What Seems To Be The Problem Here? SR&ED Tax Credit Financing Explained – Finally!
SR&ED Debt Finance Loans In Canada for SR&ED Tax Credits - Canada's R &D refundable credit system seems to pose challenges for some clients looking to monetize, via SR ED financing, their SR ED claims. Does there have to be a problem? We don't think so. Let’s dig in.
UNDERSTANDING THE GOVERNMENT OF CANADA'S SR&ED PROGRAM
Of course, SR&ED credits are available via the governments ' Scientific Research and Experimental Development Tax Credit program. Although federal budgets in recent years have changed the program significantly from the viewpoint of streamlining the process, certain portions of the allowable refund were also cut back, i.e. capital expenditures relating to the actual R&D capital investments your company makes.
IS A SR&ED LOAN REALLY DEBT FINANCE?
The term debt finance is really a misnomer, as no debt comes on the balance sheet when you monetize your sr ed claim via 7 Park Avenue Financial - in effect you are financing an account receivable, with your client being the federal and provincial government - that receivable is turned into cash loan proceeds.
The irony of SR&ED is that many, in fact almost all banks don't recognize sr&ed receivables - they view your claim as an ' intangible asset ' in many cases which is partially understandable but certainly less so if your firm regularly files claims.
WHO PREPARES SRED CLAIMS?
In Canada, the majority of tax credits/claims are prepared by independent consultants - they are known as ' sr&ed consultants'.These sr ed claims are filed, of course, in conjunction with your year-end tax return. Retaining a good preparer for your claim is one part of the financing process of a claim. In the past couple of years, a lot of focus was placed on the way consultants bill and prepare claims - the majority of which are on a ' contingency' basis, which in hindsight probably caused some bad behaviour by a small few.
WATCH YOUR DEADLINES!
We encourage all clients to consider whether they are eligible for the SR&ED refundable tax credit and focus on filing the claim promptly as there are some deadlines in place under the program.
BILLIONS OF DOLLARS ARE REFUNDED TO CANADIAN BUSINESS ANNUALLY UNDER SRED
Refundable credits return billions of dollars to Canadian corporations each year. Your ability to cash flow or monetize your claim makes the program complete in some way. Your company is in effect ' fast-tracking ' the cash flow return to your company by filing and financing your claim.
HOW DOES A SR&ED BRIDGE LOAN WORK?
How then are the claims financed? It certainly doesn't have to be problematic if you have some expertise backing the process. A simple business application starts the whole process - typical info needed here is a copy of your claim, information on who prepared it, as well as your business financials.
WHAT IS THE COLLATERAL REQUIRED FOR A SR&ED BRIDGE LOAN? SPOILER ALERT - IT'S YOUR SR&ED CLAIM!
We note here that many firms that complete claims range from start-ups to firms that are still in the early stages of revenue. So it's important to understand that the key collateral under SR&ED financing is fact, just the claim itself. In effect, you've created a (government) account receivable and are only financing /monetizing that specific A/R.
CONSIDER A SR&ED CREDIT LINE TO PRE-FUND YOUR CLAIM
The newest trend in tax loans for SR&ED financing is the ability of your business to, in effect, pre-finance your claim - you are reimbursed for funds you are spending during your spend. That fast tracks the return of R&D capital even faster.
CONCLUSION
Does your firm qualify for sr&ed finance? If your firm makes investments in research and development and if you're looking to avoid any ' problems ' associated with financing SRED CREDITS, seek out and speak to a trusted, credible and experienced Canadian business financing advisor at 7 Park Avenue Financial and let us help. Our specialty is helping you fund refundable tax credits - The probable result - Problems gone!
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.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021
