Most Canadian businesses don’t fully explore the power of Canada’s SR&ED program, but what if you could fully harness the financial benefit of the program. The reality of the program is of course that if you are participating properly in the program you have completed your annual claim and are waiting for your cheque. And hopefully an audit on your claim won’t further prolong the waiting for those funds.
In talking to many clients we can safely say that most firms who have a commitment to r&d probably could use put those funds to alternative uses – those uses might include working capital for daily operations, purchase of new equipment, and yes, even continuing again their whole research and development process . Therefore as powerful a tool as a sred claim is the reality is that it itself can create short term cash flow problems. Those challenges are on top of the ones Canadian business owners and financial managers face every day, slow receivables, demanding payables , opportunities to purchase more inventory , or in some cases invest in equipment and long term fixed assets .
So how would your overall cash flow and working capital position change if you could monetize the sred claim the minute you filed it, or, in some cases even before that. If you could convert the sred claim into cash today you could more easily address the challenges in cash flow and working capital that we spoke of above.
SRED, aka SR&ED tax credits are financeable! So you ability to finance your claim simply allows you to receive approximately 70% of your claim today in the form of a SRED Loan. And remember, that’s not additional debt on your balance sheet, since the sred loan is in fact offset or collateralized by the full value of your actual sred refund. (We tend, like many Canadian business owners, to use the works sred and sr&Ed interchangeably).
So , all of a sudden you have double kick started your participation in sred , as you are receiving non repayable grant money today, and putting that to purposes such as expanding your business, hiring additional staff, reducing obligations to suppliers, or finding yourself in the position ( perhaps for the first time ) to take supplier discounts for prompt payment . Can you only imagine that one!?
So how difficult is it to finance your sred claim. That answers in two words – not very! It involves a very typical business financing application, as well as full backup for your sr&Ed claim, including who prepared it, details of any previous year’s submissions and approvals, etc. Even if your firm is experiencing financial challenges you are still very much in the position of being able to discount, or in effect factor your sred claim, because that is the asset that supports the financing .
Clients often ask how long the whole process takes, and we indicate that with your firms full co operation a sred financing can be completed in a couple weeks. There are numerous smaller issues that need to be addressed or clarified, so we encourage clients to speak to a trusted, credible and experienced sr&Ed finance expert who will no doubt help them accelerate the sred financing.
So our bottom line is not now ‘what if ‘you could finance your sred claim, it’s now ‘what would your firm do with that additional cash flow and working capital. That’s a good problem to have.
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: