OVERVIEW – Information on tax credit loans in Canada, Financing Sred and FILM production tax credits alleviate the waiting game when it comes to cash flow, working capital and investment recovery
Tax credit loans around the gov’t SR&ED program in Canada, as well as the similar credits available in the film/TV and animation industry in Canada have a lot of business owners and executives being kept up at night. Your ability to access the cash in federal tax credit programs should not be a worry, concern, or mystery that some might think it is. Let’s dig in.
Some might question why we are grouping two different tax credit programs together for our discussion. Our answer is simple – both credits are financeable, they are financed in somewhat of a similar manner, the financing in both cases alleviates the waiting for the government cheques, and again in both cases SRED credits as well as Media credits provide valuable cash flow and working capital to current and future projects in either R&D and Media.
We think we can be further forgiven on that issue simply because it’s very possible to actually file SR&ED claims in film, animation being a good example of that.
Whether Canadian taxpayers like it or not these two programs provide Billions of dollars every year to claimants of SRED or Media Credits. In the film industry that has garnered Canada the reputation of Hollywood North, and in SR&ED Canadian firms strive for innovation and market leadership in their industry and niches.
Let’s take a look at the SR&ED program as it relates to preparation and financing of claims. It’s important to ensure your claim is eligible, and both the government and the financier of your claim wants to minimize questions and fast track approval. Here the role of the SR&ED consultant is key. More often than not the consultant that prepares your claim has specific industry expertise and understands your field of endeavor.
When it comes to the financing of your claim we point out to clients that it’s sometimes more challenging to finance your claim if it is prepared by yourself. Financiers like to get a strong sense of eligibility and chances of full approval. Many clients we meet have utilized the same consultant for years and actually have good dialogue with CRA auditors on an annual basis. That’s a good thing!
In the Media/Transmedia industry (film, television and digital animation) federal and provincial programs focus heavily on providing tax credit incentives based on amount spent on productions which in turn generates taxes, employment, etc.
Again, similar to our R&D credits a combination of federal and provincial credits in Production, Service and Digital Media are available to Canadian productions and co-productions with qualified U.S. and international partners. These credits can often fund 40-50 % of a budget based on the point system that your Tax Credit Accountant calculates and presents.
Again, drawing to our similarity of these two major refundable tax credits both are financed in a very similar manner. Financings are structured as bridge loans, almost always with no payments being made during the term of the loan. A typical financing is 70% of the total value of your SRED or Media tax credit, the combo of federal and provincial claim. You receive the other 30%, less financing costs when your claim is funded by the government – the proverbial ‘ the chq is in the mail’.
If you’re looking to maximize or replenish working capital, start on new projects, or recoup owner investment consider monetizing your tax credit in these two exciting areas of Canadian business.
Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your needs around tax credit loans for SR&ED or Media. Finally, no more being kept up at night – financing your investments is a logical way out.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
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Canadian Business Financing