Best Sr&ed Loan Tax Credit Financing Sred Finance Solutions !

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS!

Alarm Clock Ringing On Your SR&ED Claim?  It’s Time To Cash Flow It!

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

 

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

 

 

 

Maximize Your Return ON SR&ED Tax Credit Financing 

 

 

 ' SRED '  Financing in Canada is all about using tax credit financing for the right reasons. Maximizing Canada's  r&d program via a SR ED loan is all about reaping the program's final benefit -  ' Cash '  Let's dig in!

 

It's important to view financing your SR&ED credit in the sr ed claim process as an option that's your choice as a business owner/financial manager. It's simply one more way to assist in both the R&D portion of your business as well as your business's general financial health. Simply speaking, being eligible for the program makes you eligible for the financing.

 

 

  

WHAT IS SR&ED / ‘SRED ‘ FINANCING

   

 

SR&ED Financing is your firm's ability to take advantage of the  SR&ED (Scientific Research and Experimental Development) program to support research in Canada. This  Canadian federal tax incentive program provides refundable tax credits to Canadian companies, with the program being administered by  Canada Revenue Agency (  CRA) -

 

The program allows  Canadian businesses to innovate and focus on business growth with the help of financial support for businesses that focus on R&D .  The program requires that basic research done be in the areas of applied research and experimental development in any of Canada's industries - Common industries utilizing e program include technology, natural sciences, and engineering.

 

 

  

UNCOVER THE UNTAPPED POTENTIAL OF  SR&ED TAX CREDIT FINANCING FOR INNOVATION  

 

Sr&ed  financing for small businesses includes larger corporations as well, and even non-profit organizations can participate and utilize these tax credits and cash refunds for their sr ed project that allows them to fund their businesses and pursue additional r&d activity.   SR&ED financing solutions are a valuable alternative to companies having to consider raising more business capital because it is non-dilutive and allows owners to maintain current ownership. Many early-stage and pre-revenue companies use Sred financing to help increase current ownership valuation.

 

 

Sred is termed non-dilutive funding as the financing of your credits are short-term financing that does not dilute the ownership of your business. Financing is in the form of a bridge loan and does not require owners to give up additional ownership of the company at a critical stage when the full business potential has not been realized and the business owner wants to retain ownership of the company.

 

 

 

TAKING ADVANTAGE OF THE SR&ED TAX CREDIT HELPS REDUCE THE CASH BURN RATE  AND OPTIMIZE CASH FLOW

 

Your company cash burn rate is the amount of cash your firm uses as well as the speed in which that cash is consumed - A large number of firms utilizing the SR&ED tax credit program spend significant dollars over a long period of time before positive cash flow and strong revenue are achieved. That negative cash flow is a concern for all business owners and is even more of a challenge when cash is limited and they can't access traditional capital. The ability of a company to achieve a trend to more positive cash flow is a key benefit of companies that utilize SR&ED loan financing! Your business model continues sustainable!

 

 

HOW DO SR&ED TAX CREDITS WORK  - HOW SRED CREDITS CAN HELP FINANCE YOUR BUSINESS

The SR&ED program is formally called the Scientific Research and Experimental Development program and it provides tax incentives to Canadian firms doing r&d. Businesses claim credits for a portion of the qualified expenditures related to the r&d work they faced in technical challenges.



The tax credits are for items such as salaries/ wages and items such as materials of payments made to subcontractors under their research work as long as those contractors are at arm's length of the business. Provinces and the federal government combine these refundable tax credits which can vary based on the provincial portion of the claim.



Companies can claim Sred credits by filing at ear end under form T6661 from CRA -  That form is filed with the firm's annual financial statements. The company must demonstrate the r&d done is technological in nature and is focused on the advancement of knowledge and capabilities around products and processes.  Claims are accompanied by detailed reports about expenses and work done.


 

 
WHAT ARE SR&ED CONSULTANTS  &  WHAT ARE SRED CONSULTANTS? 

 

SR&ED Consultants help businesses to successfully navigate the government Sr&ed program to allow a business to successfully claim investment tax credits for r&d.  Do you need to use a sr&ed consultant?  These consultants have the technical knowledge and help identify projects that are eligible for the sred program as well as actually prepare and file sr&ed claims on behalf of the company.

 

In many cases, they assist clients with any potential audit of the claim as well as provide ideas and advise on how to maximize the incentive provided under the program for work in scientific and technological uncertainty and in demonstrating how the company furthered technical knowledge. They will help demonstrate your hypothesis using consistent scientific methods including if your effort did involve formulating testing and modifying that hypothesis and if the adopted procedure was consistent.

 

Was a hypothesis formulated specifically to reduce or eliminate uncertainty? Was the procedure used consistent with the scientific method, including formulating, testing, and modifying the hypothesis?

 

Refundable SR&ED credits are of course for privately owned companies in Canada. They, along with their counterpart, film credits are administered by CRA - Canada Revenue Agency.

 

Financing your SRED claim is all about cash flowing your refund - many businesses that utilize the program are at various stages of what we can call their ' life cycle '. In fact, many firms that choose to monetize their claim are in a start-up or very early stages of development.  It's at these times that cash flow and working capital are most important.

 

What then are the typical uses of cash when financing your R&D claim for Canadian controlled private corporations? Typically they include:

 

Funding additional research - many companies have an ongoing R&D program annually.

 

Utilizing the funding to move their R&D into new markets - aka Revenues!

 

General working capital needs - payroll, supplier commitments

 

Financing growth via new orders/contracts, etc

 

If you have those needs that is when you should use sred financing!

 

Some clients we meet often speak of the additional time commitment required to prepare the claim. Naturally, a lot of that time commitment can be eliminated by both having documentation in place, and even more importantly ' tying your horse ' to the right SR&ED consultant - it's these folks that prepare the claims for this industry.  A good consultant will maximize your claim.

 

Utilizing the right consultant adds legitimacy to your claim - and categorically speeds up the process both in writing your claim and ensuring it moves through the govt processes at  'warp speed.' Businesses will appreciate that not all govt programs move at warp speed!!

 

By the way, if you're looking for proof of the benefits of the program you need only understand that thousands of firms just like yours (including your competitors) reap almost 3 Billion dollars a year in refunds for their work in overcoming technical challenges in their industry.

 

A  SR ED loan is all about needing, and getting your money now. It's your chance to beat the ' waiting game ' as refunds can take anywhere from  3-12 months depending on the complexity, size and filing time of your refund claim. In fact, the entire finance process can take only a couple of weeks to receive funding when you're working with the right firm

 

 

EXAMPLE OF A SRED LOAN FINANCING  

 

SRED Finance typically monetizes 75% of your total claim. For example, a 400k claim will net you 300 k in loan proceeds. That's how much you can borrow against SR&ED claims when you qualify for sr&ed financing.

 

Really the simple way to look at it is to view the SR ED claim tax refund as an account receivable of your business - and you're simply borrowing against that asset. By the way, the financing costs of an SR&ED loan are built into one final balloon payment at the end of the loan - this is a bridge loan with no monthly payments.Your loan is paid back when your company received the refund.

 

KEY POINT -   Accrued sr ed claims can be financed before you file your year-end claim - Talk about accelerating cash flow financing!  Many firms we work with choose to take advantage of ongoing regular financing as they spend on r&d in advance of filing - an example might be every quarter.

 

 

How long does it take to process a sr&ed financing claim - Spoiler alert -  a couple of weeks!

 

KEY TAKEAWAY - CLAIMING AND FINANCING YOUR SR&ED TAX CREDIT

 

Businesses in Canada can file and claim for the  Investment Tax Credit (ITC)  for r&d they are performing under Canada's Scientific Research and Experimental Development (SR&ED) program.

 

Companies  claiming the Sred credit must identify eligible activities and expenditures and be able to provide a detailed record of work and expenses via the approval process

 

Claims are filed on Revenue Canada's T6661 form which claims the refundable credit - Claims must include documentation that supports the claim such as receipts  for material costs  and records of payroll to employees or outside third-party contractors

 

Companies claiming SR&ED should understand claims may be audited and verified to determine claim eligibility around work and records

 

 

 

CONCLUSION  - GET THE MONEY YOU DESERVE BY TAKING ADVANTAGE OF SR&ED 

 

SR&ED Tax Credit Financing for small businesses is a great tool for financing research and development. Let 7 Park Avenue Financial help you in navigating the sr&ed tax credit finance process. Sred funding is a great tool to help fund startups. Government tax credit financing solutions for businesses allow you to monetize your refundable tax credit and maintain good cash management. No minimum filing history is required - first-time applicants are welcome!

 

If you're looking to ' think differently ' on your SR&ED refund and want to consider the benefits of financing that claim today speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs. We'll show you how Sred finance solutions are achieved in a fast, flexible, and low cost manner!

 

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

 

How much Can You Get From Sred?

The actual amount a company can claim under the SR&ED program will vary depending on each

business's project and the refundable tax credit is a combination of federal and provincial tax
incentives around the eligible expenses under the program. Depending on the province where the r&d is done different credits are applied - any investment tax credit under the program can be claimed by a private Canadian-controlled corporation, known as a  CCPC.

 
Is Sred a government grant?

 
The Scientific Research and Experimental Development (SR&ED) program is not grant per se, it is a tax incentive via an investment tax credit - The program allows Canadian businesses to invest in R&D in every aspect of the Canadian economy - small businesses and even large corporations can access the program to get financial assistance to conduct research and development in Canada. The key benefit of the program is it allows businesses to claim a refund for a portion of r&d that has been spent under eligible guidelines.

  

IS  SRED AN INVESTMENT TAX CREDIT 

The SR&ED) program is an investment tax credit and allows companies in every part of the Canadian economy to conduct r&d and claim tax credits for a large portion of expenses related to the research and development they conduct.

 

This incentive allows a company to reduce taxes and recoup a large portion of items such as wages and salaries and materials and other expenses related to the research. The percentage claim varies but can typically be in the 35% range. Software development is a large part of Sr ed claims.

 

Qualifying expenditures also include payments to third-party contractors and overhead costs related to the research in scientific or technological advancement. Companies are required to maintain complete details around the r&d, utilizing manuals as an example. Typically sr&ed consultants that the company engages to prepare a claim will ensure expenses incurred that are not eligible will not be submitted with the claim.

 

 What is the digital media tax credit?

Canadian game developers are eligible for the digital media tax credit in Canada. The program provides tax incentives to businesses developing and producing digital media - examples include video games, mobile applications and animation. The government's goal is to encourage the development of innovation in entertainment while allowing businesses to offset costs in the development of these products - Similar to SR&ED the Canada Revenue Agency administers these tax credits.

 

What is equity financing? 

 

Equity financing allows a company to raise business capital via the issuance of shares of ownership in the business. Shareholders receiving ownership participate in the success of the company which is proportional to their share of ownership.

 

Financing equity can be achieved through a variety of sources including initial public offerings, known as IPO's. New equity financing dilutes the ownership of existing shareholders of the business and allows new shareholders to have a say in the business decisions and direction of the company. SR ED funding is an example of non-dilutive financing and monetizing federal credit.

What are Government Funded Programs

 

Government-funded programs in Canada include the Canada Small  Business Financing Program which helps businesses access term loans and working capital and asset financing.  This program, along with the SR&ED program are the two most popular government-funded programs for business.

What technology grants are available?       

 

Numerous technology grants are available to Canadian businesses, including the Scientific Research and Experimental Development (SR&ED) Tax Credit -

The IRAP program, formally known as the Industrial Research Assistance Program is another popular program used by businesses to develop and commercialize the technology in areas such as clean tech. The IRAP program is a good example of non-dilutive financing as grants are non-repayable in a firm's efforts to develop and commercialize the technology.

 

The NSERC (Natural Sciences and Engineering Research Council)  program funds research in science and engineering

 

 

 What is alternative lending? 

 

Alternative lending is a form of financing that is an alternative to traditional banking. Different type of financing is available to Canadian businesses, including factoring, short-term working capital loans, asset-based lending solutions, and financing refundable tax credits.

Alternative financing solutions are a viable option for many businesses including smaller firms and startup businesses. Borrowers must consider the terms and requirements for different alternative finance solutions.

 

 How much money is in the ERC program 

 

The ERC program is the acronym for ' EXCELLENT RESEARCH CANADA ' - The program provides early funding to early career researchers from provincial governments in Canada. Applicants must submit research proposals to secure funding and in order to determine if eligibility criteria are met under the program.
 

 

 

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

How Do Factoring Companies Work in Canada? Understanding the Basics of Accounts Receivable Financing

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You Are Looking for  Accounts Receivable Finance Solutions! 

The Benefits Of  Confidential Accounts Receivable Financing

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

        Financing & Cash flow are the biggest issues facing businesses today

               Unaware / Dissatisfied with your financing options?

Call Now! - Direct Line - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

  Email  - sprokop@7parkavenuefinancial.com

 

HOW YOUR BUSINESS CAN USE ACCOUNTS RECEIVABLE FINANCING

 

An effective accounts receivable finance solution has the ability to 'supersize' your overall working capital and cash flow.

 

This can be even more enhanced with a business accounts receivable finance strategy known as C I D - Confidential Invoice Discounting; a type of 'factoring' that has worked very well for our clients at 7 Park Avenue Financial. Let's dig in

 

HOW DOES A BUSINESS USE ACCOUNTS RECEIVABLE FINANCING

 

When your business uses a  accounts receivable financing solution, it enters into an agreement with a bank or a commercial finance company / factoring company. The receivable assets on a business's balance sheet represent one of the largest and most liquid assets on your balance sheet. Those receivables represent money owing to your firm for products or services you have billed to clients but remain unpaid. 

 

Most lenders view the quality of a business's accounts receivable when providing financing around working capital and growth issues. Lenders will measure asset turnover in accounts receivable as a measure of the business being able to pay current liabilities such as accounts payable.

 

Although the investment a company makes in accounts receivable is a cost of working capital the ability to convert the accounts receivables into cash is always a challenge!   Banks, asset-based lenders, and factoring companies step in to assist the business with cash flowing those receivables.

How can this business finance solution be 'supersized' then? Simply that it is highly possible that on the utilization of this type of financing, you will often double, and in some cases triple, your access to immediate cash flow and working capital. Business owners and their financial managers will be surprised to know that, in most cases, even traditional bank financing won't provide the same cash flow access as this little-known solution.


And safe to say that in some cases where you would have been self-financing or had non-financing in place whatsoever, well, your firm has it now!

 

  

SELLING RECEIVABLES / ASSIGNING RECEIVABLES- ACCOUNTS RECEIVABLE FINANCING VS TRADITIONAL LOAN STRUCTURES   

 

The majority of non-bank financing of accounts receivable in Canada is structured as an asset sale  - The documentation and factoring agreement signed by the business specifies the sale of the receivable to the financing firm.    As an example, some banks may use to choose to sell off some of their loans in the same manner.

 

The business selling the receivables receives cash for those receivables.  A typical advance rate for a non-bank a/r financing firm is in the 90% range - which is much higher than bank advances on receivables which are funded in the 70% range - That is one of the more significant benefits of third-party a/r financing.  Factoring companies pay the company the same day as the invoice is generated, and most factoring agreements allow you to finance which receivables you wish to fund - without obligation to fund all.

 

If a company is not using Confidential a/r financing, the factoring finance company assumes collections. In Confidential non notifIcation financing company bills and collects its own a/r!

 

Companies are still required to take on normal bad debt risk associated with their clients as factoring companies don't want to take on bad debt risk without charging more for their service.

 
HOW MUCH DOES A FACTORING COMPANY CHARGE? 

So what in fact, is the cost of this unique and innovative AR Finance solution, how does it work, and what can your company compare it to when assessing your specific cash flow needs?

C I D is our terminology for Confidential Invoice Discounting. 'Factoring' solutions are used by firms of all sizes (even major corporations, by the way) but seem to be more common in the SME (small and medium enterprise sector).

 

It even accommodates start-ups if you can believe it, as any type of financing for a start-up is often a major challenge for the business owner. By the way, the big boys have a fancier name for their AR financing solutions - Securitization.

Companies that sell on credit in Canada will always have an investment in their accounts receivable, often representing, along with inventories, a huge part of their overall business assets. Accounts receivable management best practices will always include proper financing facilities.

So how is that asset financed? That becomes even more challenging when traditional bank financing is unavailable. A large majority of clients we talk to don't qualify for some or all of the business capital they need via a bank.


That's exactly where business accounts receivable invoicing and discounting come in. Your ability to 'sell' those invoices as you generate them, using the A/R as collateral, allows your company to turn into an instant cash flow machine. It's all done by a fairly seamless process when you are working with the right type of facility and the best firm/financing partner.


So that’s the essence of factoring or invoice discounting, but where does our key benefit of confidentiality come in? Right about here!

The key difference between Confidential Receivable Finance facilities and business factoring is that you control your sales ledger and customer base, not the factor finance firm. That gives you superiority over other firms who use this type of financing but are forced by their factoring agreement to make their customers aware of how they are financing their firm. In talking to clients here at 7 Park Avenue Financial, that benefit is huge in their minds regarding how their competitors and suppliers might view them.

 

HOW DOES A/R FINANCE WORK? REQUIREMENTS AND APPLICATION

 

When it comes to the underwriting process, a business lender such as a receivable finance firm focuses on several key issues in approving and setting up a facility.  Several key factors affect how the financing is priced relative to financing cost. Factoring costs are expressed as fees versus interest rates.

 

Typically firms selling to larger, well-known companies or the government can get more favourable pricing based on the overall quality of the a/r.  The time that a receivable is outstanding also plays a key factor in pricing and overall collection, and DSO turnover will affect factoring and financing fees.

On a daily basis, a/r financing works in the same manner as what we will call 'traditional' accounts receivable finance and invoice discounting. It’s a simple process.

 

You generate invoices for the products and services that your firm provides, and you receive immediate same-day funds for 90% of the invoice value. (That remaining 10% is held back until your client pays, you then receive the 10% less a finance fee of anywhere from  .75 -1.5% per month).

The way our clients look at it is that the 1-2% per month reduction in gross margin is more than offset by all the cash flow their sales generate - allowing them to run and grow the company on an ongoing basis.

ADVANTAGES OF  CONFIDENTIAL INVOICE DISCOUNTING

Clearly, the advantages of this type of business financing couldn’t be more pronounced :

- Financing is approved quickly

- Easy to administer

- Your company bills and collects its own a/r!

-  Improved cash flow  - Cash flows generated are used to run and grow the business

-  Increased working capital enhances the long-term growth potential

-   A/R Financing is flexible and tailored to business needs

-    Accounts Receivable factoring solutions can be accessed in days and do not require  external collateral

-  Financing of receivables is not a term loan structure, and no fixed payments are required

So, does a solid AR Finance strategy seem like the proper cash flow solution for your firm? Ultimately you will decide that - we're simply letting you in on the secret and letting you be the decision-maker around supersizing that cash flow.

 

KEY TAKEAWAYS - ACCOUNTS RECEIVABLE FINANCING SOLUTIONS

 

A/R Financing solutions  provide business capital for the investment a company makes in carrying accounts receivable

Financing solutions can be structured as  a loan or assignment via a bank, or an asset sale to an asset-based lender/factoring firm

 

CONCLUSION

 

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success. Get your company ahead of the pack and competitors. 

 

 

  

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION  

 

 

  

What is accounts receivable financing?   

 

Accounts receivable financing is a financing arrangement where a business receives early/immediate payment of outstanding invoices they wish to finance - In return for cash received the financing or factoring firm charges a fee. While receivables financing from a bank is an accounts receivable loan for the unpaid invoices on the company's balance sheet, financing capital is provided by a business line of credit secured by the money owed to the business.

Small businesses benefit from asset-based lending factoring solutions where they can immediately sell unpaid invoices for cash when the invoice is generated for products or services the business has sold.

 

Do banks offer accounts receivable financing?

 

Banks offer accounts receivable financing for firms selling on a business-to-business / trade finance basis. That allows a company to extend credit terms to customers and grow sales revenues - When the business provides a product or service to a client, and an invoice is generated, the bank can include the invoice in a bank receivables finance/line of credit for drawdown by the company. Banks take an assignment of accounts receivable to provide the funding, typically secured by a general security agreement on all the company assets.

What are the advantages and disadvantages of A/R Financing?

The advantage of a/r financing is the ability of a business to receive cash without going through a loan approval process or waiting for bank approval, for which many small businesses can't qualify. Factoring companies also assist in the collection of the account receivable. Accounts receivable funding solutions are an excellent choice for startups who often have financing challenges.

Historically there was a negative connotation to factoring services, but in current times thousands of businesses and even major corporations use the service. Financing costs and factoring fees are perceived by some owners as high. Still, business owners often do not consider the opportunity cost of business capital and their ability to fund ongoing operations and growth.

 

 

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

SR&ED Tax Credits - Lowest Cost Financing for SR&ED Tax Credit Loans in Canada

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YOUR COMPANY HAS CANADIAN SRED CREDITS AND WANTS TO EXPLORE THE FINANCING OF YOUR SR&ED CLAIM! 

LET SR&ED FINANCING BE THE GROWTH FUNDING YOU ARE LOOKING FOR

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

 

 

 

SRED FINANCING IN CANADA 

 

Canadian business owners and financial managers who file for SRED credits are often not aware that these claims can be financed in order to generate working capital and cash flow out of the claim.

 

 

They are even more surprised to hear that it is actually possible under most conditions to obtain financing even prior to financing the claim.

 

WHAT IS SR&ED DEBT FINANCING

 

SR&ED debt financing solutions allow businesses to monetize their  SRED refundable tax credit in advance of receibing their cash refund from the CANADA REVENUE AGENCY/CRA.  The SR&ED  credit is in effect an account receivable and the company can fund this receivable as it requires for working capital and cash flow needs. The term 'sred factoring' is similar to any commercial accounts receivable financing.  The sred bridge loan advance against the receivable is repaid when the government tax refund is paid to the company.

 

The term sred is used by many business people instead of the formal name of the program, which is the Canadian Scientific Research and Experimental Development (SR&ED) program - which is in fact a tax incentive from the government - Another synonymous term used similarly is  ' shred'

A the end of the day it's all SR&ED!

 

SR&ED TAX CREDIT FINANCING FOR R&D BUSINESSES IN CANADA

 

What could be a better working capital and cash flow strategy than getting immediate cash flow for a government grant that is non-repayable? We frankly can think of no other risk-free way to bring valuable cash funds into your company if you are utilizing this great government program.

 

 

HOW SR&ED FINANCING CAN FUEL YOUR R&D IN CANADA

 

Are you taking advantage of one of the two most successful government programs in Canada - The r&d tax incentive?  Unbelievably there are still thousands of firms every year who either don't even know about the program, let alone use it!  Talk to a sr&ed expert to determine if you are due for your share of the 3 Billion dollars + that is doled out by the government of Canada.

 

By the way - that other successful government program? It's the Canada Small Business Financing Program, which is a lump sum term loan government guaranteed financing in participation with numerous Canadian financial institutions such as  Canadian banks and credit unions.  Other programs offered by the government under grant financing are also available.

 

UNDERSTANDING SR&ED TAX CREDIT FINANCE

 

Let’s establish some bedrock around what we are talking about. The program's formal name of course is the Scientific Research and Experimental Development aka ‘SR&ED program' that is funded by the federal and provincial governments. Each SRED claim has a federal and provincial portion, and, combined, they provided you with a non-repayable tax credit for a significant amount of the funds you spend on qualifying R&D and business processes.

 

 ELIGIBILITY FOR SR&ED FINANCING IN CANADA - WHAT THE BUSINESS OWNER NEEDS TO KNOW

 

Is your firm eligible for SRED Financing?  CRA clearly outlines the criteria for the sr&ed tax incentives. It boils down to 3 key areas - your ability to demonstrate technological advancement with the purpose of enhancing technical knowledge. Secondly, there must be an element of technological uncertainty in your work and your company's ability to demonstrate your goal of overcoming that uncertainty and those technical challenges.

Finally, the firm must show the processes that have been taken to resolve uncertainty in their r&d.

 

THE ROLE OF THE SR&ED CONSULTANT

 

Many clients we work with have their claims prepared on a contingency basis – that simply is letting someone else, known as an SRED consultant, prepare your claim and let them absorb all ( yes all ) of the cost of that claim. When you finance an SRED claim you can actually arrange to have the SRED consultant paid at the same time also.

 

Sred consultants will work with you and your accountants to file the actual sr&ed claim under the year-end T6661 form which is the actual claim for sr&ed expenditures. A technical narrative of your claim should accompany the filing as well as detailed calculations and backup on sr&ed expenditures.

 

 

SRED claims continue to be on the rise in Canada, and when you couple the filing of those claims with a somewhat challenging financial environment for business financing you have a perfect storm, so to speak, for the consideration of financing your claim.

 

The financing of SRED claims is the ultimate ‘boutique' financing business in Canada. We urge clients to work with a business financing advisor who can ensure they are receivable maximum funds and market rates, terms and structures for the amount of the claim. 

 

Clients want to know how ‘complex' SRED financing is. The reality is that you should view an SRED tax credit financing in exactly the same manner as any business financing, other than to understand perhaps that the main collateral on the SRED loan is really the claim itself. We use the word ‘SRED loan' but in reality, the SRED financing brings no debt to the balance sheet – you are simply monetizing your claim for cash flow and working capital now.

 

  

UNDERSTANDING THE SR&ED FINANCING PROCESS - HOW IT WORKS  ( SPOILER ALERT- IT'S EASY!)  

 

The essence of the entire process can be simply described under the following process

 

• SRED financing application
• due diligence
• legal/documentation
• Funding!!

 

It’s as simple as that, and we advise most clients the entire process can be completed within a few weeks, which is standard for most business financings anyways.

 

  

WHEN  SHOULD YOU FINANCE YOUR SRED CLAIM?  

 

You would only want to consider SRED financing if in fact, you don’t want to way from 1-12 months, (sometimes longer) for your grant cheque from the government. As a Canadian business that is growing, you probably have much better uses of those funds now, including reducing payables, investing in even more R&D, acquiring new business assets, etc. Accrued sr ed expenditures can be financed as you spend.

 

 KEY TAKEAWAYS - SR&ED FUNDING 

 

SR&ED Refundable tax credit incentives provide billions of dollars every year in non-repayable funds  from CANADA REVENUE AGENCY / CRA for thousands of firms in Canada like yours who invest in r&d

SR&ED credits come in the form of a refundable tax credit, and for some firms such as public companies, there is an income tax deduction.

Different types of organizations can claim sr&ed credits  - that includes, most commonly CCPC's - ie private companies, as well as individuals, foreign-controlled firms who do the r&d in Canada, as well as private individuals.

Sr&ed credits can be as much as 35% of total sr&ed expenditures.

 

CONCLUSION

 

Talk to the  7 Park Avenue Financial team about how our sr&ed tax credit financing solutions  provide a solid alternative to cash flow needs for any business in Canada that utilizes Canada's sr&ed program.  We're a trusted, credible and experienced Canadian business financing advisor for Canadian businesses. The business capital obtained by this method of financing is in the form of short-term debt financing in the form of a bridge loan that does not dilute equity ownership in the critical early stage of the growth of a business.

Your firm can fund your claim after it is filed, or if you choose, financing can be provided in regular installments as you spend on r&d under better cash management

Consider SRED tax credit financing as one more toolkit you have in your overall business strategy to access capital. Work with an expert and maximize the amount of your return and the overall most effective use of that essentially free cash flow and working capital via a sr ed loan.

 

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK  MORE INFORMATION

 

 

WHAT IS THE CANADIAN SR&ED PROGRAM 

Canada's Scientific Research and Experimental Development (SR&ED) program from the Canadian government is a tax incentive under Canada Revenue Agency that helps Canadian businesses fund research and development around work under scientific or technological uncertainty - It is often a major source of revenue and cash flow for many early-stage businesses who are working on products and processes for Canadian or global markets . Companies must ensure they are eligible and that expenses file under eligible expenditures.

Firms will typically use experience sr&ed consultants to ensure they are eligible for the tax incentive. SR&ED tax credit financing options are available for companies wishing to monetize their claims in advance of refunds under the sr ed claim process.

 

 

HOW MUCH FUNDING CAN BE CLAIMED UNDER SR&ED CREDITS 

SR ED Claims can vary based on the type of firm that is applying for a sr&ed refund under their sr ed project - as claims vary between private CCPC's (Canadian controlled private corporations ) firms and other entities such as public companies. Typical claims are in the 35% range of qualifying expenses . Companies filing for the first time can receive first-time filing assistance from Canada Revenue Agency.

 

 

 

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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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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!

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Financing & Cash flow are the  biggest issues facing business today

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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