YOUR COMPANY IS LOOKING FOR CANADIAN SR&ED TAX CREDIT FINANCING!
Revolutionizing Cash Flow with SR&ED Loans: A Game Changer for Canadian Companies
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Financing & Cash flow are the biggest issues facing businesses today
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From Tax Credits to Immediate Cash: The Magic of SR&ED Loans
SR&ED tax credit financing allows owners/financial managers to fully explore the cash flow potential of Canada's SRED program.
SRED financing is a financing process that allows a business to access the cash for their sr&ed tax credits before the government refund arrives, which in many cases can take many months - That whole process goes by several names - ie sr&ed financing, sr&ed loans, and even sr&ed factoring as your claim is, in effect, a government receivable. Let's dig in
INTRODUCTION
Canada's Scientific Research and Experimental Development (SR&ED) program has been a benefit for thousands of companies every year as these companies take advantage of the sr&ed federal tax incentive program - It is of course the Canadian government's way of encouraging businesses in Canada to work on research and development (R&D) projects within Canada.
The challenge within the program is that businesses face a cash flow challenge as they spend on r&d and then wait to receive their tax refunds due to government delays around claim approval, a potential claim audit, and review, etc - Naturally PSAC CRA strikes never help also!
So the Sred loan process changes that cash conundrum into a solid financial tool that solves the cash flow challenge around research and development.
WHAT IS THE SR&ED LOAN AND HOW DOES THE SRED FINANCING PROCESS WORK?
SR&ED loans are a truly innovative financing solution that allows a business to beat the slow release of refundable tax credit refunds by the government - aka Canada Revenue Agency (CRA).
So how difficult is it to finance your SRED claim? It involves a very typical business financing application, as well as a full backup for your SRED claim, including who prepared it, details of any previous year's submissions and approvals, etc.
The actual sr&ed loan process could not be easier - A simple application process around the company information, as well as information on your actual sr&ed claim, is all that is required. The vast majority of companies in Canada hire' sr&ed consultants' to write and prepare their claims. Knowing your claim is prepared by an experienced and credible sred consultant simply enhances both approvals of your claim by CRA, as well as the same time enhancing its ability to be
financed.
A company can choose various financing options around funding sred claims - they include funding claims before they are filed, financing filed claims on a one-time basis, or arranging for timely disbursements depending on cash flow needs,
KEY POINT - The collateral for the claim is the actual refund itself, no payments are made during the loan period - and claims are typically financed at 75% of the claim amount - Companies receive the final 25%, less accrued financing costs when the claim refund is paid by the government.
Talk to 7 Park Avenue Financial on how you can receive the lowest financing rates in Canada for your sred refund.
Whether your business is a first-time, or multiyear claimant everyone is in the same boat - waiting for the refund cheque. Occasional audits of either your technical claim or the financial aspect of the claim can further prolong your receipt of funds.
In talking to many clients we can safely say that most firms who have a commitment to R&D capital probably could put those funds to alternative uses.
BENEFITS AND USES OF SRED LOAN FINANCING
The uses of SR&ED loans go well beyond basic cash flow needs - In the majority of cases, it allows businesses to fast-track and complete their research and development - thereby enhancing the valuation of the company which is so critical in the early stages of a business.
Opportunities that arise in the interim can be taken advantage of, and business owners love the fact that sr&ed finance is non-dilutive in nature - that has a great appeal to the entrepreneur attempting to build value and maintain ownership.
Simple concepts such as hiring additional technical staff can add to larger claims and greater business success.
Bridging the Gap: How SR&ED Loans Are Driving Canadian R&D Forward
Clients we meet use SR&ED refunds for working capital, buying new equipment, reducing payables, and of course also furthering their R&D enhancements. In essence, you're enhancing and continuing to expand your business.
Therefore as powerful a tool, as an SRED claim is, the reality is that it itself can create short-term cash flow problems. Those challenges are on top of the ones Canadian business owners and financial managers face every day, slow receivables, demanding payables, opportunities to purchase more inventory, or in some cases invest in equipment and long-term fixed assets.
How then does monetizing your SR&ED claim address your overall working capital and cash flow position? Simply that you can monetize your claim as soon as you file it, or even while you're preparing the claim. That's called an SR&ED accrual or SRED credit line facility.
SRED, aka SR&ED tax credits, are financeable! So your ability to finance your claim simply allows you to receive approximately 75% of your claim today in the form of an SRED bridge loan. And remember, that's not additional debt on your balance sheet, since the SRED loan is in fact offset or collateralized by the full value of your actual SRED refund.
Talk about kick-starting cash flow - you're receiving cash for non-repayable refundable tax credits under the program.
Even if your firm is experiencing financial challenges you are still very much in the position of being able to discount, or in effect factor your SRED claim, because that is the asset that supports the financing. Many firms that look to SRED Loans for cash flow are also start-ups in many cases, or at a minimum, early-stage firms - in all industries.
An SRED cash flow loan can be completed in a week or two assuming your full ability to provide backup on the claim, info on your firm, etc. It's a very basic process.
CONCLUSION - THE SR&ED LOAN BENEFIT
SR&ED loans are a solid solution for any business in Canada focusing on r&d and wishing to address the cash flow challenges that come with that investment - SRED loans bridge that critical gap between executing your r&d project and waiting for your tax credit refund - Whether your company is established, or a startup let sted tax credit financing alleviate cash flow pressures around the large amount of r&d you are spending. These short-term bridge loans bring no long-term debt to the balance sheet and come at competitive financing costs much less than other financing solutions such as long-term longs or short-term high-interest working capital loans.
Call 7 Park Avenue Financial, a trusted, credible, and experienced SRED finance expert who will no doubt help them accelerate the financing of sr ed credits for cash management - ending the waiting game!
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is the sr&ed loan process?
The sr&ed loan process involves the company detailing basic claim preparation on r&d activities on the research project - That process, often via an sr ed consultant, includes technical reports and summaries, as well as supporting documentation on eligible expenditures around the technological innovation in the project. The sred loan application is a basic loan application based on the collateral of the sred refund itself and comes with competitive rates compared to many forms of financing.
After basic due diligence around the company and the claim which typically takes a few days, a term sheet is provided to the borrower. Loans are typically in the 75% range of claim or accrued sred work values and the loan is collapsed and repaid in full to the commercial lender/ financial institution when the sred refund arrives - Businesses can also take advantage of advance funding for claims for their financing needs, prior to filing the formal claim at financial year end with their corporate tax return
What is the Sr&ed Program?
The Scientific Research and Experimental Development (SR&ED) program is a Canadian tax incentive program for Canadian firms that is designed to encourage businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada. These tax incentives come in three forms: an income tax deduction, an investment tax credit (ITC), and, in some cases, a sr ed refund.
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