Tax credit incentives in Canada play a key role in the financing of ‘ media ‘ projects in film, TV, and digital animation. Given the somewhat limited access for independent producers to specialized Canadian chartered bank financing how and where do independent film financiers play a role in getting our project fully financed? Let’s dig in.
Specialized loan funding and media financing comes a lot easier if the producer/owner has a bit of an inside track via the following information. Not only did the 2008-2009 world wide recession take manufacturing, technology and service industries down, it also slowed down the ability of the entertainment industry to access the capital it needed. Almost no hedge fund firms, angel investors, or VC’s in Canada offer film tax credit or equity/debt finance solutions. This forces project owners to work even hard to access capital.
There are different players the owners/producers must deal with to get a project fully financed. They include equity investors, the project owners themselves, government funding, and niche financiers specializing in pre-sale, distribution, and gap financing.
Projects that can access film, TV and animation finance solutions require a strong focus, experience, and the ability to forge relationships with independent film financiers to pull a full financing package together.
Producers that are not well known, just starting out, or focusing on smaller projects generate very little interest from the bank film financing sector. In fact to our knowledge some of the Canadian banks do not participate at all when it comes to proven strategies such as tax credit financing.
In Canada provinces such as Ontario, B.C., and Quebec garner most of the tax credit ‘ action ‘. Using digital interactive media projects as an example Canada has become a hot bed of workers with talent and skills and technological savvy when it comes to working on media related projects in film, television and interactive media.
While tax credits often can finance up to 30-50% of a project independent film financiers can provide bridge loans, distribution financing, and print and advertising (P&A”) finance.
Critical to accessing support from an independent film financier is the ability to pull a team together. That team can be internal or external and the expertise there will save you two things – time… and money! Typically that team will include a tax credit accountant and a lawyer or law firm.
Refundable tax credits account for a large portion of the billions of dollars of revenue and employment that comes from media and film. The credits are a combo of federal and provincial, provincial of course depending on where you project is produced, filmed, etc.
The tax credit accountant will maximize your claim, as well ensuring its approval and viability for financing. (Often an’ opinion letter ‘ is provided by the film tax accountant verifying the calculations in your claim)
Depending on what province you’ve chosen to domicile your tax credit in different percentages are applied to your refund for your total ‘spend’. The tax credit is, simply speaking, a ‘ point system’ whereby you get, or lose points based on Canadian content, foreign involvement, whether the producer is Canadian, where you film, etc.
Two quick clarifications: Partial foreign ownership of your projects is called a ‘ co production’ and must be validated up front. Where you film or produce gives you whats known as a ‘ Regional Credit ‘.
Independent film financiers also like ‘ slates ‘. That’s a group of projects that lowers the volatility risk of entertainment. Each project typically in Canada is a separate legal entity.
Tax credits that are cash flowed work best when you’ve got good advice and good people working your deal. If you are looking for independent film financiers in Canada to finance tax credits and other parts of a project seek out and speak to a trusted, credible and experienced Canadian business financing advisor.