YOU ARE LOOKING FOR SRED CLAIM FINANCE
FINANCING YOUR SR&ED IS A GREAT CASH FLOW STRATEGY!
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Financing & Cash flow are the biggest issues facing businesses today
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The Complete Guide to SR&ED Financing
INTRODUCTION
As a business owner seeking SR&ED tax incentives in Canada, navigating the sred financing process can be overwhelming. Let the 7 Park Avenue Financial team show you how easy the process is from start to finish - Leverage our expertise to help fund your r&d activities confidently, and we'll demonstrate the benefits of sr&ed financing.
Companies can also take advantage of SRED Advance Funding, an alternative financing option in Canada that can greatly benefit businesses undertaking innovative projects in research and development,
Your ability to finance your SRED claim (aka ‘SR&ED claim') signifies the cash flowing of your non-repayable refundable investment tax credit. At 7 Park Avenue Financial, we think that anytime you can hasten cash from the government and turn that into immediate cash flow and working capital, that is a good thing.
UNDERSTANDING SR&ED FINANCING
Financing your SR&ED claim is crucial for accessing Canadian government tax incentives and the cash flow you need to run your business. The SR&ED program provides substantial cash incentives for companies involved in scientific research and experimental development. These incentives for sr ed expenditures can significantly mitigate the costs of your research activities.
SRED credits are of course the funds you received from the Canada Revenue Agency based on the filing of your Scientific Research and Experimental Development (SR&ED) claim.
CANADA'S TWO GREAT GOVERNMENT FINANCE PROGRAMS
These funds have never been more generous, and many Canadian business owners and financial managers are unaware that the program even exists, let alone their ability to partake in the billions of dollars of non-repayable grants issued by this department. Essentially it is the most significant support for research in Canada. Many clients always ask us if there are government grants and loans. We think that the two best programs in Canada to finance your firm are the federal BIL/CSBF loan and of course, the SRED program.
WHAT IS SR&ED ADVANCE FUNDING?
SR&ED Advance Funding allows a company not to have to wait until the end of the fiscal year or until the sr red claim is filed. The funding process is straightforward and typically takes only a couple weeks - and revolves around a simple application on the company background, information, etc and key documents relating to accrued sr ed expenses to date.
Following some short due diligence, the bridge loan is funded, and the company can choose to schedule when they receive their funding for work accrued to date under the pending sr&ed claim - The sr&e bridge loan funding has no monthly payments ( the interest accrues ). The loan is repaid when CRA approves and sends the refund.
Timing is everything, and you can finance that claim if you want to monetize those funds and get them working inside your firm. For many early-stage and start-up firms, the ability to finance their SRED claim is often the firm's largest receivable that year. And the beauty of the program is of course that as long as your firm is a private Canadian-controlled private corporation, businesses can participate in the program.
DEMYSTIFYING SRED FINANCING & THE ROLE OF THE SR&ED CONSULTANT
As companies and consumers, we generally use an ‘expert' to prepare our taxes and file them. It is no different with SRED, and we recommend using an SR&ED consultant to ensure your claim is prepared correctly.
Naturally, using their own expertise or the government's self-assessment tool, you want to be sure you are eligible for the grant, given that it takes time to prepare and file the claim.
Naturally, after filing a professionally prepared claim, you are, of course, entitled to wait for your cheque – that timeframe can be anywhere from a couple of months to potentially close to a year depending on some key factors such as your first time filing, and the due diligence that SRED employees do on the technical and financial aspects of your claim.
SRED FINANCING - THE HIDDEN GEM IN CANADIAN BUSINESS FINANCING
So you are eligible for SR&ED. You have filed a claim. You have been made aware you can finance the claim, but you are not sure how. The banks in Canada don’t finance these sorts of claims – that’s a general statement, but 99% of the time we are pretty sure we are correct in making that comment.
Contact 7 Park Avenue Financial, a business financing advisor specializing in SRED finance. At that point, it’s a relatively simple process, and we encourage clients to view it as they would any business financing, from a lease to a loan arrangement. There is standard application information, and the whole process, up to and including funding, can be completed in weeks.
SR&ED CLAIM SIZE - DOES SIZE MATTER?
As a general rule, it makes sense to finance claims over 250k in size, but quite frankly, smaller claims can also be funded. There is no challenge to the amount of financing regarding the size of an SRED filing – Claims more than a million dollars can be easily financed.
The critical advantage of financing a claim is that you are not undertaking any debt; you are just discounting a receivable that you have – that receivable being the SRED claim itself.
The SR&ED filing itself is the actual collateral for the financing – and if you want more good news, then you should be aware you don’t make payments on SRED claim finance. The funds advanced are netted out from your final cheque from the government. Usually, SRED claims are financed at 75% of their filed value - that leaves a buffer in case part of the claim is downsized when approved.
WHAT ARE THE BENEFITS OF SRED FINANCING
Financing your SR&ED claim offers several advantages for your business. Companies can access cash flow from one of the best Canadian government tax incentives, which helps reduce research and development costs and facilitates ongoing innovation in product and service research and development. SR ED funding improves cash flow by providing upfront funds, eliminating the need to deplete existing reserves of cash or credit lines, and helping cover research expenses. By leveraging SR&ED claim financing, companies can sustain business growth and financial stability.
Companies fast-tracking r&d investments and cash-flowing claims can maintain a competitive edge with the financial stress of funding limitations.
SR&ED financing is non-dilutive, businesses do not need to dilute shareholder ownership, and experts know that short-term debt financing is cheaper than equity financing!
KEY TAKEAWAYS
SR&ED (Scientific Research and Experimental Development) is a tax incentive program by the Canadian government for R&D.
SR&ED financing provides funding for companies engaged in SR&ED activities
SRED Loans improve a business's cash flows by accessing SR&ED credits in advance for accrued sred research to date - or companies can file an entire claim at year-end
SRED financing is a loan based on the anticipated value of the SR&ED tax credit
Financing r&d efforts benefits startups and small businesses to finance research activities.
Business owners should ensure they Understand loan terms, including interest rates and fees - sr&ed financing is low cost and competitive compared to other forms of debt and equity financing.
Companies must ensure they meet eligibility requirements and approval of SR&ED claims before taking financing, including documentation for third party payments.
CONCLUSION
Let the 7 Park Avenue Financial team make funding your sr&ed claim fast and easy. SRED Finance is an alternative source of funding that provides predictable cash flow management and a source of funding that helps growth-oriented companies.
Cash flow is king, if you have an SRED claim, be aware that the claim is financeable, and your ability to get those funds working again usually puts you in a more competitive stance within your industry and allows those funds to be used for further research or any general working capital purpose.
Call 7 Park Avenue Financial to ensure you know the benefits of SR&ED finance – claim those funds!
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What do you need to apply for sr&ed loan financing
For a company to apply for SR&ED tax credit debt facility, the requirements are simple under financing for the sr ed claim process:
- The business must be a Canada based company, incorporated in Canada
- Businesses must have reasonable levels of R&D expenditure in areas of scientific or technological advancement
- Qualified expenditure for SR&ED investment tax credits in sr ed projects must demonstrate sr&ed eligibility
What is The Eligibility Criteria for SR&ED Financing
To be eligible for SR&ED financing, your business must engage in scientific research and experimental development activities in areas of scientific or technological uncertainty in their business that qualify for the tax incentives offered by the Canadian government. Research and development activities must meet specific criteria, including being performed in Canada and involving a systematic investigation or search and being able to provide technical drawings, project records, payroll records, purchase invoices etc. Additionally, your activities must be conducted to achieve technological advancement, and you must maintain proper documents to support your claim.
What are Other types of Financing Options for funding SR&ED Claims
There are several financing options available for SR&ED claims, each with its advantages and disadvantages. The most common financing options include traditional loans, lines of credit, and government grants. Traditional loans provide you with a lump sum of money you repay with interest over time. Lines of credit allow you to access funds as needed, but you only pay interest on the amount you use. Government grants provide you with non-repayable funds to support your research and development activities.
What are some tips for a Successful SR&ED Claim Financing Application?
When applying for SR ED refund claim financing, it is essential to be prepared and organized. Ensure you have all the necessary documentation to support your claim, including financial statements, project descriptions, and supporting documents. Additionally, be prepared to demonstrate how your research and development activities meet the eligibility criteria for the tax incentives offered by the Canadian government for Canadian controlled private corporations in areas of tech, software development, and many other industries. Finally, be prepared to answer questions about your business and your research and development activities.
What is the SR&ED Investment Tax Credit (ITC) Program in Canada
SR ED tax credits are a valuable yet slow-to-materialize source of cash for many Canadian companies. For a company to access the payments, it must expend money on R&D within the current financial year and patiently navigate through fiscal year-end, accounts preparation, tax credit claim filing, and finally, the processing and payout of the refund by the CRA. This process can extend from 4-10 weeks. But with an SR&ED tax credit loan, you can access funds for your sr ed tax credit claim within the year the R&D spending happens, much before the CRA refund date.
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