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Archive for the ‘Finance’ Category

Financing Tax Credit Incentives

Tuesday, September 29th, 2015

Tax credit incentives in Canada play a key role in the financing of ‘ media ‘ projects in film, TV, and digital animation. Given the somewhat limited access for independent producers to specialized Canadian chartered bank financing how and where do independent film financiers play a role in getting our project fully financed? Let’s dig in.

Specialized loan funding and media financing comes a lot easier if the producer/owner has a bit of an inside track via the following information. Not only did the 2008-2009 world wide recession take manufacturing, technology and service industries down, it also slowed down the ability of the entertainment industry to access the capital it needed. Almost no hedge fund firms, angel investors, or VC’s in Canada offer film tax credit or equity/debt finance solutions. This forces project owners to work even hard to access capital.

There are different players the owners/producers must deal with to get a project fully financed. They include equity investors, the project owners themselves, government funding, and niche financiers specializing in pre-sale, distribution, and gap financing.

Projects that can access film, TV and animation finance solutions require a strong focus, experience, and the ability to forge relationships with independent film financiers to pull a full financing package together.

Producers that are not well known, just starting out, or focusing on smaller projects generate very little interest from the bank film financing sector. In fact to our knowledge some of the Canadian banks do not participate at all when it comes to proven strategies such as tax credit financing.

In Canada provinces such as Ontario, B.C., and Quebec garner most of the tax credit ‘ action ‘. Using digital interactive media projects as an example Canada has become a hot bed of workers with talent and skills and technological savvy when it comes to working on media related projects in film, television and interactive media.

While tax credits often can finance up to 30-50% of a project independent film financiers can provide bridge loans, distribution financing, and print and advertising finance.

Critical to accessing support from an independent film financier is the ability to pull a team together. That team can be internal or external and the expertise there will save you two things – time… and money! Typically that team will include a tax credit accountant and a lawyer or law firm.

Refundable tax credits account for a large portion of the billions of dollars of revenue and employment that comes from media and film. The credits are a combo of federal and provincial, provincial of course depending on where you project is produced, filmed, etc.

The tax credit accountant will maximize your claim, as well ensuring its approval and viability for financing. (Often an’ opinion letter ‘ is provided by the film tax accountant verifying the calculations in your claim)

Depending on what province you’ve chosen to domicile your tax credit in different percentages are applied to your refund for your total ‘spend’. The tax credit is, simply speaking, a ‘ point system’ whereby you get, or lose points based on Canadian content, foreign involvement, whether the producer is Canadian, where you film, etc.

Two quick clarifications: Partial foreign ownership of your projects is called a ‘ co production’ and must be validated up front. Where you film or produce gives you what’s known as a ‘ Regional Credit ‘.

Independent film financiers also like ‘ slates ‘. That’s a group of projects that lowers the volatility risk of entertainment. Each project typically in Canada is a separate legal entity.

Tax credits that are cash flowed work best when you’ve got good advice and good people working your deal. If you are looking for independent film financiers in Canada to finance tax credits and other parts of a project seek out and speak to a trusted, credible and experienced Canadian business financing advisor.

Franchise Financing Canada – The Reality

Tuesday, March 30th, 2010

Franchise financing is a large part of the decision to purchase a franchise in Canada and grow and profit that business. Canadian franchisors themselves, rarely, if ever, provide the financing for you to purchase your business. That should not be a mystery to the entrepreneur, because the

Franchisor uses your funds to continue to grow their franchise empire! That’s how franchisors prosper, grow, and build and sell more units. Many franchisors use funds received from your investment, build a company store, and then sell it as a franchise. This is a very strong and proven business model – so the bottom line is of course – You are on your own with respect to franchise financing.

It is important therefore for the business person to take some careful time and plan around how they will arrange their franchise financing.

Naturally at the same time you want to due a fair amount of due diligence around the basic finances of the franchise you are looking at. By that we mean that different franchises require different levels of capital. For example if it is a purely based ‘SERVICE ‘ franchise then you can expect that financing costs, and therefore your own investment will be significantly smaller than a business requiring more assets and capital expenditure .

As a prospective franchisee you have many legal rights around the financial disclosure that is made to you by the franchisor. You should therefore ensure that you use all options and information available to yourself with respect to understanding how the franchisor is financed, what type of financing is generally needed and recommended from yourself, and what affiliations or efforts a franchisor might make with respect to assisting you in financing the business. We have said very clearly that franchisors won’t provide you the financing, but based on their success and reputation in the market place they might be in a position to have set up a program with lenders in the marketplace such as banks or independent finance companies.

We strongly recommend that if business owners considering buying a franchise don’t feel 100% comfortable with financial jargon, current market financing conditions, etc, that they should engage the services and advice of a trusted financing advisor with expertise in Canadian franchising .

References with respect to financing should also be checked, by that we mean that in your discussions, negotiations, and disclosure made by the franchisor you should obtain a strong sense of what general financial performance you can expect from your investment. If you think you wish to grow a million dollar business and your investigations reveal that no other unit in the chain is close to approaching that revenue number, well, you get the picture, right?? Time to re think your investment and your proposed financing.

Every business and industry has an acceptable debt and equity ratio. By debt and equity we of course simply mean how much you are going to put in, and how much you will borrow. You want enough working capital and cash flow to grow your business, but you do not want to become over leveraged. That’s the balancing act in any business quite frankly.

In Canada franchises are primarily financed by your own investment in the business, as well as the Governments CSBF program. This is a solid
loan program used by a huge proportion of Franchisees in Canada.

Our firm has found that a combination of the entrepreneur investment, the CSBF loan, as well as some innovative leasing and working capital
strategies allow the franchisee to be adequately financed , therefore providing a much stronger chance of business success and profits!