Maximize Funding for Digital Media with Grants, Loans & Tax Credits

There are several options for companies engaged in developing interactive digital media products in Canada, including: Ontario government grants, Canadian small business loans, and both national & provincial tax credits. It is important to understand the difference between these funding instruments in order to maximize a digital media firm’s funding potential while improving project scope, scale and timelines. Applicants must also be careful how they combine funding programs, as some programs are incompatible with others. This article with guide you through the intricacies of each program and how to get the most out of the top grants, loans, and tax credits for digital media businesses.

Canada Media Fund (CMF) Experimental Stream Small Business Loans

The Canada Media Fund – Experimental Stream is a popular business financing program available to for-profit businesses through the Canadian Heritage Fund and administered through Telefilm Canada. This program provides funding through three sub-streams that accommodate each stage of a digital media project: (1) Development, (2) Production, and (3) Marketing & Promotion. Applications are accepted twice per year (Spring & Fall), and eligible projects will receive up to $500,000 to $1 million in prime plus one percent interest financing depending on the stream. Businesses can only be accepted for one stream at a time. Applicants must be Canadian for-profit organizations that are incurring at least 75% of costs within the borders of Canada. Funding will cover up to 75% of eligible costs which include costs of labour, contracting, and other expenses like hardware and software, and travel expenses. What is important to understand with this funding program is that advanced planning is required and relevant costs and activities cannot commence until the applicant is accepted for funding by Telefilm Canada. Companies taking advantage of this program can also take advantage of a tax incentive program, but funding from assistance programs such as CMF will be deducted from costs eligible for reimbursement.

Ontario Business Grants through the OMDC Interactive Digital Media Fund

The Interactive Digital Media Fund (IDMF) is a government grant offered through the Ontario Media Development Corporation (OMDC). The grant covers up to 50% of eligible projects costs to a maximum of $150,000. Of the funds allotted to this program, 75% of funds will be dedicated to funding proprietary content, and 25% partner owned content. It is important to note that 75% of the Ontario business grants total sum will be given to the successful applicant upon execution of the funding agreement, 15% upon delivery of an interim report, and the final 10% upon completion of the project. While firms taking advantage of IDMF may also apply separate expenses to a tax incentive program, applicants must keep in mind that at least 10% of cash used to cover projects costs must be from a source other than OMDC.

Ontario Interactive Digital Media Tax Credits

The Ontario Interactive Digital Media Tax Credits program is available through the Ontario Media Development Corporation (OMDC) and the Canada Revenue Agency (CRA). Like all tax credits, application is made for reimbursement when filing taxes –after the expenses have been incurred. These tax credits cover from 35%-40% of eligible expenses which include labour costs, freelance labour costs (paid to residents of Ontario) and marketing & distribution costs of up to a maximum of $100,000 per eligible product.

It is worth noting that the OMDC and the CRA classifies project expenses made prior to March 2009 differently than more recent expenses. In order to qualify for the OIDMTC program, the applicant must be established in Ontario where at least 90% of production takes place. Applicant firms cannot claim the same expenses under SR&ED, and eligible amounts will be less any other government assistance received. The reward process appears on average to be 20-24 months as reported by our clients.

SR&ED Tax Credits for Interactive Digital Media Projects

The Scientific Research and Experimental Development tax credit program, or “SR&ED”, is Canada’s largest single government support program for industrial research and development. As a federal tax incentive for promoting research and development within Canada’s borders, the Canada Revenue Agency (CRA) administers the program. SR&ED tax credits, like OIDMTC, is applied to tax returns annually to reimburse businesses for eligible research and development costs. Businesses can claim eligible project expenses incurred within the previous 18 months from the fiscal year-end tax filing. The differences are the scope of the project, the reimbursement amount, and that SR&ED covers projects carried out across Canada (as opposed to just Ontario). SR&ED covers between 35% and 45% of eligible costs related to projects that seek to overcome a technical challenge with the amount variable dependent on client size and other factors. Although SR&ED cannot be stacked with other funding programs, companies will, at times, pull some projects out of SR&ED in order to benefit from higher rates of funding from programs like grants from the Industrial Research Assistance Program (IRAP), which covers up to 75-80% of eligible labour and subcontractor costs. Read a comparison of IRAP vs. SR&ED to learn more about how to leverage both funds.

Additional Business Grants and Loans Programs for Digital Media Projects

The above mentions only four government incentive programs available to Canadian businesses undertaking a digital media project. For additional funding needs it would be advisable for one to look into Southern Ontario Fund for Investment and Innovation (SOFII) and Investing in Business Innovation (IBI) loan programs which offer up to $500,000 and $1,000,000 for innovative small businesses in Ontario –while being aware that digital projects or gaming projects that are B2C will not qualify for IBI.

Grants for Hiring Recent Graduates to Digital Media Positions:

Also, visit Mentor Works frequently in order to stay up to date on grant programs offered to off-set hiring costs. Many of these grants for hiring fill up quickly after launch, so whenever you are hiring send Mentor Works a job description and resume (if possible) and we will be able to tell you whether there is a program suited for the position.

How to Leverage Multiple Funding Programs for your Digital Media Project

Now that we have discussed each of the programs, it is important to understand how to determine the optimal government incentive(s) for your particular interactive digital media project. Tax incentives can be used to cover retroactive expenses; that is expenses incurred before starting the application process. Thus, SR&ED and OIDMTC are businesses’ best option for receiving support for expenses already incurred.

On the other hand, small business grants and loans are heavily focused on pre-planning project activities, completing the application process, and commencing the project activities upon application acceptance (not before). For many Canadian government grants and loans, if an applicant starts their project activities before they are accepted for funding, their project is deemed ineligible for funding.

The last thing to keep in mind is cost coverage. As a general rule, most Canadian government funding programs require that projects are not budgeting over 75% of project expenses through funding support. When choosing the optimal program(s) for your interactive digital media project, please be sure to keep in mind the cost coverage percentage, maximum funding, and funding type. A program that covers a higher percentage of direct labour but caps at a lower maximum funding amount might not be the best choice. Large 0% interest loans are also sometimes more impactful than relatively smaller grant programs. Businesses should carry out forecasts and other finance calculations or contact a Mentor Works Funding Expert to ensure you are getting the most out of the available funding.

Access Canadian Government Funding & Incentives for Interactive Digital Media

Discover how your business can benefit from these and other grant and loan opportunities by signing up a Free Canadian Government Funding Webinar or Workshop. In just over an hour, Bernadeen will cover dozens of the most popular Canadian government funding programs, explain how to find them, and how to use them to fund projects that are key to unlocking greater success for your digital media business. You can also keep up to date on news, funding releases, and changes to government incentive programs by signing up for our Canadian Government Funding Weekly E-Newsletter.