SRED Financing In Canada : Taking Advantage Of Tax Credit Finance Via SR ED Bridge Loans

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Canada’s SR&ED Program : Get it While You Still Can! By the Way Did We Mention SR&ED Credits are Financeable for Cash Flow Now?

OVERVIEW – Information on SR&ED loans in Canada. SRED Financing offers cash flow bridge loans on your firms r&d capital investment. Tax credit finance is a solid cash flow solution to recovering valuable working capital outlays

SR&ED credits help replenish the investment thousands of Canadian firms make with R&D capital. The refundable tax credit in this sometimes misunderstood program is also financeable, accelerating and replenishing cash flow.

But the program (The Scientific Research & Experimental Development Program) is under attack. Looking for proof? The Aug 9/206 Globe &Mail story is a good example. The article (‘Gargantuan Tax Credit Doesn't Pass The Test For Evidence Based Policy) offered up 3 essential reasons the program does not work.

1. Canada's R&D capital investment is weak and declining
2. No evidence that the majority of firms are benefitting from spillover imagined benefits
3. The program is driven by bureaucracy not growth and innovation imagined benefits

The bottom line?

We'll let the pros debate the program and may the best man or woman win. We'll continue to originate and offer financing under the program

SRED financing in Canada is somewhat of an under used working capital and cash flow financing solution in Canada. Let’s explore the key basics of what SR&ED is and how Canadian firms can maximize the benefit of the program. SR&ED Bridge Loans turn that government non repayable tax credit into cash flow sooner than you had anticipated.

Most Canadian small and medium large businesses finance their day to day working capital via bank credit lines or non bank alternative financing facilities, such as asset based lending, factoring and receivable discounting. If your firm has such facilities in place, for example with a Canadian chartered bank then you are receiving probably 75% of your receivables and perhaps 50% of your inventory as eligible financing.

Did you know that your SR ED can also be in this working capital category? Let’s cover off how that is, and how it can work to your cash flow advantage! Unfortunately it's probably uniform across the board that SR ED credits aren't financed by Canadian banks. So alternative financing solutions have taken up the slack.

The basic strategy around SR & ED financing is the securing of a separate financing facility outside of your current financing arrangement. Therefore you are in essence creating a separate short term financing facility around the SR & ED claim that you have just filed.

In normal circumstances companies that file SR ED claims particularly on a first time basis can wait well close to a year to receive their funds from the federal and provincial governments. Remember the great benefit of these funds, which is they are not repayable . How long will the government commit to this solid, proven program? We're not sure but over 3.5 Billion dollars is shelled out annually to firms just like yours.

So what have we found discovered so far? SR &ED claims a great way to recoup a large per cent age of all the funds you have invested in research and development and experimentation during the past year. In fact you can claim up to 2 years of work.

The Canadian SR ED program is Canadian government’s way of assisting firms who are moving forward with innovative products and services. To be eligible to file a claim your firm must be a private Canadian owned company , have prepared and filed a proper SR ED claim in conjunction with your annual tax filing . We would point out that if your company has arrears with Canada Revenue Agency these arrears will be set off against monies due to yourself under the claim.

Also, if cash flow and working capital are at the top of your importance list your claim can be financed with the assistance of an experienced and credible SR &ED financier. This is truly a boutique industry in Canada and business owners and financial managers are urged to seek out trusted and credible advisors in this niche financing area.

Under the concept of SR ED financing your SR ED is security for a working capital loan – funds are advanced to approximate 70% of your filed claim. If properly structured you would not make any payments under this cash flow infusion, and would repay the principal amount of the SR ED financing when your claim is authorized and approved. In effect you’re are factoring or discounting the SR ED claim.

In summary, Canadian firms eligible to file a SR ED should do so. Get it while it lasts! What firm would not want to receive a cash non repayable grant from our friends in Ottawa! If you can wait for the money, great, if you wish to arrange interim financing for your claim enlists the services of a trusted and credible SR ED financier. In a matter of a couple of weeks (why wait a year?) your working capital and cash flow will be augmented via your SR ED financing bridge loan. That’s a good thing, and a great Canadian alternative financing strategy.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow and working capital needs.

Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
http://www.7parkavenuefinancial.com

7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop