Cash flowing and the monetization of your film tax credits in Canada can be a very large aspect or part of your overall production financing success in today’s challenging entertainment finance area .
Whether your film is 100% Canadian, or a co – production you should be aware that your tax credits for Ontario film grants, B.C. film grants, ( those seem to be the most two popular provinces ) can be financed for cash flow and working capital .
It is certainly not unusual that tax credit can be anywhere from 25-40% of your overall finance plan, and if that is not significant then we don’t know what is! Its that sort of cash flow and financing commitment that keeps your productions moving forward from a viewpoint of the equity and debt investors you need to engage to successfully finance a production, whether that be television, film, or of course the ever growing digital animation area .
Those funds become an intrinsic part of what is generally known as the ‘soft money ‘component of your production.
When you rationalize Canadian film tax credits into your overall production financing you can make a strong case that even if a movie or TV show is shot elsewhere than in Canada in certain instances it makes total sense to use Canadian cast members, and post production, all of which significantly contribute to your tax credit status.
Everyone seems to agree to day that film, digital animation and TV financing is very much a ‘cobbling together ‘of resources which will end up funding your entire plan.
The concept of co productions and co ventures seems to be a very strong part of what is happening now in independent film and TV financing. While film tax credits seems to be falling apart and in fact disappearing in many parts of the world the Canadian environment is very robust. Tax credits can be financing on a ‘when filed ‘basis, or, if your production has good credibility and financial reporting, financing can be provided on an accrual basis.
Clients will often ask what the pre requisites are for tax credit financing in Canada. As different and unique as is the entertainment industry the reality is that you’re simply need some careful up front planning and documentation to ensure you can qualify and obtain financing for your tax credits. Generally that comes in the form of having pre sold some of your product in question ( a film, tv series, etc ) and having a financing plan in place that address the three components of debt, equity , and tax credits .
Having a specific budget in place for your project, and having that budget validated with respect to which amounts will qualify for tax credits is critical. We can assure you that if your budgets haven’t been reviewed by a proper entertainment accountant then that will be a part of your financing term sheet with respect to requirements for the proposed financing.
While some experience in having been approved on previous projects for tax credits is desired, it is not a 100% pre requisite – but when hasn’t experience ever not helped in business and in financing?
Whether you view the financing of film tax credits as a mainstream or alternative strategy the reality is that this will make up a key component of your financing. Ultimately you have to be able to verify your numbers and provide some level of clarify around your eligibility for the tax credit.
In Canada tax credits can be financed on a when certified and filed basis, or, even more attractively, on an accrual basis. Funds are reimbursed to you as you spend them, in effect doubling up on the cash flow and working capital requirements of your project .
Speak to a trusted, credible, and experienced film tax credit financing advisor in Canada who can provide you with financing information that should allow you to complete you’re financing in the most cost effective manner to yourselves as owners of your productions.