe to the idea that independent (‘ indie ‘ ) film financing,(and of course we are talking about independent televison project financing also ) is dead our basic point is simply that tax credit filing, and the financing of those tax credits has never been more popular than in the current environment in Canada - 2010 .

Tax credits can finance a very significant portion of your production, in particular whats known as ’ below the line ’ budgets. By employing a specific quota of Canadian actors and resources and filming locations, and utilizing the point system in place, you can recover a large amount of costs, and, if you choose you can finance your tax credit claim prior to receiving a final cheque from the government.

The key tax credit involved is of course the ’ Film Production Services Tax Credit ‘, which covers a large portion of labour cost. As great and in some cases greater per cent age amounts can be recovered on digital animation projects related to your production, or as separate entities themselves.Some of the basic rules are that key personnel such as actors and directors must be from Canada.Several thousand products have been done in Canada - no one can of course say that tax credits were the sole reason for these productions, but we can venture to say they were in many cases a primary decision driver.

As industry professionals and participants are aware of some of the key elements of financing your project - those include proper budgeting and accounting via reputable staff and parties.

Revenue and cash flow, pre and post production comes from foreign pre sales, your own equity, bridge loans, gap financing, and of course tax credit financing.

How are tax credits financing in film, TV, and digital animation. Your project of course must be certified and eligible for the credit being financed - that is only common sense. It also makes sense to have a separate legal entity in place for each project - the lawyers call this a ’ SPE ’ - Which stands for Special Purpose Entity.

It is critical to work with an experienced, credible, and trusted tax credit financing advisor, lets call he, she, or it the ’ Film Financing Company ‘. Film financing sources are a great way to finance your projects. Your credit can be cash flowed, or ’ monetized ’ when it is filed, and, if you have some credibility and good accounting and up to date filings for your project you might be surprise to know you can receive funds, via a loan, prior to the actual filing.

Utilized available and popular tax credits as a solid source of your overall project financing strategy for your independent film, television show or series, or a digital animation project.

http://www.7parkavenuefinancial.com/Independent_Film_Financing_Film_Tax_Credit.html

Inventory Finance – Working Capital from an Inventory Loan

Canadian business owners and financial managers focus on the term ‘inventory loan ‘when they want to address this balance sheet component for additional working capital and cash flow.

While it is possible to get an inventory loan the reality is that more often than not inventory financing is a critical component of additional working capital facilities.

Let’s examine some key aspects of inventory financing and determine how you can access this unique type of financing. For starters, when you are successful in financing inventory you are in essence freeing up the cash that is tied up in that critical part of your balance sheet. When we talk to clients about working capital and cash flow financing in general the term ‘cash conversion cycle’ is one on which we place critical importance. It may sounds like a text book finance definition, but the reality is that it’s simply the formula for determine how one dollar of capital flows through your business. And that dollar of capital usually in fact comes from the initial purchase of inventory. This is in turn converted into accounts receivable, which are (hopefully!) collected and turned into cash.

The amount of time that dollar stays on your inventory line is a key part of the cash conversion cycle.
You should focus on inventory financing when in fact your investment in this balance sheet category is significant, often only rivaled by accounts receivable. We have worked with many firms who in fact have to carry more inventory than A/R. That becomes a financing challenge.

Naturally traditional financing institutions such as chartered banks don’t place a lot of reliance in their lending on their ability to secure and dispose of this type of asset. The reality is that your inventory might be in the form of raw materials, work in process, or finished goods. Depending on the lenders knowledge of inventory the ability to margin or finance that inventory becomes limited.

Inventory financing on its own tends to be a challenge – it is not impossible in some circumstances. The reality is though that inventory financing works best when it is tied to a full working capital or asset based financing facility that covers the inventory itself, your receivables, and in some cases supplemental assets such as equipment or real estate .

As a cautionary note we must add that for your inventory to be financing you should be able to demonstrate that it ‘ turns ‘ , and that there is only a very small per cent age of obscelescence attached to this asset category . You can quickly determine how fast inventory turns by going to your income statement , taking your ‘cost of sales ‘ line , and dividing it by ‘ inventory on hand ‘. So what is a good turnover number? The answer is that it depends on overall industry benchmarks for your type of business. A grocery store might turn over their inventory many many more times more often than a manufacturing company with a complex builds process.

We should also add that inventory becomes more financeable when you are running a perpetual inventory system and you are able to demonstrate you have a solid handle on what is on hand , and provide reporting in that regard .
Speak to a trusted, credible, and experienced financing advisor in this very specialized area of business financing – that will allow you to determine if your inventory is currently properly financed, and, if not, what financing options are available.

--

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 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .
For info on Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/Inventory_Finance_Working_Capital_InvenTORY_LOAN.html

SR&ED Tax Financing - Cash and Working Capital for your R&D Credit

SR&ED Financing, (also often pronounced ’ SRED Financing’ ... we’ll use the term interchangeably ) is a tremendous way for Canadian firms to monetize their research and development tax credit claims in order to generate additional cash flow and working capital for their business .

It is of course common sense that to finance a claim and get funds now you have to have a claim filed! Canada’s sred program and absolutely one of the most positive, beneficial and proactive non repayable grant programs that exists in Canada, bar none.

Over the years we have met with many clients who, unfortunately, haven’t even heard of the program, at that same time for years they have been allocating considerable funds to research and development in manufacturing, software creation, etc. We say software for a specific example, because in many ways it is one of the most obvious areas for sred, and your ability to generate a sred loan against software development is virtually almost guaranteed. But our point simply is that any R&D you do probably can be assessed for research and experimental development - That’s where the acronym comes for Scientific Research and Experimental Development = S R E D!

Many professionals in the SRED area advise our clients that out of the several billion dollars that the government hands out now for the program that almost twice as much remains unclaimed by Canadian business simply for the fact that firms have not heard of the program . One of the key cornerstones of the program is the term ’ uncertainty ’ - if your firm is working on products, processes etc and is unsure of the final result , and funds are expended against that research then clearly that’s SRED !

Well up to this point we have talked about the program, detailed when it is available, now let’s focus on generating cash for our R&D expense.

You have two options after you have prepared a sred claim and filed it. They are not very complex options:

1. You can wait for your technical audit, financial audit and the government cheque, which will of course arrive many months down the road. If it is your first filing the process will take quite a bit longer.

2. You can finance, or ’ discount’ - we can even call it ’ factor ’ your sred to generate a sred loan for immediate working capital.

SRED Loans can be generated immediately after the filing of your claim. Many of our clients actually start the financing process earlier, and the reality is that funds could be advanced exactly at the time of filing. Many firms are very surprised to hear that in certain circumstances you are actually eligible to receive funds during the year, prior to filing - We have termed this process as ’ accrual sred financing ‘. A few more criteria are attached to this process, but isn’t it a great idea to know that your R&D could be funded along the way as you dispense your own capital for the projects.

’Whats involved in a SR&ED financing’? Clients ask. To keep things simply we simply advise that they should view a sred financing in the same manner they view and business financing or working capital financing application. It’s a clear defined process which is as follows:

- Prepare a SRED claim (more often than not with the help of an external consultant)
- File the Claim
- Complete a business financing application

It’s as simple as that. Typical back up documentation and due diligence that you would associate with any financing of your firm applies.

Oh, and a final question we always get - How much can I get and how do payments work. The good news is typically there are no payments made, you get usually around 70% of the claim value on approval, and the balance could be called a holdback or buffer. When your cheque is processed by the government and the grant is mailed to you the additional 30% is of course released, less the financing charges.

Consider monetizing your SR&ED claim for valuable cash flow and working capital generation.

===

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 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .
For info on Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/sred_tax_financing_sred_loan.html

How To Finance A Franchise – Your Options and Risk

Entrepreneurs who wish to purchase a new or existing franchise are always asking us ‘What are my Financing Options?”. The ability to choose the right financing option (in reality it is the right mix of financing options) is one of the most important aspects of your entry into the purchase and running of a successful franchise in Canada.

It is of course very rare that a franchise can be purchased for all cash, as the amounts involved can be very significant. And in fact, as we will demonstrate, in many cases that would actually be the wrong thing to do. Even the largest and most successful corporations in the world take on debt, there is good debt and bad debt of course (as consumers we now that also. By utilizing the right mix of debt and your own equity you can properly ‘leverage’ the business for greater rewards and returns.

We will use a quick and somewhat blatant and unrealistic example just to illustrate our point. Let’s say that you wish to purchase a franchise for 250,000.00, which is certainly not an uncommon amount. You have the option of paying cash for it (lets pretend!), or you can put 10,000.00$ down and borrow the rest. At the end of one year your franchise nets 20,000.00 in net income, let’s assume. If you had only put in 10,000.00$ of your own money you have generated a 200% return on equity. Even Warren Buffet would be jealous of you. However, had you put in 250,000.00$ of our own money you can clearly see you have many years to go before you get a positive return on your significant initial investment.

So whats our bottom line – it’s simply that debt and the right amount of leverage can be a good thing, and it’s an excellent way to measure the potential returns in any business, including your investment into a Canadian franchise.

Let’s return to our core topic, financing your franchise. The reality is that are several options in Canada to finance your purchase. Those options can relate to either a new or existing franchise – both are quite financeable. One of the main reasons you might wish to consider purchasing an existing franchise is that in some cases the track record and the assets in the business might present an easier case for financeability.

Franchise financing in Canada is absolutely a specialized type of financing. When we sit down with clients to evaluate their options d and focus on the quickest and best way to achieve franchise financing success we can summarize your financing options in the following manner –

-Government Small Business Loan – (By far the most common and popular)

-Your own personal equity or down payment (typically from 10-50%)

- Equipment and asset financing

- Working Capital Term Loan

- Operating facility for ongoing requirements

- VTB – (Vendor take back) – in some cases the franchisor or the seller of the current franchise will waive full payment and agree on a final pre agreed upon payment to be made at some point in the future

Whether you consider yourself financially astute, or if you are concerned and worried that you don’t know enough about financing in general, it is strong recommended you align yourself with a trusted, credible and experienced advisor in franchise financing. Understanding your options, picking your options, and executing on those options within your timelines is the key to franchise financing success.

---------

http://www.7parkavenuefinancial.com/HOW_TO_FINANCE_A_FRANCHISE_IN_CANADA.html

Asset Based Financing in Canada – 3 Things You Must Know

More and more Canadian business owners continue to hear about and in some cases start to investigate asset based lending as an alternative method to generation additional working capital and cash flow. This type of financing is predominantly used in the U.S. and is become much more available and popular in Canada.

When we meet with clients to discuss the benefits of asset based lending and asset based lines of credit we highlight three things they need to know. Those 3 things are as follows :

1. You need to know what an asset based line of credit is and what it is not

2. Understanding the qualifications and daily mechanics of the facility is important

3. Asset based financing pricing differs - here’s why

Let’s examine some of the key data you need to know to determine if this type of financing is form your firm, and that you can benefit from the facility. First of all in terms of what we are discussing an asset based line of credit is not an asset loan per se - There is no additional debt that appears on your balance sheet, if, for example, you were thinking this asset loan is in fact term debt. It is not. It is simply what we can call cash lending, or cash flow monetization - your firm is utilizing asset based financing as an alternative method to generate business financing. Due to tight credit conditions and the generally improving prospects of Canadian firms it is becoming an increasing attractive method of financing your firm.

An even better way to thing of it is to view it as a direct competitor to chartered bank lending in Canada, on an ’ operating ’ or revolver basis. Your firm would consider this type of financing in one of two circumstances - you don’t qualify for bank financing, or, as in many cases, you have financing in place but it simply does not supply with the amount of cash flow and working capital you need.

Let’s move on to # 2 - qualifications and methodology. In general asset based financing in the form of a revolving facility is available to any firm. We tell clients that a solid entry point with respect to financing needs is in the area of 250k and above. If you didn’t know it some of Canada’s largest corporations utilize this type of financing - if they do why shouldn’t your firm consider this alternative. On an ongoing basis you simply supply, usually monthly, reports on your receivable and inventory levels. You are then advanced funds against these two asset based balance sheet accounts.

The only difference is that in general, 99% of the time you receive higher advances on your receivables and inventory than you would from a bank. The reason is that the banks focus on traditional balance sheet, income statement and operating metrics - while an asset based line of credit focuses predominantly on one thing, the asset!

Pricing in Canada is all over the place with respect to these types of facilities. We tell clients this is for a number of reasons , one of which is simply that the Canadian market is under developed in this area and consists of some large U.S. firms, and a number of smaller Canadian firms, privately owned, who are in some cases geographically constrained or have certain limits themselves with respect to their own capital based .Pricing in Canada varies form 9% per annum, and can in fact go up to 2% per month if in fact your firm has significant challenges but could benefit from the financing . Your ability to turn assets quicker and generate more cash and profits can significantly offset any cost. For this reason we recommend to clients that you deal with a trusted, credible, and experience advisor in this area who can confidently walk you through the ’ ABL ’ (ASSET BASED LOAN) maze.

--

http://www.7parkavenuefinancial.com/asset_based_financing.html

Working Capital Financing – Commercial Financing Solutions

Working Capital Financing is forever a major challenge for small and medium sized business in Canada . And that is certainly not to say that larger corporations don’t have that challenge, it’s simply a case of having more assets and resources to deal with the same challenge.

As a business owner or financial manager the level of working capital that you need, and the method in which you achieve that financing is really what drives the solution to your challenge. It is important , in understanding your cash flow needs and solutions, to determine if your working capital financing is required due to the capital intensive nature of your business - or if you in fact simply need to ’ monetize’ , or ’cash flow ’ your assets in an effort to generate more working capital and faster turnover of those funds .

Your focus on working capital becomes even greater if your sales and profits are increasing. However, at the same time the ability to obtain business credit in Canada remains a challenge.
Bank financing has become more difficult to acquire, and many firms are looking at non traditional or alternative sources of financing to secure the funds they need for working capital.

Another hard reality of working capital financing is that most small and mediums sized business are searching for more cash flow on an unsecured basis. This type of financing is very difficult to achieve in the Canadian marketplace, certainly in the Chartered bank environment.

So what are the sources of financial capital that Canadian business owners and financial managers can investigate and potentially utilize? Let’s cover off some of the basic options - These include:

Personal savings (not high on a business owner’s priority list!)
Business Credit Cards
Factoring
Government Working Capital Term Loans - Financing Business Loan (These are cash term loans with fixed payments and rates)
Factoring financing
Asset Based lines of credit

When you are looking for working capital financing one of the key areas you can start with is your own key financial metrics. You don’t need to be a seasoned financial analyst to determine at what rate your receivables are turning over. The bottom line if you haven’t realized it yet (we are sure you have) is that receivables and inventory ’ eat ’ cash.

One key point needs to be made here, if your sales are growing at 15% and your receivables are growing at 15% that’s not a bad thing. (To calculate simply measure the ratio of these two data points) However, if your sales are growing at 15% and receivables are growing at 30% your cash flow and working capital is being consumed by the investment you have made in A/R and inventory that is not turning over. Collections and inventory turnover are a key aspect of working capital financing.

Commercial financing from a bank is the optimal solution for small and medium sized business - as have noted that is difficult to achieve. Funding a business can be complex and we urge clients to seek the advice and guidance of a respected, trusted and experienced commercial financing expert to ensure they pick the right tools to solve working capital challenges.

----------

http://www.7parkavenuefinancial.com/working_capital_financing_commercial_financing.html

Equipment Leasing Companies - Three Things You Must Know About Equipment Leasing In Canada

Most Canadian Business owners know all about the advantages of leasing business equipment and other assets in the Canadian marketplace . If you don’t know those advantages you should .

But what are the 3 things that you need to know to achieve maximum rates, terms and structures for your firm. Here are those three critical elements and information you can use to your advantage in negotiating the best lease financing for your equipment acquisition.

Here are the three things you need to know:

1. Customers get to pick their own lease rate

2. Any asset can be financed

3. Who you deal with will ultimately decide whether you have been properly successful in negotiating the best lease financing

So, clients ask - How is it possible that we as clients get to pick our own lease rate? Isn’t that impossible? Here is what we mean by that, as clients are always surprised by our comment. In fact they jokingly confirmed they would like the lowest rate – wouldn’t we all?

When we make the ‘pick your own rate ‘statement what do we really mean. Simply that all leasing firms have to be competitive to stay in business. In leasing your rate, and in fact the overall structure, is determine by your credit quality. No one knows your firms credit quality better than you the Canadian business owner or financial manager - the best rates in Canada are achieved if you have growing sales, growing profits, and growing cash flow. In fact, whether you like it or not, your ability to show historical and future cash flow generation is in fact probably, in our opinion, the largest factor in final lease approval and achieving the best rate. So, by understanding where your firm is at re balance sheet, profits, and sales growth will allow you to properly project the fact that you deserve a market competitive rate. Leasing companies do a poor job of conveying rate sometimes, they use rate factors and terminology such even industry people get confused on – those terms might include things like ‘ residual, full payout, down stroke, bargain purchase option, effective rate, ‘ etc, etc .

In most cases when assets your are acquiring are significant it is strongly recommended that you utilized the service of a trusted, credible and experienced business lease financing advisor who will work on your behalf to wade through the terms and the rates and proposed structures on only your behalf.

Let’s move on to Critical point # 2 in our info – all assets can be financed. Many firms are not aware the both new and used equipment can be financed. The financing of used equipment in Canada is a huge business. Another key point we can make here is that soft costs can often be included in your lease.

One of the largest soft cost components in leasing today is software – many are not aware that software can be financed. And when it comes to equipment for shops and plants you can often include maintenance, warranty, installation, and delivery as part of your overall lease financing strategy. Customers lay out thousands of dollars only to be told by us that they could have saved that valuable cash flow and included it in the lease.

Finally, point 3 – Leasing in Canada is fragmented and diverse. Companies do business geographically, in some cases only by asset type – i.e. computers, technology, and firms in Canada might do business here but be foreign owned and funded. Investigate who you are dealing with to ensure you have a proper match with your required lease financing benefits.
Being a well informed lessee in these three critical areas will undoubtedly guarantee you lease financing success.

-----------

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 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .
For info on Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/equipment_leasing_companies_equipment_leasing.html