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Is Your Company Taking Advantage Of SR&ED Loan Financing? Consider This ..
OVERVIEW – Information on SRED loans in Canada. SR ED financing via a tax credit loan is the logical way to monetize your r&d capital credits for cash flow purposes
SR ED financing is the most efficient way to accelerate and monetize your investment in R&D capital. A SR&ED tax credit loan allows you to take maximum advantage of this most famous and used govt refundable tax credit. Why do SRED loans make sense for your firm then? Let's dig in.
Of course the actual ' formal ' name for the program is the Scientific Research & Experimental Development refundable tax credit .By the way , we've never been one for name calling , so whether you call it ' sred ' ' shred' or anything else for that matter only the importance of the program is key to us!
Canadian business owners and financial managers in a variety of industries have the ability to of course file sred claims, and at the same time, if they choose, they can finance their claim and generate immediate cash flow and working capital from this valuable government grant program. Again, to be clear, those funds are non repayable.
Safe to say that the only thing that prevents you from financing a claim is if you do not file a claim, so understanding the basics around a claim, as well as the characteristics that claim needs to be financed is valuable information for Canadian business owners and financial managers. The govt refunds billions of dollars every year under this program , and many owners/mgr choose to finance their claims.
Claims are filed and substantiated under the normal program guidelines. One of the misconceptions around the program is that your R&D has to be successful in nature, and that's actually NOT correct, you just have to be in a position to document what you did and how you did or tried it.
Although claims prepared by owners and management can be considered for financing, the reality is that if you are applying for sr&ed financing it makes a lot more sense to have your claim prepared by one of two parties, either your accountant , or what is known as a ' Sred Consultant '.
Claims have never been easier to file, as the govt has very much streamlined the program - but total care is needed to adhere to current filing guidelines - that's where those SRED consultants come in.
With the information we are sharing here we want to be able to ensure you understand how the quality and size of your claim affect its overall financeability. SRED claims are applied for in all sorts of amounts, we have seen clients file as low as 20,000 - 30,000$ per annum, and as high as 1.5 million dollars, and we are sure there have been higher claims.
The actual claim preparation has an effect on your claims financeability - as your goal, should you need the cash flow and working capital, is to monetize that claim into a short term sred loan - with the sred itself being the collateral for the loan.
When you choose to finance a claim the general advance is made at 70% - so let's do some rough arithmetic around a sample claim and it's financing.
We're told that in business timing is everything - As a business owner you can wait anywhere from 1-12 months to get your cheque in from the government, which is reimbursed at the federal and provincial levels. Or, if you choose to utilize those funds now under a sred loan, you can get an immediate loan of 70% of that claim.
What do clients do with their SRED Loan proceeds? Funds are typically used for working capital purposes, equipment purchases, or even more ongoing sred activity! Looking for more good news? No payments are made on your sred loan; financing costs are calculated at the back end of the claim when you receive your funds, including the previously mentioned 30% that was held back on the financing.
Furthermore, if you have successfully financed sred claims in the past you could be very eligible for sred accrual financing - which is a special program that reimburses you for your sred expenses as you go along during the year.
Traditional financing institutions such as banks and business credit unions are poorly equipped to understand and finance sred tax credits .As a result we recommend you work with a trusted and credible business financing advisor to ensure your claim can be financed quickly and with a modest amount of preparation.
A bottom line on SRED Loans? If you in fact utilize the SR&ED program consider cash flowing your claim to accelerate the monetization of your claim. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in financing your R&D capital refund.
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
7 Park Avenue Financial
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
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
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