Canadian business owners who take advantage of Canada’s SR&ED program have one up on their competitors if they not only file a SRED but utilize Sr&Ed funding as part of their overall Sr&Ed company strategy. The program is by far the best program in Canada that incorporates a non repayable grant for your firms R& D work. Many clients hear about ’ government grants and loans ’ and ultimately realize these are not as available as one would think - however SRED is everything you hoped for and more.
The true power of the SR&ED PROGRAM comes when you accelerate your claim and turn it into immediate cash. Most of our clients, as sophisticated as they might be in their sred filings actually also haven’t heard that in certain cases your sred can be considered for financing prior to filing. That whole process is called SR&ED accrual financing.
Let’s examine 5 key basics in our overall sred and Sr&Ed financing strategy that you must know or be aware of - they are:
1. Sred financing is highly specialized - seek and work with a trusted, credible an experienced sred financing consultant
2. The only thing you need to know about financing a claim is that you must have a claim! It is a simple business financing application with supporting back up on your Sr&Ed
3. SRED’s are financing at 70% LTV - More on that below
4. You can finance a claim as soon as it is filed; starting earlier simply accelerates the process
5. We refer to a SRED ‘ loan ’ - the reality is that no additional debt is added to your balance sheet, because the loan is offset by the asset, the claim itself ! You are simply monetizing, or ’ discounting ’ you claim.
As you can see by now the whole process of a sred funding is simply the financing or factoring of your claim. You are selling your right in the receivable now in lieu of cash that you will receive from the government many months from now, in some cases close to a year.
Let’s back track and share more info on our 5 key basics. As we noted Sr&Ed funding is specialized. Work with an expert for two reasons - maximizing the value and finance rate on your transaction, as well as ensuing the whole process goes smoothly. You should not view the sred loan process any differently than you would any other financing, you apply, you provide supporting back up, and you receive your funds after the normal sort of due diligence. The collateral, if we can call it that, is the SR&ED claim itself.
With respect to # 2 simply focus on the fact that you should consider financing the claim if it will generate a reasonable amount of working capital and cash flow that you need today. To be honest most claims that are financed are in the 200k ++ range, but smaller claims can be financed.
Point #3 had us referring to loan to value - you can expect to receive an immediate advance on approx 70% of your claim - the balance should be viewed as a holdback - its still your money, but final financing costs, plus any adjustments the government makes to your claim are accounted for in that 30% buffer that is held back by the sred financier.
“When can be obtaining our funds “is really the meaning of our 4th point. The entire process takes approx 2-3 weeks as it covers your application, review of your sred, normal financial due diligence, and the clarification of any issues raised by your firm or the sred finance firm . And the good news here is that again the term ’ sred funding loan’ is a misnomer, you don’t make any payments, and finance charges simply accrue and are deducted from the final accounting of the claim. That covers our 5th point of course.
So is there a bottom line - of course there is. It is simply that you should be aware of this great program for Canadian business - if you have a claim and require additional cash and working capital consider a sred funding to solve that challenge.
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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/sr_ed_FUNDING_SRED_LOAN.html
nice post and great tips of SRED claim.Thnaks for sharing
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