SR&ED Sr ed Tax Credit Financing in Canada

SR&ED (SRED) tax credit financing is a solid strategy used by more and more Canadian business owners and financial managers who wish to accelerate the benefits of Canada’s Sr Ed program.Cash flowing, monetizing, or factoring ( they all mean the same thing!) your Canadian Sr edclaim can accelerate cash flow and working capital for your privately controlled Canadian business that is utilizing SR ED credits under the governments program .

In many ways the financing of your Sr ed credit actually allows you to maintain your competitive edge, as the combination of your non repayable tax credit and the immediate financing of it are a ‘ double whammy ‘ in the face ofyour competitors who might not use this strategy .A banker we deal with recently told us that current industry statistics show that many companies who are in fact eligible for the SR ED credit aren’t even applying for it, let along financing it. Therefore when your firm maximizes on the total value of your claim, and then generates instant cash flow on that claim you are clearly leading the pack in this regard.

Many clients tell us that they utilize the Sr Ed funds that they finance to assist in acquiring new equipment that allows them to maintain a competitive edge in their markets. The reality is of course that these funds can be used for an general corporate purpose , which might be things such as equipment acquisition, advertising and marketing, reduction in payables or debt, or of course the continued investing of even additional research and developmentefforts .

So what is the cash flow and working capital potential in your SR ED, and how do you unlock that potential?If you are already filing for SR ED credits you are no doubt working with the assistance of your client, or, alternatively, someone that is known as a SRED consultant. Having a solid resource in one or both of these parties allows you to maximize on your potential claim.

Once you have filed you claim we recommend that you consider immediately financing the claim. Naturally you don’t have to do this, and can simply wait the3-12 months that it might take Ottawa and your particular province to review the claim, adjudicate it, and process it for payment. But, as we state, why not consider financing the claim.

Clients ask us how the actual process works. It is quite simple really. Your calim is generally financed at 70% of the total value of the amount you and your accountant and consultant have claimed. You can receive cash immediately after it is filed. In certain cases you can actually receive funds for the claim prior to financing – that whole process is called SRED accrual financing. Some of the basic criteria are simply that you must have filed a claim before, have a solid reputable party preparing it, and be prepared to demonstrate good records and accounting around those expenses you are intending to claim.

So how can we summarize in a ‘bottom line ‘manner. Its simply as follows – you should be filing Sr Ed claims if you are eligible. On filing you have the option of financing that claim, so you are bringing immediate cash flow and working capital to your firm on funds that are not repayable to the government. Funds can be used for any company purpose, and proper utilization allows you to maintain a competitive advantage on your competitors. That’s using research as a cash flow generator – a solid financing strategy!

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