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A Better Way To Take Advantage Of Your Sr&ED Refund ? We've Got One!
Information on Canada's SR&ED program. The ability to cash flow finance your SRED credit is a potential key benefit when your firm takes advantage of the SR ED refundable tax credit
The question then becomes simply understanding the mechanics and benefits of such a financing – i.e... answers to the basic questions –
How much can I get?
What does it Cost?
What is involved?
What are the benefits of financing my tax credit now versus waiting for the cheque from the federal and provincial governments in Canada
Let’s cover off some of the answers and the basics you need to know to make an informed decision in this regard.
Business owners that either have prepared SRED claims in the past , or who are preparing them for the first time are always advised by their accountants and sred consultants as to how much the claim will be for . The reality is that this claim is filed at the same time you file your corporate tax return. If you have highly confident that you will receive the full amount of your claim we see many clients actually booking this future cheque as an ‘ account receivable ‘ – i.e. money that is due their firm just as if it was a sale to a customer .
So when you finance that claim you are dealing with an absolute amount. But the one thing to understand is that generally advances under the SRED tend to be in the 70% range based on the total value of the claim. So for example $ 300,000 dollar claim filed by your firm has the potential to net you 210,000.00 as a working capital loan should you choose to cash flow or monetize that claim now.
Although we see some claims as much as a million dollars from clients, the reality is that most claims tend to be in the 200 – 500k range, some smaller, some larger .
On to costs. Generally the overall size and quality of your claim, coupled with the amount will dictate the costs of financing the claim. A few key points should be kept in mind, and they clearly are in the category of ‘benefits ‘. That is to say that when you undertake a SRED loan you receive 70% of the claim immediately – there are no payments made unlike a regular loan, and you receive the final 30% of the claim when the refund is made by CRA, or, if you choose, when they indicate in writing or via their technical audit that the claim has been approved.
The financing costs are deducted out of this final 30%. So clearly the overall benefit of financing your SRED claim revolves around taking that cash and working capital and putting it to work in your business right away. Putting those funds to work might mean acquiring new equipment, reducing payables, investing in sales and marketing of your product services, etc.
A tax credit sred financing loan is not unlike any business financing. An application with typical business background data is completed , one of the key additional pieces being of course the actual sred claim you have filed, and , in some cases, proof of your success in previous years .
We advise clients the whole application and diligence process takes about 2- 3 weeks, so if you are focused on financing your sred claim you should undertake your sred financing negotiations as soon as you have made up your mind to finance the claim.
Everyone agrees the SRED program is the government’s way of encouraging in a measurable way (their cash back to your firm!) research and development. If you have filed claims in the past, or are filing for the first time you should also investigate the benefits of financing your claims.
Its non repayable money – why not put it work as early as possible to grow sales and profits and improve you overall financial picture. That’s a solid business financing strategy. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in cash flowing your claim,
7 Park Avenue Financial :
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
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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