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HERE'S FINANCING OF YOUR REFUNDABLE TAX CREDITS
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Financing & Cash flow are the biggest issues facing business today.
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
SR ED R&D financing and the film finance credit often have some clients we meet ' drawing a blank' when it comes to how to monetize either one of these two significant programs.
FINANCING TAX CREDITS IS CASH FLOW POWER!
The reality is that either tax credit provides significant cash flow power, and the ability to finance your credits either before or after they are filed represents your ability to beat the 'waiting game’ as it pertains to the government approving and processing your refund chq. Let's dig in.
CANADA'S SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT PROGRAM - AKA ' SR&ED!
The SR&ED program, for those who follow or have a vested interest in it has been turned upside down and inside out in the last year or two. It got to the point where the government did what they do well (?), which is commissioning a report on the program's validity and benefits to the govt and claimants.
BILLIONS OF DOLLARS OF REFUNDS ARE ISSUED EVERY YEAR FOR THE SRED CLAIM
Given that the government provides funds for these two programs in the Billions of dollars it's no surprise the sr ed credit tax incentive program came under significant scrutiny. Since the thousands of claimants under the program are in the SME (small/medium enterprise) sector they have become significantly dependent on the program the changes out of the government study (‘The Jenkins Report') were fairly dramatic, both positive and negative.
CHANGES TO THE SR&ED PROGRAM
They included:
Significant emphasis on the real government ' payback' on the program
Simplification of the application process
Elimination of certain of the credits under the program - i.e. capital expenditures (The main deductions center around payroll and contractor expenses)
Strong focus on who exactly is preparing the claims (aka ' Sred Consultants') and how compensation is charged
The program is primarily for private firms and doesn't discriminate when it comes to industry, geographical location,
FILM TAX CREDIT FINANCING:
While some might say the SR&ED program doesn't maximize Canadian investment in research the converse is probably true for the film finance credit. (Film finance credits include movies, TV, animation and digital effects) The ' Hollywood North' nickname for Canada didn’t come by chance; hundreds of productions have been filmed or produced here because of the tax credit investment climate.
The three largest cities, Vancouver, Toronto and Montreal all have booming media business.
The financing challenges on any project in any media category are significant. When maximized with the assistance of a good tax credit accountant, the right film tax credit delivers anywhere from 30-50% of the total financing required.
The 3D industry is a booming example of the Canadian film industry. Spending by Cdn and co-production partners is in well over a billion dollars in VFX areas.
FINANCING YOUR SR&ED or FILM TAX CREDIT:
Tax credit financing is most often structured as a bridge loan. To the benefit of the borrower, no payments are required during the loan duration and the loan is collapsed as soon as your refund chq comes in. While some banks participate in this type of financing many producers and foreign co-production partners seek commercial financing expertise outside the banks.
If you are looking for true financing of a SR&ED or Media refundable tax credit seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs in this area. Canadian businesses should maximize the cash from refundable tax credits.
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Stan Prokop
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