Canadian film tax credit financing. Clearly there is no secret path to financing a film, TV or animation project anywhere… Canada included… Ontario… BC… where ever. But one sure fire method of successfully completing a project is in fact your ability to monetize the tax credit.
From some of the sagas’ and stories we hear the financing of a project in any of the above mentioned genres could well qualify for a script of their own!
Producers and owners of successful projects already know that there are some key elements to the financing of any project. In a way they are not dissimilar to the financing of any business…your owner equity. Debt of some form, and in our case also, the monetization of a tax credit.
Financing of entertainment projects in our 3 genres could not be any ‘ hotter than in the current Canadian timeframe of 2012. Also, for the first time one of Canada’s provinces seems to be opting out of the tax credits – that’s the province of Saskatchewan.
If properly structured and qualified your Canadian film tax credit financing in provinces such as Ontario, BC (British Columbia) and Quebec and cover anywhere from 30-50 per cent of your entire project budget. When revenue, distribution, pre-sales and other targets are a challenge the tax credit, when properly submitted and eligible becomes the more straightforward method of financing projects.
Tax credits are often referred to as ‘ soft dollars’. The one thing we’ve always found interesting about tax credit finance is that they don’t really rely on the overall success of the project from a public acceptance point of view. When applying for and financing the film/TV/animation tax credit its very simply about meeting the technical criteria of the credit program itself.
It’s therefore all about ‘ the spend’ and the quality of the spend. And once you’ve qualified you then are in a position to monetize the tax credit – it becomes the collateral for extra cash flow. While in most cases that cash flow and working capital helps you on the current project it could of course be used for your next (hopefully successful!) production.
Tax credits are typically financed at a ‘ discount ‘ and a general norm might be in the 70% range – of course this varies per quality of the project and the experience and stability of the ownership team.
For successful eligibility and financing of Canadian film tax credit financing you require the services of a qualified tax credit accountant; that being a bit of a niche area of accounting. And with respect to the financing you need to be able to demonstrate that the credit can properly be assigned and that there are clear chains of title around your project.
Do you have to finance your film, TV and animation / transmedia tax credits? Absolutely, positively not. You can simply use the non repayable funds for any general corporate purpose. But if you, as a producer are challenged by successful project financing then the ONTARIO, BC AND QUEBEC tax credits can be a solid part of your overall financing plan.
Speak to a trusted, credible and experienced Canadian business financing advisor today on how you can successfully obtain.. and if you choose monetize and cash flow that same credit.