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SR&ED financing is simply the method by which you can, at your own firms own option, monetize or ‘cash flow ‘ you Sr&Ed tax credit and generate needed working capital and cash flow for ongoing operations or of course further investment in your r&d capital processes and development. All Canadian privately owned companies in every industry are eligible under the program.
The ' SRED ' program is one of the best, yet somewhat underutilized ways of recovering research and development expenditures. When both the federal and provincial tax credits under the program are combined they can return up to 50% of your r&d spend.
We have all seen the oil change commercial where the mechanic states ‘you can pay me now or pay me later ‘. Well financing your sred claim has a similar ring to it – of course you have the option of waiting for the government at the federal and provincial levels to mail your firm your cheque – that could take anywhere from 1-12 months – Or you can arrange to finance that claim now and utilize those funds for any business purpose.
Are we eligible to finance our sr&Ed claim? Clients often ask. We can only replay that if you have a claim, and have filed it, you are in fact eligible. In fact, under certain circumstances it can be arranged to receive funds even prior to filing.
That's what we at 7 Park Avenue call a financial incentive! Spending items covered in your refund includes items such as salaries, work done by subcontractors on your project, and items purchased relevant to your specific project. Your claim is filed with your T1 tax return in conjunction with your accountant and SR&ED Consultant.
Clearly the purely financial benefits of the sred grant program in Canada are numerous – you receive significant amounts back from expenditures made on research, including wages and salaries associated with that research, as well as major portions of material and equipment expenses.
All of those above noted expenses are ‘cash out ‘to your firm – the funds have been spent. So why not consider financing your claim and receiving those funds back in an extremely timely manner.
We can almost hear some of your questions now as you review our information, as they are typical of what many clients ask:
How exactly do I monetize the sred claim
What exactly is a sred loan – is there additional debt involved
How long does it take and what does it cost?
Let’s cover off some of those very basic questions so you can feel comfortable about the sred financing process. The sred financing, or the monetization or cash flowing of you sred claim is simply a business financing that uses the actual sred claim as collateral. You receive approximately 70% of the full federal and provincial total as a short term cash loan that is collateralized by the sred itself. Of course the additional 30% is still yours, it is simply held back as a buffer for any adjustments that are made to your claim.
No payments are made on your sred loan, and the final cheque to your firm (you have already received 70%) is the holdback amount less the financing costs. So you have pure cash flow and additional working capital, no long term debt associated with a loan per se, and no payments are made. That is truly creative business financing for which most Canadian business owners are not even aware.
The typical process to create a sr&ed financing is approximately 2-3 weeks, you should quite frankly view it as any other business application – the usual business info and backup on your firm, plus of course the details of the sred financing.
From the government's perspective the amount of time it takes to validate your claim or inquire about any specific details might be from 2-6 months depending on the size of your claim. Your actual Sr ed credit is the main collateral for the loan; Canadian firms are tired of waiting for their refund, so they explore the refundable tax credit financing option. This short term working capital loan is a key source of cash for many younger and growing companies, with many in still in 'start-up' mode. They can't wait for long periods of time to recover expenditures related to future sales prospects - SRED finance loans allow the firm to grow faster.
In summary, have your claim prepared by a qualified sred consultant - recent submission rules and styles have changed.
If you have unlimited cash flow and working capital resources by all means wait for your cheque – if you want to cash flow or discount your claim speak to a credible, experienced and trusted business financing advisor in the area of SRED Financing.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.
Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.
Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced
business financing consultant
.Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and financing experience
. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in-depth, hands-on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
Working Capital Via SRED Finance
