YOUR COMPANY IS LOOKING FOR CANADIAN SR&ED FUNDING!
Power Up Your R&D Projects: How SR&ED Loans and Funding Fuel Canadian Innovation
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Financing & Cash flow are the biggest issues facing businesses today
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Discover the Secret to Non-Dilutive Financing: SR&ED Loans and Funding for Canadian Innovators
An SRED funding loan has been a key advantage of business owners & financial managers who take advantage of Canada's SR&ED program. As our good friends at BDC say its ' financing r&d without breaking the bank !
INTRODUCTION
Canada's Scientific Research and Experimental Development (SR&ED) tax credit financing has proved to be a critical tool for Canadian businesses looking for assistance in their r&d activities - By enabling companies to finance their refundable tax credits in advance of filing their claim the Sr&ed Finance solution provides cash flow when companies need it most in their growth and innovation strategies.
Let's dig in on maximizing sr&ed benefits via the financing of sr&ed claims in Canada and your sr ed eligibility.
WHAT IS SR&ED TAX CREDIT FINANCING?
Sr&ed tax credit financing allows your business to access capital via a short-term cash flow loan using your refundable tax credits as the only collateral for the loan. Although some companies choose to explore grant financing for r&d activity the actual SR&ED program is the government initiative that helps a business invest in research and development, encouraging innovation in Canada.
The prompt receipt of your R&D capital tax credit is quite often a key part of your overall cash flow strategy. While it’s not quite the ‘speed of light' it’s still quicker than almost all other loans in the business. We're covering some key SR&ED financing basics - let's dig in.
PREPARING YOUR CLAIM - THE ROLE OF YOUR SRED CONSULTANT
The true power of the SR&ED PROGRAM comes when you accelerate your claim and turn it into immediate cash. Most of our clients, as sophisticated as they might be in their SRED filings actually also haven't heard that in certain cases your SRED can be considered for financing.
In fact, the majority of claims are prepared by third parties called ' SR&ED Consultants' who in many cases focus only on claim prep, not financing the claim.
While a business does not have to work with a third-party independent sr&ed consultant the majority of businesses in Canada filing sred claims do in fact work and benefit from using these consultants. They help ensure a successful claim and filing and provide a nice level of assurance for the financing of your claim around the eligible expenses you have claimed. Many consultants specialize within certain industries, which is a further benefit in maximizing more of a refund.
Most sr&ed consultants work on a contingency basis, which is an additional appeal to the business owner.
THE SR&ED FINANCING PROCESS
Accessing your sr&ed loan promptly has never been easier - A simple business finance application with details about your sr&ed claim will generate a loan agreement term sheet. Most funds are distributed within a 2-week period and any claim greater than 100k can be quickly financed - Small claims can be considered under certain conditions. Talk to the 7 Park Avenue Financial team about how you can achieve the lowest cost financing in Canada around financing your refundable tax credits.
And by the way, no personal guarantees are required!
The program is by far the best program in Canada that incorporates a non-repayable grant for your firm's R&D work. Many clients hear about 'government grants and loans' and ultimately realize these are not as available as one would think - however SRED is everything you hoped for... and more.
Even more important is that claims can also be financed PRIOR to filing - That whole process is called SR&ED accrual financing.
5 THINGS YOU NEED TO KNOW ABOUT SRED FUNDING!
What then are your 'must-knows' when it comes to SRED funding?
1. SRED is highly specialized - seek and work with a trusted, credible an experienced consultant to prepare your claim, as well as a credible business financing advisor to fund your claim immediately.
2. The only thing you need to know about financing a claim is that you must have a claim! It is a simple business financing application with supporting backup on your SR&ED - your actual refund is the key collateral in the claim.
3. SREDs are financed at 75% of your total claim value - No payments are made during the duration of the short-term sred loan
4. You can finance a claim as soon as it is filed; starting earlier simply accelerates the process. And remember, you can opt to finance prior to filing under accrual filing. It is kind of like an SRED line of credit.
5. We refer to an SRED ' loan ' - the reality is that no additional debt is added to your balance sheet because the loan is offset by the asset, the claim itself! You are simply monetizing, or ' cash flowing ' your claim.
As you can see by now the whole process of SR&ED Finance is simply the financing or 'factoring' of your claim. You are selling your right in the receivable now in lieu of cash that you will receive from the government many months from now, in some cases close to a year.
A QUICK RECAP / PRIMER ON THE SR&ED LOAN
5 key basics. As we noted SR&ED funding is specialized. Work with an expert for two reasons - maximizing the value and finance rate on your transaction, as well as ensuring the whole process goes smoothly. You should not view the SRED loan process any differently than you would any other financing, you apply, you provide supporting backup, and you receive your funds after the normal sort of due diligence. The collateral, if we can call it that, is the SR&ED claim itself.
With respect to # 2 simply focus on the fact that you should consider financing the claim if it will generate a reasonable amount of working capital and cash flow that you need today. To be honest, most claims that are financed are in the 100k ++ range, but smaller claims can be effectively financed
Point #3 had us referring to loan to value - you can expect to receive an immediate advance on approximately 75% of your claim - that is the combo of the federal and provincial components. The balance is a holdback - it’s still your money, but final financing costs, plus any adjustments the government makes to your claim are accounted for in that 30% buffer that is held back by the lender.
"When can we obtain our funds?" is really the meaning of our 4th point. The entire process takes approximately 2-3 weeks as it covers your application, review of your SRED, normal financial due diligence, and the clarification of any issues raised by your firm or the SRED finance firm. And the good news here is that again the term 'SRED funding loan' is a misnomer - you don't make any payments, and finance charges simply accrue and are deducted from the final accounting of the claim. That covers our 5th point of course.
HOW CAN MY BUSINESS MAXIMIZE SR&ED FINANCING / FUNDING
A business has a number of opportunities to maximize SR ED Financing
Companies have tremendous flexibility in choosing how much of their claim they wish to finance and when disbursements are made
If a business has other tax credits these can be combined into the sr&ed loan
Sr&ed loans are an effective cash management tool around utilizing sr&ed refunds when cash is needed to further r&d as well as helping to fund day-to-day operations and long-term growth and valuation objectives
KEY TAKEAWAYS ON THE BENEFITS OF SR&ED FINANCING
Numerous benefits around sr&ed funding for refundable tax credits include:
Quick access to cash - eliminating the sr&ed CRA waiting process around your claim and refund
Sr&ed loans are a form of short-term debt financing that is non-dilutive to owner equity - businesses retain ownership and control of the business
Sred loans are flexible - as well as no monthly required payments during the duration of the loan financing is competitive when it comes to rates compared to high-cost short-term working capital loans/merchant cash advances, or permanent working capital loans with long amortizations
CONCLUSION - SR&ED Financing Revolution: Transforming Canada's Research and Development Landscape
Bottom line - if you're a user of the SR&ED program consider SRED funding to solve that challenge of cash flow/working capital tied up in your R&D capital investments.
The financing of sr&ed tax credits has become one of the most valuable resources for firms committed to r&e - The combo of quick funding, good interest rates, and flexible repayment options allows businesses performing research and development to maintain a lead in today's competitive domestic, and yes, global economy!
A company's ability to understand how easy the sr&ed finance process is, combined with a quality claim with the help of a sr&ed consultant helps ensure the long-term economic and financial success of the business.
Talk to 7 Park Avenue Financial about sr&ed financing services with the lowest financing cost in Canada with a total focus on a quick and smooth application process via a trusted credible and experienced Canadian business financing advisor for funding solutions.
FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
What is SR&ED funding?
The Canadian SR&ED (Scientific Research and Experimental Development) funding program is a Canadian government investment tax credit incentive program designed to help and encourage Canadian businesses to invest in r&d activities.
By providing cash refunds against refundable tax credits eligible companies receive assistance for their expenditures on eligible R&D SR&ED funding loans can significantly reduce a company's research and development costs and provide financial support for further innovation in a competitive economy in domestic / global markets.
What is an SR&ED loan?
SR&ED loans are a financing option that allows businesses performing r&d to access their future SR&ED refundable tax credit receivables in advance of the Canada Revenue Agency refund. This allows companies to fund working capital needs based on qualified sr&ed tax credits from CRA - By eliminating the waiting process for refunds the company receives cash based on the collateral provided on the tax credit refund.
How does the SR&ED program work?
Canada's SR&ED program provides cash refunds for tax credits to eligible businesses for their qualified research and development expenses, Companies must ensure their r&d projects involve work in 3 areas-
Technical advancement / technical uncertainty, and technical content. Companies file their claims annually based on eligible criteria as defined by CRA. When claims are reviewed and approved tax refunds are issued to the business based on this tax incentive program.
Who can claim SR&ED credits?
SR&ED credits are claimed by Canadian incorporated companies / Canadian controlled private corporations, as well as proprietorships, and partnerships that carry out eligible r&d activities in Canada. The eligibility of a company for sr ed tax incentives focuses on the nature of the research and development as well as challenges encountered in the area of technical advancements. Canadian companies and businesses of any size can claim sr&ed eligible expenditures, and every industry is eligible to claim sr ed refund credits for r&d projects provided they meet program requirements under scientific or technological uncertainty.
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