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Thanks for dropping in for some hopefully great business info and on occasion some hopefully not too sarcastic comments on the state of Business Financing in Canada and what we are doing about it !

In 2004 I founded 7 PARK AVENUE FINANCIAL. At that time I had spent all my working life, at that time - Over 30 years in Commercial credit and lending and Canadian business financing. I believe the commercial lending landscape has drastically changed in Canada. I believe a void exists for business owners and finance managers for companies, large and small who want service, creativity, and alternatives.

Every day we strive to consistently deliver business financing that you feel meets the needs of your business. If you believe as we do that financing solutions and alternatives exist for your firm we want to talk to you. Our purpose is simple: we want to deliver the best business finance solutions for your company.



Saturday, July 8, 2023

Sr&ed Or Sred? – Call It What You Want But Take Advantage of SRED Funding Or Factoring!






 

YOU WANT SR&ED FINANCING – FINANCING YOUR SR&ED CLAIM

SR&ED Financing: The Lifeline for Canadian Businesses

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

Let us help your firm just like our hundreds of other satisfied clients.

        Financing & Cash flow are the biggest issues facing business today

   ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

 Email us with any questions on Canadian Business Financing

                          EMAIL - sprokop@7parkavenuefinancial.com

 

SR&ED Financing: Canada's Best Kept Secret for Funding Innovation

 

Semantics, we tell clients. You can call it your SRED claim, your Shred claim (they use that a lot also!) or your SR and ED claim.  You can even throw in an ampersand and correctly write it as SR&ED.

 

INTRODUCTION

 

Have you ever wondered about the mechanisms the Canadian Government utilizes to bolster innovation and technological evolution across the nation? The key lies in an essential, albeit frequently underemphasized financial instrument named Scientific Research & Experimental Development (SR&ED) financing.

 

SR&ED, colloquially pronounced as "sred," is a tax incentive scheme orchestrated by the Canada Revenue Agency (CRA). This program stimulates enterprises of varying magnitudes and sectors to engage in research and development (R&D) within Canadian borders. The ultimate objective is to stimulate inventive thinking, catalyze technological progress, and fortify the nation's economy.

 

 

 

WHY  SR&ED FINANCING IS CRITICAL FOR CANADIAN BUSINESSES DOING R&D 

 

In today's intensely competitive landscape, innovation is the lifeblood of business sustainability and expansion. However, there's a caveat - research and development endeavours aren't cheap. They necessitate considerable financial commitments and carry associated risks. This is precisely where SR&ED financing enters the picture, serving as a crucial financial safety net for businesses, helping alleviate the monetary impact of their R&D initiatives.

 

Revolutionizing Business Growth with SR&ED Financing in Canada

 

So there is only one bottom line, so you aren’t considering financing your claim. Putting our semantics aside, many business owners and financial managers are inquiring as to the financeability of their claims. More often than not, they have been told by their bank that this type of claim is not financeable, and even though you are showing it on your books as a receivable, it cannot be margined for working capital and cash flow.

 

Canada's SR&ED Financing: The Fuel for Your Business Innovation



Two words. They are wrong, as SR ED claims can be financed in many situations. They are funded utilizing SR ED Canadian business financing advisors experienced in this niche area of Canadian finance.



We believe it’s always good to recap the basics and set the stage for our financing discussion.  The program is of course, a federal program, in concert with the provinces, that encourages small, medium, and, dare we say it, large corporations to research products, processes, etc.



How committed is the government to this program? Very we say, given that approximately 4 Billion dollars are doled out each year to the 1/3 of the companies that take advantage of the program.  That infers that 2/3 of eligible customers don’t use the program.

 

We have heard a litany of reasons why they don’t hear from clients - they include - we're too busy, it sounds complicated, we don’t want to get audited, our R&D spending is not large enough, etc.  These firms would be better off keeping it simple and saying, 'No, we don’t want funds that are non-repayable that reimburse us for our R&D' because that’s, in effect, what they are saying.

 

HOW DOES SR&ED FUNDING WORK?

 

While you anticipate the approval of your SR&ED claim from the CRA, acquiring third-party financing is an option. Such an approach can offer immediate resources, ensuring your R&D activities continue unhindered.

 

Though initially, the terrain of SR&ED financing might appear intimidating, mastery over it can transform the trajectory of your business.

 

The initial stage involves discerning whether your project meets the SR&ED financing eligibility. The CRA lays out detailed criteria centred around technological progression and uncertainties, systematic inquiries, and concrete evidence. The application for this tax credit can be initiated by completing designated forms in your corporate tax return.

 

HOW MUCH FUNDING CAN YOU RECEIVE WHEN YOU FACTOR YOUR SR ED CLAIM

 

If you have a valid claim prepared by either an experienced internal party, more preferably, a true SRED consultant, then you can finance your claim. Funds for approximately 75% of the claim value are provided to your firm, with the SR ED receivable collateral.  Of course, you can wait 3, 6, or 12 months to receive your funds, but why not consider putting that valuable cash flow and working capital back to work in your business?

 

 

THE BENEFITS OF FACTORING YOUR SR ED CLAIM  



Clients who finance SR&ED claims typically use the funds for general working capital, further R&D, new equipment, marketing, etc. The bottom line is that you choose the use of the funds.  And by the way, that other 25% of your claim is still yours; of course, it’s returned to your firm, less financing costs when the government sends your cheque.

 

And get the news gets any better, but no payments are made on the SR ED loan. Interest accrues and is calculated at the end of the financing.
 

 

Having dissected how SR&ED works, it's time to understand its benefits. Besides the obvious financial relief, SR&ED financing offers numerous other advantages.

 

Enhanced Cash Liquidity: The SR&ED tax credits notably amplify your cash flow, enabling you to utilize these funds for procuring advanced equipment, onboarding proficient professionals, or supporting your next R&D endeavour.

  1. Risk Deterrence: R&D investments inherently carry risks. SR&ED financing helps diminish these risks by compensating for some of the expenses, encouraging businesses to pursue innovation without the stress of financial constraints.

  2. Expedited Innovation: By mitigating financial anxieties, companies can devote more resources to fostering innovation, heightening their competitive position in the market.

 
 

 

ELIGIBILITY CRITERIA FOR SR&ED

 

SR&ED financing isn't universally applicable to all projects or businesses. It's crucial to comprehend the qualifying conditions, which predominantly focus on technological evolution and associated uncertainties. If your company is engaged in creating novel materials, devices, and products or enhancing existing ones through R&D, the likelihood of qualification is considerably high.

 

THE COMMON MISCONCEPTION ABOUT THE SR&ED PROGRAM

 

Erroneous beliefs surrounding SR&ED financing can sometimes discourage enterprises from availing their rightful incentives. A common fallacy is that SR&ED is exclusive to tech or science-related fields. Contrarily, any industry striving for progress via R&D activities can be eligible.

 

Canada's Scientific Research & Experimental Development (SR&ED) program is industry-agnostic and is not limited to specific sectors. However, certain industries frequently participate in the SR&ED program due to the nature of their operations, which often involve extensive research and development activities.

 

These include, but are not limited to:

 

  1. Technology & Software Development: Many software and technology firms constantly innovate to stay competitive. This often involves developing new software, refining algorithms, or creating more efficient systems.

  2. Pharmaceuticals & Biotechnology: Companies in these industries often conduct rigorous R&D activities, developing new drugs or refining existing ones, leading to potential SR&ED claims.

  3. Manufacturing: Process, materials, or equipment innovation can lead to significant technological advancements. Manufacturers often engage in such activities, making them eligible for SR&ED incentives.

  4. Agriculture & Agri-food: Innovation in crop yield improvement, farming methods, or food processing technologies can qualify for SR&ED.

  5. Environmental & Clean Technology / 'Cleantech": Companies in this sector often develop new, more efficient technologies to solve environmental issues, making them potential SR&ED claimants.

  6. Aerospace & Defense: These industries involve high engineering and technological innovation levels, making them good candidates for the SR&ED program.

 

Please note that these are just examples, and many other industries could also qualify based on their specific R&D activities. It's essential to check with a tax professional or directly with the CRA to determine eligibility.

 

KEY TAKEAWAYS ON SR&ED


  1. SR&ED Overview: The Scientific Research & Experimental Development (SR&ED) tax credit is the Canadian federal government's largest single source of support for business-led R&D projects. It annually provides over $3 billion in tax incentives to over 20,000 claimants.

  2. Funding Amount: SR&ED tax credits cover up to 69% of labour and overhead costs, 36% of contractor costs, and 45% of material costs. All expenses must be directly related to the company's scientific research and experimental development activities.

  3. Eligible Applicants: Applicants eligible for the program must be engaged in basic research, applied research, or experimental development in Canada, creating new products or processes or making incremental improvements.

  4. Eligible Expenditures: Eligible costs include labour, contractors, materials, and overhead costs directly correlating to the activity required to address technological uncertainties, obstacles, or challenges.

  5. Program Deadlines: Applications must be submitted within 18 months from the end of the tax year in which the qualifying expenses were incurred.

  6. Amount of Tax Credit: The program offers different funding levels depending on the eligible expense: up to 69% for labour, 36% for contractors, and 45% for materials. Most provinces and territories also offer additional support, between 3.5% and 30% of eligible qualifying expenditures.

  7. Canadian-Controlled Private Corporations (CCPC): Canadian-owned businesses may earn a refundable Investment Tax Credit (ITC) at the enhanced rate of 35% on qualified SR&ED expenditures of up to $3 million. Expenses beyond this threshold attract a non-refundable ITC at 15%.

  8. Other Corporations, Individuals, and Trusts: These entities can earn a non-refundable Investment Tax Credit (ITC) at 15% on qualified SR&ED expenditures.

  9. Members of a Partnership: The Investment Tax Credit (ITC) is calculated at the partnership level and then allocated to eligible members.

  10. Project Eligibility: Projects must conduct experimental development or research activities with some uncertainty and risk. Labour expenses will cover the portion of an individual's role that revolves around such experimentation. Materials and supplies must relate to qualifying projects.

  11. Claimable Expenses: Labour is based on time spent on eligible activities in Canada. Contractor claims must be related to SR&ED performed in Canada. Materials must be consumed or transformed for the project. Overhead can be claimed either using a proxy method (55% of adjusted labour costs) or the traditional method (directly related and incremental to the prosecution of SR&ED).

  12. Program Deadlines & Review: SR&ED claims must be filed within 18 months of the fiscal year-end. CRA can review the claim to determine if the projects meet the SR&ED definition under the Income Tax Act. Approved tax credits may be refundable, used to offset taxes payable, or carried forward for up to 20 years. These carry-forward credits may survive mergers, acquisitions, amalgamations, and wind-ups under certain conditions.

 
 
CONCLUSION

 

 

With Canada persistently prioritizing innovation and technological advancement, the significance of SR&ED financing as a key resource for businesses cannot be overstated. The program is projected to refine and expand, catering to various industries continually.

 

SR&ED financing is a robust impetus for Canadian enterprises, fuelling growth, fostering innovation, and cultivating success. Gaining insight into its mechanisms and advantages can establish a solid foundation for financial robustness and consistent development in your R&D initiatives.

SR&ED financing is more than just a fiscal instrument—it's a gateway to construct, innovate, and escalate. So, are you prepared to unleash the utmost potential of your business with SR&ED financing?

 

Don’t fail to consider SR&ED financing as a way to stay one step ahead of the competition and simultaneously satisfy your cash flow and working capital needs. Call 7 Park Avenue Financial, a trusted, credible and experienced SRED Canadian business financing advisor, to assist you with factoring your claim.

 

 
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK /  MORE INFORMATION

 

  What is SR&ED financing?

 Scientific Research & Experimental Development (SR&ED) financing is a tax incentive program the Canada Revenue Agency (CRA) offers. It's designed to encourage businesses of all sizes and across various industries to conduct research and development activities within Canada. Businesses can recover some of the costs associated with their R&D activities by claiming tax credits through this program. Visit 7parkavenuefinancial.com

 

 How does SR&ED financing support businesses?

 

 SR&ED financing supports businesses by enhancing their cash flow and reducing the risks associated with R&D activities. Funds from SR&ED tax credits can be used to invest in new equipment, hire skilled professionals, or fund future R&D projects. By offsetting some of the R&D costs, SR&ED financing encourages businesses to continue innovating without the fear of financial constraints. Visit 7parkavenuefinancial.com

 

 What types of businesses or projects qualify for SR&ED financing?

A wide range of industries can qualify for SR&ED financing, not just those in the tech or science fields. The primary criteria revolve around technological advancements and uncertainties. If your business is engaged in creating new or improving existing materials, devices, products, or processes through R&D, there's a high chance you may qualify. Visit 7parkavenuefinancial.com

 

Can SR&ED claims be financed before they are filed?

Yes, in many cases, businesses can seek third-party financing while waiting for their SR&ED claims to be processed by the CRA. This can provide immediate funds to continue your R&D activities without any interruption. As a finance firm, we provide such pre-claim financing options to eligible businesses. Visit 7parkavenuefinancial.com

 

 How can I apply for SR&ED financing for my sr ed tax incentives?

To apply for SR&ED financing, businesses must fill out specific forms in their corporate tax return detailing the R&D activities conducted for eligible expenses, their purposes, outcomes, and associated expenses. Consulting a tax professional or a specialized SR&ED consultant can be beneficial to ensure the claim is appropriately prepared and maximized for your refundable tax credits. Visit 7parkavenuefinancial.com

 

 How does SR&ED financing affect my business's cash flow?

SR&ED financing directly improves your business's cash flow by providing a tax credit for eligible R&D expenses under the tax credit program. You can reinvest more money into your business from those sr ed credits for hiring, equipment procurement, or future R&D projects for a sr ed tax credit claim. This is especially important if you're a start-up or a small-to-medium-sized business where cash flow is critical when waiting for the sr ed refund. Visit 7parkavenuefinancial.com

 

What happens if my SR&ED claim is denied or reduced by the CRA?

If your SR&ED claim is rejected/denied by the CRA because of sr ed tax credit eligibility, you have the right to object and provide additional supporting information. However, preparing and presenting your claim to minimize such risks accurately is crucial. As a finance firm offering SR&ED claim funding, we work closely with you to ensure your claim meets all the necessary criteria. Visit 7parkavenuefinancial.com

 


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