But the creative and cultural industries face unique and significant challenges:
difficulties in obtaining financing;
cash flow volatility;
financial and reputational risks associated with content creation;
reliance on tax credit programs;
technological disruptions.
Companies in these sectors operate in a complex environment, often navigating tax credits, federal and provincial funding programs , broadcaster agreements, numerous international contracts and constantly changing public tastes.
Unique challenges
Industries in this sector face unique challenges. The creative and cultural industries encompass a wide range of businesses that produce films, television shows, music, video games, sound recordings and design, each with its own business model and characteristics.
Media production and production service companies often work on projects, resulting in significant and unpredictable fluctuations in revenue from year to year based on production schedules.
Distribution and publishing companies experience greater volatility, as revenues are closely tied to the popularity or success of content. They face significant financial risks, as the commercial success of a product is never guaranteed.
The ever-evolving gaming industry relies on strong customer engagement and attracting top talent. The success of games is uncertain and depends on audience reaction.
Service and creative businesses also face volatility and unpredictability in their revenues, as they rarely enter into long-term, exclusive contracts with their customers.
Creative and cultural businesses often have to incur significant expenditure on development, production and marketing, but revenues are sometimes only received much later, after a product has been launched. They often work on large projects and may face volatile cash flows between contracts.
There is also a risk that the content will not resonate with audiences or customers, which only compounds financial problems.
These challenges, together with the fact that companies in this sector generally have fewer assets to offer as collateral for a loan, explain their difficulty in accessing financing from traditional lending institutions.
The dynamism, originality and creativity of these companies inspire us.
As part of our work at BDC, we have provided financing to dozens of creative industry business owners across Canada. We wanted to share some of the solutions we have found to help these creative and cultural businesses:
strengthen their financial management;
access patient and flexible financing.
Improving financial management of companies in the creative sector
Good cash flow management is essential to the financial health of any business. But the nature of the cultural industries, with their irregular, project-based revenues and cash flows, can make managing cash flow and preparing budgets and forecasts more difficult.
How to improve your financial management if you run a creative business?
You can improve your cash flow management and financial forecasting to ensure that operations are not interrupted during periods of low cash flow.
Detailed forecasts can allow you to model different scenarios and develop contingency plans, which can help you mitigate risks specific to your industry.
Preparing clear and accurate financial reports in a timely fusion database manner can help secure financing from lenders and investors.
Having reliable financial reports can also help you make better decisions by providing you with data to help you decide which projects to implement, how to set prices , and what goals to achieve in your business strategy . Financial reports can also strengthen the profitability and long-term viability of your business, allowing you to continue creating truly original works.
Where to start? We invite you to visit the BDC website to view our free articles, tools and other resources that provide information to business owners to improve their financial management.
It’s also important to ensure that your team has people with financial expertise. It can be helpful to seek out external coaches or consulting services to improve your financial management.
It may also be helpful to bring in specialists to help you with other aspects of business management, including:
ensure strategic planning ;
make your business model more competitive;
solve recurring problems in the company;
attract and retain talent .
Creative and cultural businesses may find it more difficult to obtain long-term funding.
Access to long-term financing
Creative and cultural businesses typically incur upfront costs to fund the creation, production and distribution of their content. This can involve a significant outlay well before a product begins generating revenue.
Businesses can turn to traditional lenders for short-term financing, known as production or tax credit financing, to keep them operating until they can collect government tax credits.
However, these companies may have more difficulty obtaining long-term financing because they may lack collateral , have a higher risk profile and experience greater financial volatility. This lack of collateral can have the following consequences:
slower growth;
inability to take on projects or acquire a business;
difficult business transition.
That’s why BDC has launched a new $30 million funding envelope to accelerate the growth of Canadian businesses in the cultural and creative sectors. The program offers loans (not grants) that generally start at $2 million and targets established and fast-growing businesses that plan to carry out one of the following four projects:
business merger;
business transition;
creation of original content;
business expansion.
We seek to provide loans to businesses that have the following characteristics:
an experienced management team with a proven track record in the industry;
reliable financial reporting;
a proven and sustainable business model;
a history of profitability or expected short-term profitability.
The envelope was launched in January 2023 and will be available until December 2024.
This is not the only financial assistance or support that BDC offers to creative and cultural businesses. The new envelope complements our financing solutions , growth and transition capital , online loans for small businesses and advisory services , as well as our online resources and tools . BDC also supports Canada’s cultural and creative sectors by partnering with key organizations in these sectors to expand its expertise, strengthen collaboration and implement joint initiatives.
We are inspired by the dynamism, originality and imagination of the creative and cultural businesses we have been fortunate to support so far. We are proud to contribute to their financial viability and success.
However, we are also aware of the unique challenges they face and we take the time to support their work through a personalized approach. In this way, we hope to help them continue to contribute to this essential engine of economic growth and to reach and inspire Canadians through their creative projects.
Contact us to learn more about the solutions we offer to support your creative and cultural business.
