Technical tools to finance the development of a cutting-edge sector. The maturity of this industry calls for the development of tools that are suited to the assets generated by companies in the sector and that take account of their specific characteristics.
There are many ways to finance the video games sector. Tax credits, research tax credits, support funds, equity loans (e.g. in France, from the Institut pour le Financement du Cinéma et des Industries Culturelles (IFCIC) or from regional funds) or simply advances, there are many public and semi-public mechanisms to help finance the production of video games.
- Today, private funding is provided for the most part by private equity funds (mainly venture capitalists) and specialised banks. As needs increase and diversify, other sources of funding must be developed, in particular those more usually provided by credit institutions or debt funds.
- The use of the video games tax credit (or, for those companies concerned, the research tax credit) is a first source of financing. By discounting its tax credit claim, the company receives an immediate and largely final payment, well before the date on which the tax authorities are due to pay the tax credit concerned. Alternatively, the company can use its tax credits to guarantee the financing it has been granted. These approaches enable the financial backer to have recourse against the State for the tax credit assigned, and thus to diversify and improve the risks taken in the context of the operation.
- Video games companies have other assets with which to raise financing: receivables from partners (such as distributors or publishers), cash flow generated by a catalogue of games or by projects currently being finalised, etc.
All of these assets represent future cash flows that can be advanced as part of a structured financing package. They represent different risks, requiring a good knowledge of the sector in order to fully appreciate the impact of the risks associated with the games or receivables concerned.
As part of a structured financing package, these risks may give rise to the implementation of specific structures, such as cash reserves (covering identified risks) or special purpose entities (enabling the isolation of the assets generating the cash flows to which the financing is backed).
Depending on the stage at which the transaction is set up, these transactions may also include interest mechanisms to obtain financing that does not dilute the capital base, while rewarding the lender's contribution to the creation of value.
Our support
- Analysis of your assets to determine their bankability
- Structuring structured finance transactions
- Drafting and negotiating legal documentation
