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How Canadian Businesses Turn SR&ED Tax Credits into Cash Flow
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Converting Research Credits into Tangible Assets: The SR&ED Way
Unlocking Liquid Assets: SR&ED Tax Credit Financing & Factoring in Canada
Introduction: Unlocking Working Capital with SRED (SR&ED) Tax Credit Financing and Factoring
SRED (SR&ED) Tax Credit Financing offers businesses a strategic avenue to bolster their cash flow and working capital.
If you've explored this route, you understand the importance of timing. As companies navigate the financial landscape, converting or discounting SRED claims into immediate capital emerges as a solid business decision and cash flow solution.
Canadian Business Owners and the SR&ED Program
Many Canadian enterprises leverage the SR&ED program, aligning their efforts with research and fortifying their market position in their industry. However, it's startling that many businesses remain unaware or have yet to exploit this lucrative offering.
SR&ED Program: A Snapshot
Designed for qualifying private companies, the federal SR&ED program awards a non-repayable tax credit. This translates to a government investment tax credit, rewarding a significant portion of a company’s R&D expenditure.
While reclaiming this cash flow is rewarding, the prospect of financing your claim shortly after its filing (or even prior) adds another dimension, especially in today's challenging business cash flow scenarios.
Sred accrual financing is also available for claims not filed yet!
SRED Tax Credit Financing & Factoring: The Mechanics
How do we define SRED financing and factoring? Drawing parallels with 'factoring' – a financing solution gaining traction in Canada – one can view an SRED claim akin to a receivable regarding the SR ed refund owing to the business.
The principle guiding receivable financing seamlessly applies to SR&ED claims for business owners and financial managers.
Is SR&ED Financing a Complex Process?
Contrary to popular belief, securing SR&ED financing is relatively straightforward. It's a simple process if a competent consultant or accountant has prepared your SR&ED and your firm is eligible under program guidelines. Financing those qualified expenses is as easy as that!
SR&ED Financing: The Application Walkthrough For Your Refundable Tax Credit
It all starts with a simple business application, followed by the submission of essential documentation about your claim and company,
The SR&ED financing process is as basic as any financing application for commercial funding.
SR&ED claims can transition to financed assets within weeks – a much-improved timeline over conventional business financing! A term sheet/financing offer is provided once the application receives approval and the SR&ED claim is reviewed. Interestingly, the primary collateral is the claim itself.
Businesses can anticipate a 75% Loan-to-Value (LTV) on their claim. To put it in numbers, a 300k claim could unlock immediate financing equivalent to 75% of that value.
The best part? No monthly payments ! This capital can be invested back into the business. Upon the government's finalization and clearance of the claim, the remaining 25% gets credited back to the company, less financing charges that are very competitive - Talk to the 7 Park Avenue Financial team about how you can achieve the lowest sr&ed financing rates in Canada.
Why Consider SR&ED Tax Credit Financing?
Cash flow - it's as simple as that! Immediate cash flow deriving from a government's non-repayable grant – it's an option deserving of consideration.
Conclusion:
SR&ED tax credit financing and factoring is a great, non-dilutive remarkable financing option for Canadian businesses focused on growth and stability. Leveraging this facility can propel a business ahead, tapping into government-backed incentives and translating them into tangible assets such as cash.
Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian Business Financing Advisor who can assist you with your business financing needs.
FAQ: FREQUENTLY ASKED QUESTIONS /PEOPLE ALSO ASK / MORE INFORMATION
What is the SR&ED tax credit program in Canada?
The SR&ED program is a federal initiative designed for qualifying Canadian companies, allowing them to receive a non-repayable tax credit for a significant portion of their R&D expenditure.
Why should businesses consider SR&ED tax credit financing?
SR&ED tax credit financing offers businesses a strategic opportunity to bolster their immediate cash flow and working capital, turning tax credits into tangible assets.
How quickly can a business access funds through SR&ED financing?
Once the application is approved and the SR&ED claim reviewed, funds can typically be accessed within weeks, making it a quick solution for immediate capital needs for refunds under sred tax credit programs.
Is there a monthly repayment obligation with SR&ED financing?
No, the highlight of SR&ED financing is that there are no monthly installments. Businesses can reinvest this capital, and the remainder is settled after claim clearance by the government via the Canada Revenue Agency.
How do I know if my business is eligible for SR&ED financing?
If your SR&ED claim is prepared by a qualified consultant or accountant and your firm is financially stable, you are likely eligible for SR&ED financing.
Are there any hidden costs associated with SR&ED tax credit financing?
Typically, the main cost associated is the financing charge, which is around 1 - 1.25% monthly. It's essential to discuss achieving the best financing rates with 7 Park Avenue Financial.
How does SR&ED financing differ from traditional bank loans?
Unlike traditional loans, SR&ED financing is more niche, focusing on your R&D tax credit claim for scientific research and experimental development as the primary collateral. It's a specialized form of financing that doesn't rely on traditional lending criteria.
Can startups or new businesses achieve SR&ED tax credit financing?
Absolutely! As long as the startup or new business has an SR&ED claim prepared by a competent authority and the company has financial viability, it can explore SR&ED financing.
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