YOUR COMPANY IS LOOKING FOR TAX CREDIT FINANCING EXPERTISE!
FINANCING YOUR SR ED CLAIM AND FILM 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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Oakville, Ontario
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The Research and Development SR&ED tax credit, along with film financing credits can be maximized in another way. That way? You can finance both of these credits for cash flow needs. While not everyone in Canada these days agrees with these two very generous programs, it's safe to say those firms that use them do in fact appreciate them and often also don't recognize they can be financed. There is nothing like a good tax incentive program! Let's dig in.
2 MAIN TYPES OF REFUNDABLE TAX CREDITS IN CANADA - ' SR&ED' AND ' FILM'
To be clear, we're talking about 2 specific programs in two VERY different industries - The SRED program in the industrial/tech economy, and the various film, animation, and TV tax credits that are available to the entertainment / Transmedia industry. When it comes to a tax credit program Canada leads with these 2 very popular programs. Both programs are eligible for Canadian controlled private companies.
IS YOUR FIRM IN LINES FOR THE BILLIONS OF DOLLARS OF TAX CREDIT REFUNDS
Billions is given out in SR&ED each year, and hundreds of millions are provided to the Transmedia industry in Canada.
Let's first focus on the SR ED program. Many clients we deal with have faithfully filed claims every year - while in some cases many feel that a large number of those who qualify haven’t even heard of the program or consider it too time-consuming. We can only speak for ourselves, but if the government was handing out those billions of $ to our competition we'd be first to get in line.
THE ROLE OF THE SR ED CONSULTANT IN PREPARATION OF YOUR CLAIM
One thing that is very common to both the SR ED and media tax credits is who prepares them. In the case of the former, it’s a SR&ED consultant. His or her goal is to maximize your claim, which became more of a challenge in the last few years as the govt tightened up the program. When you finance your research and development SR ED credit a certain amount of weight in the approval process is always given to the quality and reputation of the preparer of the claim. The actual name of the program which is sponsored by CANADA REVENUE AGENCY is the SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT program
SR&ED / SOFTWARE DEVELOPMENT TAX CREDITS
The software industry in Canada is a huge user of SR&ED credits. After all, someone has to pay for all that ' bleeding edge development that is begging to be commercialized.
FILM / ANIMATIONS/ TRANSMEDIA CREDITS
In the case of media and film credits it's all about utilizing the right program among several that pertain to incentives provided to the industry. It's interesting to note that it is very possible to use a SRED credit for gaming software, again re-enforcing the need for a great SR&ED or Media accountant.
USE A QUALIFIED TAX CREDIT ACCOUNTANT TO FILE AND PREPARE YOUR CLAIMS
In the case of the media tax credits, the above role falls on the tax credit accountant, a specialized and focus individual or firm who maximizes your claim on your budgets based on numerous criteria that must be met and can be exploited for a richer claim. So as unexciting as it might seem to many when it comes to preparing and financing tax credits in Canada ' beancounters ' rule!
An interesting part of the whole tax credit preparation and financing scenario is the fact that your firm (in the case of SRED), or your production (in the case of film, media, animation) does not necessarily have to be profitable or in the case of SR&ED successful. You must have to validate that it was money properly spent under the auspices of the program.
WHAT AMOUNT OF YOUR CLAIM CAN BE FINANCED?
It's all about ' the spend' when it comes to tax credits and maximizing the financing around them. If your financials and budget can validate your research (SR&ED) or your production budget (film) tax credits can be financed in two key ways. For both types of credits, it's almost a coincidence that they are financed in the same manner. Claims that you've prepared and filed already are typically financed at the 70-75% level of their full value.
SR&ED LOANS ARE A TYPE OF BRIDGE LOAN - WITH NO PAYMENTS DURING THE LOAN DURATION
In both cases the financing structure typically used is a ' bridge loan'. The good news here is no payments are typically made by the applicant, and things are ' settled up ' on final approval of the claim by the SRED or film authorities (CRA and your province). At that time a typical claim has you receiving the balance of your claim, i.e. the other 30%, less financing costs.
CONCLUSION
Because only a very small handful of niche divisions of our banks actually will consider a tax credit financing a large number of tax credits in both sectors are financing by non-bank entities with people and expertise pertaining to each type of credit.
If you’re looking to maximize the full benefit of tax incentives and accessing valuable cash in Canada (via financing them!) seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your needs.
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Stan Prokop
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