Financing SR ED (SR&ED) tax credits is the finality of filing a SRED claim in Canada. So the question that remains to be asked is, ' Does it pay to finance your refundable credit under Canada's most popular research refund program? Let's dig in.
DOES IT SEEM THAT EVERYONE IS ALWAYS TALKING ABOUT SRED?
In recent years, the program has been a moving target by the government, whose goal was to maximize and simplify the program for Canadian businesses to achieve the benefits for which the program was originally derived.
HERE IS SOME HISTORY AROUND SRED
To understand the benefits of financing your SR&ED credit, it's necessary to step back and understand the origins and intent of the program. In reality, the program has been around for almost 30 years now. While the program's name is somewhat daunting (‘SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT”), business owners and managers tend to call the program " S R E D '!
IS YOUR CLAIM ELIGIBLE
The actual preparation of your claim is very much tied to success in financing your claim. We would maintain it's much easier to finance your refund than prepare it! It is up to the owner/manager to ensure that the refund claim they prepare is ' eligible ' under Canada Revenue Agency (‘CRA’) guidelines.
THE ROLE OF INDUSTRY SR&ED CONSULTANTS
These days probably 99% of all claims are prepared by the folks known as 'SRED consultants ' - these people are typically steeped in either industry or actual program experience, many of whom have worked for CRA in the past. A part of the ' turmoil ' in recent times, some of which has led to financing confusion of claims, relates to how these consultants who prepare claims are compensated. That compensation relates to the contingency fees that have consultants prepared those claims at their own cost, risk and expense.
SR&ED CONSULTANTS TEND TO WORK ON CONTINGENCY
That compensation was one of the main reasons the Govt undertook a few years ago to revamp the program fairly. Some previously eligible expenses were cut back; businesses must now identify who is preparing their claim and how they are paid, etc. Additionally, some key aspects of the program - i.e. the ability to claim capital equipment purchases used in research were eliminated.
It's pretty clear now that to be successful in financing SR ED tax credits and obtain a SRED credit loan, the quality of your claim is key. Business owners and financial managers using qualified and credible/experienced consultants will continue to benefit from the program.
HOW DO SR&ED LOANS WORK
That brings us to our key question - recognizing the benefits of the finance of a SR ED refund. That one benefit - Accelerated cash flow. SR&ED tax credits around your claim are typically financed at 70% ' loan to value '- meaning simply that, for example, a 200k refund would provide a loan of 140k.
Loans must, of course, be repaid! But SR&ED financing is done via a bridge loan with no payments required for the loans' duration - another key benefit. When your claim is approved and funded by the govt, you receive the 30% remaining balance immediately, less financing costs.
SR&ED CRA BRIDGE LOANS CAN BE CREATIVELY TAILORED TO YOUR BUSINESS NEEDS
While the govt was busy re-doing the program a bit, the SR ED financier has also been working - to add even more creative features to the cash flowing of your claim - these include facilities such as a SRED credit line and even the financing of next years claim around those r&d tax credits .. Today!
CONCLUSION
Want to know more about ' car sr&ed ' and funding your research and development sr ed tax credit? So, if you want to be like or business owner who has found it does pay to finance your SR&ED refundable tax credit seek out and speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your SRED credit loan needs with a viewpoint to maximizing cash flow and r&d expense recovery.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
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. He is an experienced
business financing consultant
.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 financing 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.
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