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Canadian Film Projects Utilize Ontario Film Tax Credit Financing For Success

Guest post by: Stan Prokop

Article Overview: Utilizing film tax credits In Canada – All Provinces have credits! Information on Ontario film tax credit financing and why Canadian film, television and animation projects in Canada utilize tax credit financing as an effective means of completing their projects successfully

Canadian Film Projects Utilize Ontario Film Tax Credit Financing For Success

Most Canadian film projects (we're referring to television and animation also) utilize Ontario film tax credit financing to complete their projects from a financial perspective. The proper use of these credits can enhance your overall ROI - aka return on investment.

The challenge for producers and owners of projects in our 3 named entertainment genres above is often quite simply to understand what the credits are - much less utilize them effectively. We'll try and address both issues.

Although we feel that film tax credits in Canada couldn't be more straightforward, things often become complicated probably simply because they are only one piece of your ' master plan '.

Again , we maintain the Canada film tax credits are very generous and the process for receiving them and financing is well defined, but , in defense of our clients they can be forgiven because some of the perceived complexity revolves around which province their production is domiciled in and what specify tax credits apply .And in the case of where you have a choice of utilizing one tax credit or another the question then becomes : ' What tax credit financing strategy brings my project the maximum benefits ?'

Clients seeking tax Ontario film tax credit financing, for example must ensure they have the puzzle solved. What's that puzzle - it's simply what combo of equity, debt, and mezzanine type financing will maximize the tax credit. We hope that as business people you want to make the maximum profit possible on your project and venture. If you're the owner you will make less if you have to give up equity.

That is why using your tax credit as collateral enhances your overall return on investment and profit potential.

We read a great definition of mezzanine film financing awhile back - simply put it described the financing as the money in the middle between expensive equity or giving up ownership, and that other rock and hard place - paying interest and taking on debt for your project .

Ontario (we use that as an example - so our friends in BC, QUEBEC and Maritimes shouldn't be offended) film tax credit financing uses your tax credit as the collateral for a large piece of your financing.

We've anticipated your next question - how large is large?! Realistically you can expect to recoup anywhere from 30-45% of your projects total costs in the form of a non repayable tax credit. And, when you know you are eligible for that tax credit then consider financing it to reduce the amount of real cash flow you need for your project. You in effect borrow against the value of the tax credit.

The ' reward', if we can put it that way, for financing that 30-45% of your project is simply an interest rate charged on the value of the total tax credit due your project . 99.9% of producers and owners set up a separate legal entity for each project for financial and reporting reasons.

Using a quick example, say you had an independent production with a modest budge of 1 million dollars. If you have arranged 50% of that via equity in your project you need the additional 50% of that financing. If you were able to sell the rights for the project for 20% then the remaining 30% of your financing can be locked up quite nicely via film tax credit financing .

We don't envy you around the challenges of raising equity, debt and mezzanine gap type financing for your projects. But take solace that Canadian film, TV and animation projects can be easily augmented with a significant amount of financing with the proper use of film tax credits.

Speak to a trusted, credible and experienced film tax credit financing advisor on your eligibility and the ability to finance your credits. Cut! That's a wrap.

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Article Tags: Canadian film, ontario film tax credit financing



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