YOU ARE LOOKING FOR CANADIAN SR&ED TAX CREDIT FINANCING!
SR&ED TAX CREDIT FINANCING - YOUR ULTIMATE GUIDE
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THE SECRET TO MAXIMIZING SR&ED TAX CREDITS? FINANCING !!
"Development is taking the research and turning it into something useful." - H. Dean Kamen
WHAT IS SR&ED TAX CREDIT FINANCING
SR&ED (SRED) tax credit financing is a solid strategy used by more and more Canadian business owners and financial managers who wish to accelerate the benefits of Canada’s SR ED program. Let's dig in on sr&ed tax credit financing options -
Cash flowing, monetizing, or factoring via sred tax credit funding (they all mean the same thing!) your Canadian SR ED claim can accelerate cash flow and working capital for your privately controlled Canadian business that is utilizing SR ED credits under the government's program.
"Without financial resources, innovation remains a hobby." - John Doerr
In many ways the financing of your SR ED credit actually allows you to maintain your competitive edge, as the combination of your non-repayable tax credit and the immediate financing of it are a ‘double whammy‘ in the face of your competitors who might not use this strategy.
TURN YOUR SR&ED TAX CREDIT INTO A SOLID SOURCE OF FUNDING FOR YOUR BUSINESS
A banker we deal with recently told us that current industry statistics show that many companies who are in fact eligible for the SR ED credit aren’t even applying for it, let alone financing it. Therefore when your firm maximizes the total value of your claim and then generates instant cash flow on that claim you are clearly leading the pack in this regard. That's the benefit of sred tax incentive loans.
HOW CAN I USE SR&ED TAX CREDIT ADVANCES TO GROW MY BUSINESS
Many clients tell us that they utilize the SR ED funds that they finance to assist in acquiring new equipment that allows them to maintain a competitive edge in their markets. The reality is of course that funds via SR&ED financing solutions can be used for any general corporate purpose, which might be things such as equipment acquisition, advertising and marketing, reduction in payables or debt, or of course continued investing of even additional research and development efforts.
HOW DOES SR&ED TAX CREDIT FINANCING WORK? WHAT DOCUMENTATION IS REQUIRED FOR THE SR&ED TAX CLAIM
So what is the cash flow and working capital potential in your SR ED, and how do you unlock that potential under the tax credit financing process?
If you are already filing for SR ED credits you are no doubt working with the assistance of your client, or, alternatively, someone that is known as a SRED consultant. Having a solid resource in one or both of these parties allows you to maximize on your potential claim.
What is the role of SR&ED Consultants ? Firms hiring a sr&ed consultant to rely on these experts to hand paperwork and documentation around their project to both identify the project clearly to CRA, as well as document the maximum allowable amount under SR ED - Quality claims will also avoid sr&ed audits by CRA.
Companies complete CRA form T6661 which is the actual narrative around the project and the challenges faced by the business in the sr&ed project.
Once you have filed your claim we recommend that you consider immediately financing the claim. Naturally, you don’t have to do this, and can simply wait the 3-12 months that it might take Ottawa and your particular province to review the claim, adjudicate it, and process it for payment. But, as we state, why not consider financing the claim?
HOW DOES A SRED TAX CREDIT LOAN WORK? WHAT ARE MY SR&ED TAX CREDIT FINANCING OPTIONS?
Clients ask us how the actual process works. It is quite simple really. Your claim is generally financed at 70% of the total value of the amount you and your accountant and consultant have claimed. You can receive cash immediately after it is filed.
In certain cases you can actually receive funds for the claim prior to financing – that whole process is called SRED accrual financing. Some of the basic criteria are simply that you must have filed a claim before, have a solid reputable party preparing it, and be prepared to demonstrate good records and accounting around those expenses you are intending to claim.
WHAT ARE THE BENEFITS OF SR&ED TAX CREDIT FINANCING
So how can we summarize in a ‘bottom line' manner? It's simply as follows – you should be filing SR ED claims if you are eligible. On filing you have the option of financing that claim, so you are bringing immediate cash flow and working capital to your firm on funds that are not repayable to the government.
Funds can be used for any company purpose, and proper utilization allows you to maintain a competitive advantage over your competitors. That’s using research as a cash flow generator – a solid financing strategy!
Financing sr&ed tax credits for startups is always possible, even if you are a first-time filer or pre-revenue/early stage.
WHAT ARE THE INTEREST RATES AND REPAYMENT TERMS FOR THE SR&ED TAX CREDIT LOAN
Financing rates for Sred Loans are very competitive for this form of non-dilutive financing. No repayment is made during the term of the loan, and loan facilities are closed out when Canada Revenue Agency pays the refund - Loan advances can be made after the business files its claim, or, if the company chooses financing can be approved prior to filing, ensuring a continuous road to cash flow on the claim.
Financing your refundable tax credits allows a business performing r&d to generate cash flows which can help the company run on a day-to-day basis as well as grow - all while not having to access additional owner equity and dilute ownership at a critical growth stage in the company.
Businesses can finance claims when they are completed and filed, or a company can choose to fund as they accrue their work in their project . Most financings are approved within a 2-week period from start to finish via a basic application and information on the company.
CONCLUSION - HELP AND EXPERTISE FOR YOUR REFUNDABLE TAX CREDIT LOAN
Get the cash you need to grow your business with SR&ED tax credit loan solutions. Find out how a SRED loan can help your business thrive in the new economy! Talk to the 7 Park Avenue Financial ( tax credit financing experts ) team about SRED tax credit financing services to grow your cash flow needs via maximizing the benefits of sred funding/tax credit financing as well as other financing options for business to assist in cash flow and cash management in your business.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
WHAT IS SR&ED
Canada's Scientific Research and Experimental Development (SR&ED) Program provides investment tax credits via a refundable tax credit to Canadian businesses that focus on r&d. Companies of all sizes from start-ups to large corporations, and even public companies access the program - Most firms focusing on SR&ED receive a tax refund, and thousands of Canadian businesses access over 3 Billion dollars annually.
WHO IS ELIGIBLE FOR SR&ED TAX CREDIT FINANCING
SR&ED Tax credit financing for SMEs is available for any Canadian-controlled private corporation to claims research and development under Canada's Scientific Research and Experimental Development (SR&ED) investment tax credit - R&D performed by the business must be done with a focus on the advancement of scientific knowledge and for the purpose of achieving technological advancement in science and industry. Companies that are not private receive a non refundable tax credit to reduce income tax payable in the tax year- i.e. public companies who conduct research around scientific or technological uncertainty.
WHAT ARE SR&ED ELIGIBILITY CRITERIA
Businesses qualifying for a SR ED refund/tax incentives must be able to prove criteria around technological advancement, and technological uncertainty and be able to provide information around technical content and the processes the business undertook in the research and development.
Project documentation must demonstrate the employees involved in the research and the amount of time spent on the project. The largest portion of any sr&ed claim typically involves wages and payments to subcontractors.
Financing via cash advances for the sr&ed claim can be funded via third-party commercial finance companies who fund the tax credit claim either prior to the refund being claimed or after the business has filed its year-end financial statements and documented their evidence-based documentation for innovation the business has focused on in their research and development.
WHAT AMOUNT OF EXPENDITURE CAN BE CLAIMED?
The amount of eligible expenditures that can be claimed in SR&ED falls under the categories of eligible salaries and wages, payments to subcontractors on the sr&ed project and materials cost pertaining to the sr&ed work under the category expenditure limit. Canadian controlled private corporations, aka " CCPC's) " claim for specific percentages of these expenditures under the sr&ed expenditures for credit calculation.
Supporting documentation around the qualified expenditures must be kept by the business around actual work completed, people involved in the work and the calculations done by the firm under CANADA REVENUE AGENCY /CRA guidelines.
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