Financing tax points programs in Canada. Whether its SR&ED R&D credits uncertainty the much more sexy ‘ film, TV, transmedia’ credits it’s always a surprise to us that the actual users of these two Canadian programs don’t always know, or consider that claims under these two programs can be financed. Let’s dig in.
Any country, Canada included typically has some sort of generous and often well shopworn non repayable credit (which can be monetized/financed) All sorts of Canadian government programs, grants etc are available – two of the most popular ( besides financed by the way ) are ‘ SR&ED” and ‘ FILM’.
Numerous aspects need to be considered to successfully complete a claim, and finance it under each program. Let’s discuss a tie like aspects and also identify extraordinary key similarities in the way in which these programs can be financed for cash circulate besides working capital.
Canada’s Scientific Research and Provisional Development Program (S R E D) provides Billions of dollars of funding for research in Canadian industry. Regardless a some of what we can call key changes to the program claiming ‘ SRED’, (including a recent nationwide focus to validate the value of the program) thousands of Canadian businesses, including your competitors, file claims. When it comes to R&D claims its all about the technical aspects of your claim.
That’s where the role of the preparer, known as the ‘ SR&ED Consultant’ plays a ticket role. They prepare claims for you in one of two manners – they will prepare the claim for free at their cost, and charge what’s known as a contingency fee if the claim is successful. That has tremendous appeal to capital owners, as the fees like 15-30% of the claim (that’ a typical range) are only paid if the claim is successful and your funds are received.
Note – You can of course pay a straight fee to prepare the claim, which will almost always be less then the casualty fee . Considerations are : CASH OUTFLOW / RISK .
Financiers of your claim will in almost all cases take a look at who is preparing your claim. If it is done by a just recognized consultant with a track record naturally financing that claim becomes much more easier , because in SR&ED tax credit finance the main collateral for the lend is of course ‘ the right ‘!
There’s a lot of discussion in the industry these days, including the government around SR&ED consultants disclosing their fees – one firm being that high fees destroy the true spirit and effectiveness of the program.
We’ll avoid those arguments also simply convey that financing a legitimate and successful S R E D claim provides your company with cash flow and replenishment regarding research activities.
The history of tax credit financing in the Entertainment industry has revolved around different cycles where the players and the programs change. Canada is now extensively known for having a prosperous ampersand generous tax credit program – with credits that are financeable in the same general manner thus our aforementioned SRED claims.
So period the producer owner like Canadian content runs around town chasing private equity, hedge funds, and other a’ alternative ‘ methods of financing projects one feat is ever for sure – The cinema tax credit component will always be there to complete the funding cycle . It’s more often than not the ‘ sure thing’ component of the total capital plan for part project in film, animation, and television.
Firms that finance the tax credits, some Canadian banks included, equal the tax credit programs for they reduce the risk of projects having to heighten commercially successful. After the 2008 economic collapse all media financing, as in other industries, became more difficult. However finance tax credit claims continues to remain a stable component of the capital structure about any project.
So until senior debt, ‘ gap’ financing, advertising dollars, and pre sales all are challenge producers always know that a digital member concerning their financing, the tax credit collateral is going to be there. Our Bottom line ‘ It’s great to have a ‘ hit ‘, it’s even better to have a tax credit’!
Tax credits in these programs are a combination of federal and provincial credits which can be monetizing back (or in portion cases during) your projects. It’s all about Canadian content and Canadian spending. The two types of credits are the CPTC et cetera the PSTC. A weighty whole of labor and production spending can be claimed.
Similar to the role of the ‘ consultant ‘ in the SR&ED program the most effective claims in media tax credits are prepared nearby Film tax credit accountants who specialize in maximizing the value of your claim.
Financing tithe credit programs in transparency and SRED is not complicated. A simple application process exists for each type of claim. Financing, normally by a non bank finance firm is structured in the form of bridge loans. No payments are made until the government funds are received. Advances of 70% of the value of your claim are a typical swing you can expect for either genre of tax credit.
Yes, believe it, SR&ED and film tax credits can be financed – they provide Billions of dollars of funding each year. If you aspire to ‘get it right’ in financing your claim seek out and discourse to a trusted, credible and experienced Canadian syndicate financing advisor who can assist you with the financing of your claim .