Tapping into the Potential of SR&ED Financing: Your Ultimate Guide To Sred Loans ! Blueprint to SRED Financing: Accelerate Your Business Growth

Tweet

 

 

YOU ARE LOOKING FOR SRED CLAIM FINANCE

 FINANCING YOUR SR&ED IS A GREAT CASH FLOW STRATEGY! 

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

        Financing & Cash flow are the biggest issues facing businesses 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 - sprokop@7parkavenuefinancial.com 

                                                                    

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.

 

 

 

 

Click here for the business finance track record of 7 Park Avenue Financial

How To Finance Your Business With an SR&ED Tax Credit Secured Loan SR&ED Tax Credit Financing - Cash Flow For Your Innovation

Tweet

HOW SR&ED TAX CREDIT SECURED LOAN FINANCING CAN DRIVE YOUR INNOVATION AND GROWTH

 FUNDING YOUR SR&ED ( SCIENTIFIC RESEARCH & EXPERIMENTAL DEVELOPMENT ) CLAIM

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 businesses 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

Or Email us with any questions on Canadian Business Financing

      Email - sprokop@7parkavenuefinancial.com  

                                 

 

"The government's role should be to facilitate entrepreneurship and capital formation, not stifle them with regulations and unnecessary barriers to entry." - Charles Koch

 

 

WHAT IS A SR&ED TAX CREDIT LOAN FINANCING FOR INNOVATION? 

 

SR&ED credit is treated as a future receivable, and businesses are provided with an advance loan (a cash flow facility). Businesses can draw down on this funding, to provide themselves with general working capital within their business.

 

Let's investigate how unlocking funding opportunities via sr&ed secured loans can drive your company's innovation!

 

This means they have the opportunity for improved liquidity at crucial moments of need, such as when there’s too much fluctuation in available funds or when companies are experiencing sudden growth due to increased market demand.

 

FUEL YOUR  BUSINESS GROWTH WITH INNOVATIVE FINANCING

 

To qualify, your firm should have an eligible claim, typically prepared by a ' sr&ed consultant', and be a private company in a pre-profit financial status.

 

The most significant upside that comes from SR ED program tax credits being treated like a pre-payment option via a sred tax credit secured loan? It offers better protection against fluctuations in revenue streams.

 

  

MAXIMIZE THE TRUE VALUE OF YOUR R&D CREDITS - LEVERAGING SECURED LOAN FINANCING FOR CASH FLOW  

 

In today's quickly changing and highly competitive business environment, the key to success is innovation. And when you're an innovative company with a great product or service that could be so much more if only you had enough money for it - then our SR&ED financing just might be your answer!


The Canadian government has invested in research & development (R&D), which means they are willing to support innovators like yourself who want their products developed further but don't have the cash needed for investment tax credits.

 

This funding will allow businesses of all sizes and stages better access to reliable capital at affordable rates while providing them complete flexibility by not tying up any collateral or equity stake from investors

 

  

WANT TO FINANCE YOUR SR&ED TAX CREDIT BEFORE YOU FILE? THINK OF IT AS YOUR SR&ED LINE OF CREDIT!   CAPITAL AS YOU NEED IT!  

 

 

Just as sr&ed financing is non-dilutive when it comes to not having to dilute or raise additional equity funding, your sr&ed claim in advance of filing is a tremendous cash management tool.   A simple application process allows you to access your refundable sr&ed tax credits while conducting ongoing research before filing your claim.

 

That allows you to accelerate funding and manage cash flow needs in the business to fund day-to-day operations and ongoing research.

 

The process is simple! .. Allowing your company to access investment tax credit financing for work you have accrued and documented on your sr&ed claim.

 

 

WHY SR&ED? WHAT ARE SR&ED TAX CREDIT INCENTIVES?

 

Research and development (R&D) is a huge part of a company's success. Canadian businesses can use the SR&ED tax credit program to help conduct research, develop new products or processes, and improve existing ones. The SR ED refund tax credit loan in Canada provides funding for companies that are conducting qualifying R&D activities such as: 

 

 Product development & testing;

 Process improvement, including automation;

 Designing equipment needed for production, such as machines or computer software

 

and more!

 

Companies can also apply this money towards owner salaries responsible for the work being done on these projects. If you have questions about how to claim your SR&ED expenses under the tax credit program, contact 7 Park Avenue Financial!

 

 

CAN YOU UNLOCK THE VALUE OF YOUR SR&ED CREDIT? 

 

Can you finance your Canadian business by monetizing an SRED tax credit secured loan? Absolutely, positively... maybe. We say maybe because if you don’t have an SR&ED tax credit, then it is of course not possible. However, if you participate in Canada's primary R&D tax credit refundable tax credit program, you're potentially on your way to increased cash flow and working capital.

 

 

 

 

WHAT IS SR&ED FINANCING? 

 

One of the biggest problems in small businesses is that they accumulate SR&ED tax credits over a long period, but there can be months or years before you submit your return to  CRA CANADA REVENUE AGENCY.

 

This means it's difficult for companies with tight cash flow issues and operating costs to access this money while waiting on potential refunds from the government because some funds are tied up until returns are submitted. Let the 7 Park Avenue Financial team show you how a company like yours can access advances against their accrued or filed! .. SR&ED credit investments as collateral instead of having this key receivable sitting idle- not making any interest gains!

 

 HOW FAST IS IT TO RECEIVE YOUR SRED FUNDING? 

 

SR&ED Financing can be structured in several ways.. It can come as a bridge loan from filing your SR&ED claim until you receive your refund checque from CRA. However, you can also get a cash advance as early as 3 months into your tax year - more than a year before filing for most claims if you have some historical claim experience.

 

 

Recent articles in the Canadian business press have criticized the need for the government to even further increase these tax credits. Typically most Canadian business owners and financial managers think that the SRED tax credit applies only to manufacturing, which is the farthest thing from the truth.  A recent article in the Globe and Mail, one of Canada's premier business publications, stated clearly that firms in the resource, services and technology sectors also participate vigorously in the program. 

 

If your firm innovates and spends money on R&D, the last thing you can be criticized for is under-investing in your future. Therefore monetizing your tax credit after it is filed (it can also be cash-flowed before filing in certain circumstances) makes excellent financial sense.

 

Is monetizing your tax flow credit risky in any sense of the word? Our clients hardly think so, as you are simply 'cash flowing', or 'discounting' your claim today, and you are not even adding debt to your balance sheet. Consider the SRED credit as a current asset; it’s a receivable, and you are simply collateralizing a bridge loan against your SR&ED claim.

 

SR&ED tax credits are more often than not prepared by an external consultant, although some firms choose to prepare the claim itself - we suspect it's because they think that they have a better handle on the nature of the claim. The reality is, however that you gain an additional 'brownie point' - if we can call it that by having the claim prepared by a professional SRED consultant.

 

Many firms in Canada aren’t aware that these consultants will even prepare your claim on a contingency basis - so if they are prepared to take the risk of time and expense on your claim, you can quite rightly assume they feel it will be approved, as professionals rarely choose to work for free!

 

While the Globe and Mail survey indicated that 70% of Canadian businesses thought the tax credits currently in place were not as generous as they thought they should be, let's be honest and can't we agree that receiving  40-50% back of every dollar you spend on R&D isn’t that bad of a start! And if you can turn your spent funds into instant cash flow by monetizing your claim, doesn’t that give you a leg up on your competition? We certainly think so.

 

  

 THE SRED APPLICATION PROCESS MOVES QUICKLY    

 

Cash for research tax credits is not a complicated process. A short overview is as follows - have your claim prepared in a manner that suits the government’s current filing process. File your claim with your tax return.

  

 

  

MANAGING YOUR CASH FLOW THROUGH THE SR&ED CYCLE!

    

 

If your business has an investment in research or technology, SR&ED funding can act as a continuous positive cycle. As you grow and continue to invest in R&D, the financing will flow back into more innovation under those tax incentives and help your competitiveness around the commercialization and monetizing of your products or services  - so if your company hires an additional programmer, as an example, with SR&ED loan approx. 33% of their wages are added to a larger tax credit at the end of the year! At  7 Park Avenue Financial, we think that's good business!

 

 

"Governments don't create jobs; entrepreneurs do." - Mitt Romney

 

 

CONCLUSION - SECURING SR&ED TAX CREDIT FINANCING FOR YOUR R&D PROJECTS

 

Speak to   7 Park Avenue Financial, a trusted, credible and experienced business financing advisor who will work with you to complete an SRED financing application - it is not dissimilar to any other business financing application you have ever filled out. Include your SRED claim as additional back up, as it is in effect the collateral for your SRED loan. Claims can be financed in two to three weeks after basic due diligence.

 

Financing SRED puts you in line with other firms to get your share of the 3 Billion (yes that’s billion!) dollars of non-repayable cash grants. Turning your claim into a cash infusion makes great sense if you are a small to medium-sized firm needing additional working capital.

Monetizing your claim will drive cash flow, which will undoubtedly inspire your firm to further innovation.

 

A FINAL TIP?

 

Be proactive about SR&ED to avoid headaches. Use SR ED financing strategically to ' bridge the gap ', overcome funding challenges, and maximize growth and funding opportunities. Canadian start-ups, early-stage firms, and pre-revenue companies can access sr&ed bridge loans and take advantage of government incentives / financial assistance.

SR&ED is a lot of work and a commitment  - and if you proactively track your expenses, then it becomes easier when filing taxes because you can get quarterly advances on accrued SR&ED instead of waiting for the CRA's refund checks that can take up many months from the start date or often  9+ months from the fiscal year-end filing of your claim and year-end tax filings.

 

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

 

  

What is the Canadian R&D Tax Credit  

 

For many Canadian companies, the SR&ED investment tax credit (commonly also referred to as shred credits) is a cash flow saviour. With 35%+ of eligible expenditures reduced in taxes or paid out in cash for Canadian controlled private corporations (CCPCs ) - the combination of federal and provincial programs allows firms to recoup up to 55% of r&d capital spent.

 

Canada Revenue Agency / CRA funds over 20,000 claims annually for billions of dollars in total - In 2021 alone, those fundings totalled almost 4 Billion dollars!  For companies not using  sr&ed finance solutions for funding sred credits, the process involves filing the r&d claim annually in connection with the business's year-end financial statement filing.

 

CRA reviews those claims and, over a period of months, processes and or audits claims. The waiting period for many firms restricts cash flow owing to the firm under the investment tax credit.

Canadian businesses view the sr ed program as a valuable part of the research and innovation process in Canada and the government's investment in the program helps foster innovation and makes research and development more accessible.

 

What are SR&ED Tax Credit Incentives?

 

Canada's Scientific  Research and Experimental Development Program .. aka  ' ' SR&ED "  is an investment tax credit program which helps businesses in every sector of the Canadian economy to conduct r&d.   The incentives can be a refundable tax credit or a deduction against reported income for technical challenges documented under program eligibility.

Privately owned ( i.e. non-public) companies, individuals, partnerships, and trusts can qualify for eligible credits under the tax incentive program.

  

 

What type of work is eligible under SR&ED  

Categories of work under the SR ED Program include :

Basic research

Applied Research

Experimental Development

 

Questions in areas such as " did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty .."  is a cornerstone of the program

Supporting documentation in these three areas might include operations research, computer programming/software development, collection of data, and testing.

Items not eligible for sr&ed tax credit claims are items such as market research, quality control,  and exploration  and drilling in areas such as mining and oil

 

 

What is the CRA SR&ED Self-Assessment Tool? 

Canada Revenue Agency provides a self-assessment tool that helps companies determine if the r&d work they do qualifies under sr&ed. It allows a company to do preliminary calculations around the amounts that might be eligible for sr&ed claims and provides tools for assessing the documentation and information the company may need to support a sred claim around the firm's work in scientific or technological uncertainty.

 

 

What are the benefits of financing sr&ed tax credits 

The benefits of financing a sr&ed tax credit claim include the ability to access capital and additional funding for a business, as well as reducing the financial risk around research and development initiatives. Properly structured sr ed bridge loans improve cash flows and offer opportunities for additional growth and innovation in a business. 

 

Companies benefit from the fact that no loan payments are made during the loan's duration and the simple application approval process around financing sr ed claims under a sr ed project.

 

 

 

 

 

 

Click here for the business finance track record of 7 Park Avenue Financial

Tweet

Tweet

YOUR COMPANY IS LOOKING FOR  SRED FINANCE!



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



        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 - sprokop@7parkavenuefinancial.com

A SRED financing tax credit loan is a great example of the good news around Canada's SR&ED program. If there's any 'bad news' it’s around the fact that once again some industry pundits are again wondering about the true benefit to Canada under its current ‘Scientific Research & Experimental Development' (aka 'SR&ED'!) program. SRED CANADA is Canada's premier refundable tax credit.

WHAT IS SR&ED

Canada's non-refundable tax credit program involving your investment in r&d capital is called the SR&ED program. Most business folks refer to it as 'SRED' and the government term is actually SR&ED (Scientific Research and Experimental Development) Program. It provides financing support to Canadian firms such as yours who invest in new processed and technologies to advance business and science.

Canadian provinces also partner on the program, providing additional assistance. SR&ED (Scientific Research and Experimental Development) Program is the flagship investment incentive program created by the Canadian government via tax credits.

It provides financial support to Canadian companies that are involved in creating new or improving existing technologies, with the aim of stimulating scientific advancement in the country. Most provinces have their own programs to encourage scientific R&D, which provides supplemental assistance to SR&ED claimants.

As one of the best of its kind in the world, many countries have followed Canada’s lead in setting up similar programs. It also makes it even more important to realize the quick and efficient cash recapture of your R&D capital investment via the help of an SR&ED finance consultant. Let's dig in.

While thousands of firms are still aggressively planning to file claims via their SR&ED consultant for their non-repayable tax credit refund, just as many might be wondering if financing that claim is still valid and accessible. The answer - a resounding yes!

While some business owners might view the program as a bit of ' danger and complexity ' that's definitely not the SRED loan process - which is, to put it simply - easy! We're the first to admit that properly preparing and submitting a claim is not for newbie and the weak of heart. Never has been your ability to prepare a proper claim, with proper assistance more important. The 1400 words and 3 questions you are required to address have never seemed more important.

Statistics in recent years show that over 20,000 claims annually, if not more are filed by firms just like yours. And as a note from our view in the trenches, all of those firms still view that tax credit claim as a key, if not a major source of financing for their firm. It's the private companies in the SME ( small to medium enterprise ) sector that file the majority of those claims. For more info on the dollars invested by the government in SRED click here.

That cash flow, when received allows them to do a number of things, including furthering additional R&D, starting or furthering revenue and marketing, and by virtue of that SR&ED work maintaining their particular dominance in their niche. The program has been around for over 30 years now and understanding the rules and the 'culture' around SR&ED is important.

Again, we'll leave that to the experts, pundits, and oh my god the politicians to assess the benefits and historical culture/perspective around SR&ED - We'll focus instead on the monetizing of those claims into real cash flow and working capital.

WHY SR&ED FINANCING VIA A SR&ED LOAN

If your company has address technological challenges and invested in R&D and has filed a SRED claim you are eligible for SR&ED funding. Your SRED financing can take one of two forms in Canada.

You can cash flow your claim anytime immediately after you file it, or alternatively (with a bit of a track record behind you) you can finance your claim on an accrual basis. The accrual concept is becoming increasingly popular as it simply fast tracks cash flow re your R&D capital spend.

In essence, you're recovering a portion of your R&D as you spend on it. That's a solid business premise as most Canadian business owners and financial managers would agree. SRED finance is agnostic to who prepares your claim, if, and it's a pretty basic if, your claim is prepared by a bona fide SR&ED consultant with some level of credentials and expertise. As the majority of SRED consultants seem to work on contingency naturally they are in some ways more at risk than your firm, so it's quite easy via references to find a suitable party to submit your claim.

It's these consultants that address key issues such as technical policies, claim eligibility, expenditures qualifying, etc. Looking for something simpler in the whole SR&ED process? The actual financing of your tax credit! Simple, as we stated. We explain to clients that they should view the process as a standard business application that is secured by the tax credit claim itself.

 

 

HOW DOES SRED FINANCING AND THE ' SR&ED ' LOAN R&D TAX CREDIT WORK? 

Other key aspects of SRED financing? The basics are as follows: 70% loan to value funding for your filed claim. Typically no payments are made during the duration of the loan, and final adjustments are made at government finalization, returning to your firm the balance of 30% less financing costs. Accrual financing for your tax credit claim might be funded at a lower loan to value.

 SR&ED Eligibility - Does your Canadian company qualify for an SR&ED claim? 

KEY FACTS ABOUT THE SR&ED PROGRAM

1. Almost any company can participate in the program - Scientific, medical, technological industries all participate. As long as your work is under eligibility criteria you will be allowed a claim and refund.
2. The program is all about advancing scientific and business knowledge and improving on those processes and products we mentioned previously
3. Many businesses are surprised to hear that the research you do does not ultimately have to be successful ( hopefully it will be ) so success is not part of your refund eligibility
4. Companies, with the help of their SRED CONSULTANT, have to only show their work in enhancing current knowledge levels and how they undertook to face technological challenges
5. At 7 Park Avenue Financial, we work with many firms that file year after year, as well as first-time applicants. Even firms that have filed unsuccessfully in the past can file.

CONCLUSION - SRED FUNDING

Your company should consider the SRED program and financing your claim if you want your firms share of the Billions of dollars that the government pays out annually. In fact, well over 20,000 companies in Canada participate in the program every year! At 7 Park Avenue Financial, we tell clients that the SR&ED program, along with the GOVERNMENT OF CANADA SMALL BUSINESS LOAN program are two of the best government-related programs in business.

The Canada  Government guaranteed loan program is often called the 'SBL LOAN' while SR&ED refers to sr&ed refundable tax credits that can be also financed to accelerate cash flow.

Speak to a trusted, credible, and experienced Canadian business financing advisor and sr ed finance consultant who can assist you with your tax credit finance loan today. Think of that person as part of your total SR&ED process!  Talk to us about Sred financing tax credit sr ed finance consultant implications for your firm.

Click here for the business finance track record of 7 Park Avenue Financial



Stan Prokop 7 Park Avenue Financial/Copyright/2020

SR&ED FINANCING TAX CREDIT LOAN VIA A SRED FINANCE CONSULTANT

Your Most Complete Guide to SR&ED Financing & SR&ED Loan Success In Canada

Tweet

 









SR&ED refundable tax credits and financing r&d   are in the news a lot these days. Things seem to be always changing, sometimes in a big way, sometimes less. The one constant? SR&ED Financing! It's always there - always available. Let's dig in.

 What is The SRED CREDIT?

 

Sometimes called ' Shred  Credits ' they are one of Canada's most accessible, popular, and widely used incentive programs under the auspices of Canada Revenue Agency, allowing you to claim for either a cash grant or in some cases a deduction against income taxes owing. R&D capital investments use up cash flow resources, so collateralizing your sr&ed claim makes a lot of sense when other traditional  sources of financing are not available.

Corporations that are in need of liquidity cannot afford to wait until the end of the fiscal year to receive payment of refundable tax credits. For this reason, lenders offer sred funding, an advance (or loan) to eligible corporations, while using the future receipt of the SR&ED refundable tax credits as collateral.

 

In the majority of cases, you are eligible for amounts in the 35-40% range of your total expenditures. The amount of that refund can go over 5O% when your Sred Consultant and accountant, typically working in combination, take advantage of both the federal and provincial parts of the program. 

 

At 7 Park Avenue Financial we can't overemphasize the role of ensuring your have an experienced and reputable sr&ed consultant preparing your claim . Their track records and reputations are invaluable both in the financing process as well as the CRA audit process for sred.

The formal name of the program is ' Scientific Research and Experimental Development ' , hence ' SR&ED ' ! It is one of the most popular government programs vie encouraging firms to conduct r&d in Canada, as well as providing refundable tax credits for those investments made by your firm.

 

Why a Sred  Loan ? SR&ED Debt Finance

 

 

Simply because its a method of allowing you to use your refund owing, which is essentially an account receivable, as a source of operating cash in the same manner in which any company would finance their receivables via either a bank or a commercial a/r financing firm. It's a good example of  ' specialty financing '. Note that this does not involve government grants, or grant financing - that's a whole different category of accessing funding from the government.

 Essentially you are unlocking the value of your tax credit, which is, in fact, a real asset on your balance sheet, although many companies we have worked with sometimes do not book that as a receivable. 

 

Companies using the Sred program tend to always be looking for business growth capital. Most but not all are early stage companies looking to commercialize their products and services. Just the ability to finance their r&d prior to their claim filing is appealing to firms who are always looking to generate cash. Many firms are in new or emerging sectors such as digital medial , environment, biotech, etc but firms in every industry utilize SR&ED. Accessing traditional financing is very challenging for many of the firms involved in SRED, and going the equity raise route is both time consuming and even moreso, costly!

 

 Claimants under the program may be surprised to know that if your firm has ongoing multi-year activity in research you can set up a Sred Line Of Credit, allowing you to accrue and then finance ongoing work. Here is where a track record in' Shred ', as well as a good consultant, is important.  Also, your claim can be financed before filing with the proper level of due diligence around claim content.

 

 

 We can make the case that SR&ED finance is really  SRED factoring, namely the factoring of your sred receivable. And as we have mentioned elsewhere, owners should consider sred accrual financing allowing you to accelerate cash flow.

The challenge around receivables of course is ' waiting for payment '! Historically the timing around SRED REFUNDS has been a major point of discussion and is one of the reasons why a  SR&ED FINANCING COMPANY is often utilized to monetize your tax credit. Depending on the size of your claim, the technical aspects around it a firm can easily wait for  many months to receive their refund.

 

 

 Another issue around the timing of claims is that your claim is filed by your accountant and Sr&ed consultant, typically working together, at the time of your year-end tax filing. You can see that it could add a further delay to payment by the government to your firm. 

 

 

KEY POINT: A  SRED CLAIM  can often be financed and funded in just a few weeks if you are working with expert help and someone who has a track record of financing success in the tax credit area.

 

Although many business people use the term ' loan ' when it comes to this type of debt facility,  SR&ED financing brings no debt to the balance sheet, you are just monetizing your claim as a manner of advanced funding.

 Utilizing SRED TAX CREDITS is simply an additional source of funding for many companies, many of which are new, emerging, and even startups. Although many firms are technology companies almost every industry is eligible for SRED CREDITS based on their commitment to r&d.  It's all about growing their business.

 

 New clients at 7 Park Avenue Financial always want to know if they are in fact eligible for SRED CREDITS.  If your business is what is known as  CCPC,  essentially meaning a private, not public company and you are doing qualified experimental research to develop your products you are eligible.

 

Industry statistics around SR&ED tell us that in the last 7 years payouts on SR&ED claims have reduced by over 5 Billion dollars - suffice to say billions are still being paid on thousands of current claims. The government seems to be asking anyone with interest to provide guidance on the future of the program.  Canada Revenue Agency provides great information on the CRA website on both the qualifications around your claim and overall eligibility. 

 

All of that  information essentially comes down to 3 issues - Is your firm investing in r&d capital to advance technologically, are their uncertainties in your research, and has the research become a process whereby technical challenges are overcome

Talk about uncertainty! Business owners hate uncertainty. Who doesn’t? The one constant in SRED? Cash Flowing Your Claim!


SR & ED (SR ED) factoring is a viable consideration for any Canadian company that files SR ED claims and is looking for additional working capital. Not all Canadian business owners and financial managers are aware that SR ED claims can be monetized (financed!).


For an overview of SR ED financing, it’s important for us to validate some of the basics -


-Have you filed an SR ED CLAIM?


-How much was the dollar amount of the claim?


-Who prepared the claim?


-What amount of cash or working capital do you need in conjunction with the claim filed?


If you are looking for cash flow with respect to your Canadian SR ED claim you either have working capital financing in place now with your bank or finance firm (a factoring company perhaps) or your firm is self-financing and you are looking for the SR ED to supplement additional cash flow. Risk capital /equity capital and Canadian venture capital is challenging to raise in Canada . Financing r&d makes a lot of sense.


Canadian business owners and financial managers are aware that when they finance their receivables and inventory these 'current assets' are 'margined'. By margining we of course mean the amount of funds you can borrow against these assets.


In SR ED financing you are generally financed 70% of your claim, and that is the combined total of the Federal and Provincial claim.


So if you have filed an SR ED claim, of say, for example, $350,000.00 you are eligible for 70% of that amount, or $245,000.00


Funds can be advanced as soon as you have filed the claim, but not before. Naturally, it is somewhat important to ensure your claim was filed by a qualified party - usually an accounting firm or consultant. It's these consultants that are in the field daily on the program, wresting with all sorts of changes around Form 4088! ... Defining and backing up your project.


SR ED financing is outside your normal current financing arrangements. The SR ED is collateralized separately - it is, in essence, a short term working capital loan that is repaid when the government sends you your cheque. Most Canadian business owners do not want to wait, 3, 6, 12 months or more for a cheque for a substantial amount that is in effect a non-repayable grant from the government. The Canadian government continues to pour well in excess of a billion dollars into the program, and if your firm qualifies for an SR ED claim -


1. Why wouldn’t you use the program?

2. Why wouldn’t you accelerate the cash flow from the grant by financing your SR ED claim?


SR ED financing is a boutique small industry in Canada - business owners are cautioned to work with a qualified, credible, and experience party who will ensure they are maximizing financing capabilities under the program. Naturally, any firm can wait for its refund , but using the cash from financing your claim allows you to move on to new opportunities in your business, including even more investments in r&d. 

 

Typically companies investing in research are in highly competitive industries, and rather than considering external equity this type of financing is simply one way of increasing value and time to market without the dilution of additional ownership to your company. Utilizing internal cash resources in the early stage of growth allows you to increase the value of your firm at a later point.

Companies financing their r&d claims use funds for a variety of reasons - that might include further research, general working capital purposes, marketing, new employee hires, or geographical expansion.

 

How Does The SR&ED Financing Application Process Work

 

 Business owners and their financial mgr's should view the financing process as the most simple of loan applications. A minimum amount of the claim is typically $100,000.00. With a client's full cooperation we have had clients financing in plays in a week or two, sometimes sooner. Typical loan amounts are in the 70% range based on your total claim. Simple business application information applies, ie years in business, articles of incorporation, etc,

No payments are made for the duration of the financing! The loan interest accrues and is deducted from the final payment by the government of your claim . Your current lender security stays in place, and significantly less emphasis is paid to typical bank focus on personal guarantees, net worth of principals, etc. A track record in previous SR&ED claims is helpful, but not necessary, and firm time claimants may apply to fund their claims.

It should not come as a surprise that certain other refundable tax credit programs can also be financed, they include:

 

 

Digital Multimedia Tax Credits

E-Business Development

Multimedia Gaming

Film Tax Credits in Many Canadian Provinces

In summary, Canadian firms that are eligible to file an SR ED claim should do so. What firm would not want to receive a cash non-repayable cheque from Ottawa! If you can wait for the funding, and don’t need additional cash flow, great. That's why sred tax credit loans make sense.

 

If you wish to arrange interim financing for your claim enlist the services of a trusted and credible SR ED financier. In a matter of a couple of weeks, your working capital and cash flow will be augmented vis a vis your SR ED financing. SR ED Financing and factoring - a great Canadian alternative financing strategy

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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
7 Park Avenue Financial/Copyright/2020

SR&ED Tax Credit Loan Financing

Tweet

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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