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FOR SR&ED OR MEDIA CREDITS!
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SR&ED Claims financing and the finance of film tax incentives in Canada eliminate the ' victim' part of these two solid government programs. The ' victim' part arises when a lot of work and effort and by Canadian business people leads them to ' waiting ' for their claims to be finalized and funded. Let's dig in.
CANADA'S 2 MOST POPULAR REFUNDABLE TAX CREDITS FOR FINANCING CONSIDERATION
Let's examine some key benefits in financing tax credits under 2 of the most popular programs in Canada -
SR&ED (Scientific Research and Experimental Development)
Film/Digital/Television Tax Incentives
CANADA'S SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT PROGRAM - AKA ' SR&ED"!
Similar to programs in the U.S. the Canadian government funds research via R&D sr ed tax credits. Here's one case where the ' little guy' often benefits more than larger and sometimes publicly traded companies in Canada. Private ( i.e. not publicly traded ) firms receive billions of dollars of funding in Canada for recovering a large percentage of the monies they spend on salaries, contractor cost and overhead as these relate directly to research.
WHY WAIT FOR CASH REFUND UNDER THE SRED PROGRAM - FINANCE YOUR CLAIM
While the thousands of firms that receive funding might find their claims a little smaller these days (example: equipment purchases related to R&D no longer qualify) the ' cashback ' benefit of the combined federal/provincial program can't be denied.
PREPARING YOUR CLAIM WITH YOUR SR&ED CONSULTANT
Prior to considering SR ED claims financing a tremendous amount of work, and some risk goes into claim preparation for the Canada Revenue Agency. From software firms to mfg companies all across Canada third parties known as ' SRED Consultants ' prepare and file claims. The majority of claims prepared seem to be on a contingency basis, with the SR&ED consultants bearing the risk in time and costs in your claim preparation. In return for that, they typically take a fee of 15-30% of the total claim. Naturally, business owners also have the choice of simply paying for a qualified SR&ED practitioner on a straight fee for service basis.
While the government has clearly made things easier for claimants, i.e.
IT'S EASIER TO FINANCE YOUR SR ED CLAIM THESE DAYS!
Self-assessment tools to help guarantee approval success
Simplified and shortened online application
none of that takes the ' waiting' out of your cash refund.
FILM TAX CREDITS/ DIGITAL MEDIA TAX CREDITS : KEY ELEMENTS OF FINANCING YOUR PROJECTS
Media credits in movies, TV and animation, also under the auspices of federal and provincial programs, take a lot of the risk out of the task of financing projects. Traditional bank type financing is difficult to achieve for smaller independent producers. The complex web of financing a project involves a lot of moving parts:
Pre-selling your project
Consideration co-producers to complete funding
Owner Equity
Product placement/sponsors
'GAP' financing (a ' bridge' between production and future sales potential)
UTILIZE A GOOD FILM TAX CREDIT ACCOUNTANT
Have we forgotten anything? We sure have! It’s the generous film tax credit incentives that monetize a large part of the costs of production of any project. In many cases of 40-50% of a qualified budget can become a tax credit refund to owners. Claims are best prepared by experienced film tax credit accountants - specialized folks who maximize claims.
While some might argue there is little in common between producing an animated film versus striving for improvements in software, biotech, mfg, or robotics the one constant is the finance ability of either of these two programs.
HOW TO CASH FLOW YOUR REFUNDABLE SR&ED PROGRAM AND FILM TAX CREDIT CLAIM
While owners can choose to wait for months, perhaps up to a year for recouping funds under either program they also have the option to ' cash flow' their tax credits.
Tax credit loans for SRED R&D TAX CREDIT CANADA and Media credits are financed very similarly. Bridge loans will advance typically 70% of the combined value of the federal and provincial claim. No payments are made during the loan period. When the government approves and funds your credit you receive the balance of the claim, less financing costs that are typically priced at ' mezzanine ' type rates.
CONCLUSION
If you feel you can benefit from the immediate financing of film tax credit incentives and SR ED projects seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in claim finance under the tax incentive program.
P.S. Yes, it's true; claims can also be financed prior to formal submission to government of Canada bodies.
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Stan Prokop
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