Financing SR ED Credits : A Pathway to Working Capital FOR Business Growth Via a SRED Loan in Canada

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LET SR&ED FINANCING SOLUTIONS BE YOUR SOURCE OF FAST CAPITAL - SRED TAX CREDIT FINANCING... WORKS!

INTRODUCTION

Canada's SR&ED (Scientific Research and Experimental Development) refundable tax credit program is a government incentive

SR&ED is a federal tax incentive program - Canada Revenue Agency (CRA), works with businesses of all sizes that are conducting research and development (R&D) in Canada. The SRED Program ( along with the Canada Small Business Loan Program ) is the largest and most utilized source of government funding for R&D.

SR&ED FINANCING

Sred credits can be financed - allowing businesses to receive funds in advance based on anticipated sred refunds for the refundable tax credits under the program. The ability of a company to access funds in advance of the anticipated refund helps with cash flow, general working capital needs, and of course to continue to invest in r&d efforts.

The sr&ed loan process is in many ways similar to financing, or ' factoring' your government refund receivable - The refund is the collateral for the loan, and waiting time can be reduced significantly for companies that qualify for the sr&ed investment tax credit.

Scientific Research and Experimental Development (SR&ED) credits are a key part of business innovation in Canada, for both small and large companies investing in r&d. Leveraging the financing of the Sred claim allows access to capital for the government receivable, ie the sr&ed claim.

SR&ED Debt Finance is a short-term bridge loan that allows the business to access the sred refund in advance of the filing of their claim, which is done at fiscal year-end. The sr&ed refund is in effect a receivable owed by the government to the business. Sr&ed loans are short-term loans that are repaid when CRA processes the sr&ed tax credit refund.

REVOLUTIONIZE YOUR R&D EFFORTS BY UNDERSTANDING SR&ED LOANS IN CANADA

It is a unique and alternative financing strategy that monetizes your SR&ED tax credit and has no long-term effects of adding debt to your balance sheet. All you are doing is simply 'cash flowing’ or receiving your refund now instead of waiting for a potentially long time for your government refund cheque.

A Canadian business investing in r&d will typically have a cash flow challenge - so funding your sr&ed tax credits can provide access to capital to run and grow the business. Business owners/entrepreneurs can ensure additional capital is utilized for continued reinvestment of r&d as well as the potential to secure grants such as those under the IRAP program. ( By the way, IRAP grants are financeable!)

The appeal of sr&ed financing is the ability of a business to add one more source of financing to the capital structure mix.

SR&ED FINANCING IS YOUR GROWTH FUNDING SOLUTION

Business owners who file claims under the program already are keenly aware of the power of this great Canadian government program. Hundreds of Millions of dollars are refunded annually to your firm and your competitors – why not get a step ahead of the competition and turn that SR ED credit into immediate working capital?

INNOVATION CALLS FOR SR&ED TAX CREDIT & GRANT FINANCING SOLUTIONS

Naturally, the amount of your SRED financing is related very directly to the total amount of your filed SR ED claim.

SR&ED CONSULTANTS

Therefore it is in the best interests of every Canadian business owner who files under the program to maximize the size of their claim under sr&ed eligibility. They do that by working with a solid accountant or SRED consultant who understands the true nature of the program. It is a misnomer that your research and development must be ‘successful‘ in the true sense of the word.

The reality is that a proper SRED claim is often increased simply by proving that you had significant trial and error in those business processes and research that you are documenting.

Not everyone knows that the Government of Canada provides billions of dollars annually to allow Canadian businesses to forward new technologies, products, and processes under its Scientific

Research and Experimental Development (SR&ED) tax credit program - Pretty well every industry in Canada participates in the program in key areas of the economy such as biotech, software, oil and gas, and agricultural industries for example.

SR&ED financing could not be a more simple process - The application is a straightforward business application with information you supply about your business and the actual claim itself. Loan approvals can be achieved in a manner of days, and no personal guarantee is required by owners -

Your sred refund is the collateral for the loan, and when the CRA processes and funds your claim the loan is capsized and paid off - No payments are made for the duration of the loan, and loan-to-value calculations on the claim allow borrowers to receive funding for 75% of the anticipated refund.

Size does not matter and loans from 100k to the millions of dollars can be funded - Talk to the 7 Park Avenue Financial team about how you can access the most competitive financing rates in Canada for the loan.

A company can be a new start-up, a mature business, or a larger or mid-sized firm. Privately owned companies can claim their SR&ED credits, even if they are foreign-owned! At the end of the day, it's all about your ability to prove your justified research and development efforts to CRA/Canada Revenue Agency.

It's important to ensure your claim is backed up by proper documentation and timelines around your write-up of the claim - that helps to ensure the chances of not having your claim audited and helps with a more prompt approval of your claim - which in some cases can take 12 mo or more - reflecting the need to fund your claim prior to the refund!

At 7 Park Avenue Financial clients will also ask about the manner in which CRA reviews SR&ED claims - It's important to note that a sr&ed claim audit/review is not a financial audit of your business - in many cases claims are reviewed by an auditors desktop and might include a meeting or a suggestion to review the government's first-time claimant process - known as an FTCAS meeting via the CRA Sr&ed guide which is very valuable information for first-time filers.

Consider financing the claim and turning your refund into immediate cash. Clients we work worthy with typically utilize funds in an SR ED financing to reduce payables, invest in additional research, buy equipment, or focus on investing in more direct marketing and sales The bottom line is that when you finance your SR&ED claim funds can be used for any worthwhile corporate purpose.

GRANT FINANCING ALTERNATIVES

Many businesses can access additional funding via grants to fund almost any size of the project - These grants almost always require a business to fund a portion of the project to ensure eligibility. Grant payments are then made to reimburse company costs under the grant research. The ability of a business to fund accrued IRAP ( or SRED ) credits adds back valuable cash flow to the company via grant financing.

HOW DOES SR ED FUNDING WORK?

It's important for business owners to understand the criteria for sr&ed refundable credits, The ability to access funding in advance of even filing the claim is a solid benefit.

So how does SR ED funding work ask our 7 Park Avenue Financial clients. It’s really complementary to any type of business financing you have ever done.

You are not taking on debt; you are simply converting a receivable, i.e. your SR&ED credit, into cash. The best and most easy way to think of SRED financing is simply that you are factoring or discounting your claim. The funds will be repaid to the SR ED lender when your claim is approved by the government and your provincial government. (There is a Federal and Provincial component to each SR&ED claim).

You can access approximately 75% of the total claim you have filed or the accrued credits!

If the claim has already been approved by Ottawa and you are just waiting for the confirmed refund the 70% loan to-value we just referred to can even be increased in many cases.

Even more sophisticated firms that finance their SR ED claims annually are not aware that under the right circumstances, they can receive funds even prior to filing! That process is called an SR&ED accrual loan. That’s really staying one step ahead of the competition!

Financing SRED claims in Canada is a boutique financing. You accomplish it successfully when you work with a trusted, credible, and experienced financing advisor such as 7 Park Avenue Financial, regarding SRED claims.

The process involves a simple business financing application, copies of your SRED filing, and miscellaneous business backup material to substantiate the SRED loan. The total focus of the loan relies heavily on the actual claim itself, not the overall creditworthiness of your claim, as some might believe.

BENEFITS OF SR&ED FINANCING - CASH MANAGEMENT AND IMPROVING THE FUNDING TIMELINE!

By now the benefits of a sr&ed financing solution must be obvious - The ability to access capital and to use those funds for a variety of purposes ( new hires, marketing initiatives, or the funding of day-to-day working capital for your business needs ) The ability to predictably know when cash inflows will come in is a huge benefit. At 7 Park Avenue Financial, we can confirm you will receive the best rates and terms for this type of financing.

Monetizing your SRED receivable unlocks cash flow while at the same time ensuring non-dilution of the equity /ownership interest in your company. It's a recognized way to reinvest capital into your business while allowing you to grow based on your goals and financial structure. Let 7 Park Avenue Financial put a facility in place without the traditional reliance on personal guarantees, restrictive covenants, etc. No more waiting for the fiscal year-end - time to continue or begin other projects.

SR&ED ELIGIBILITY

SRED credits for companies conducting research and development can qualify for their expenses around wages, materials, overheads, contractor expenses, etc.

All work must be done in Canada. Funding via sr&ed reduces financial risk around the r&d process while allowing Canadian companies to maintain competitiveness domestically and internationally. Canadian businesses filing qualified SR ED can stay ahead of the competition by considering financing your claim.

It’s a simple process that can be completed in a couple of weeks with your full cooperation of backup info, etc. Your SRED claim is already not repayable to the government, as it’s a grant, so consider supercharging that program by immediately monetizing your claim in valuable cash flow and working capital.

CONCLUSION - KEY BENEFITS OF SR&ED LOAN FINANCING

SR&ED loans are an innovative business financing solution that allows businesses to unlock the potential of r&d. They provide the liquidity a company needs to fund day-to-day operations and help in a big way with the r&d capital investment process. Companies from the startup process to the established firms can benefit from funding their eligible sr ed r&d initiatives.

SR&ED loans help many firms that are still in the pre-revenue stage and who might be raising additional capital which is a time-consuming process. Traditional bank financing is often not available to founder/ co founder owners of these firms and venture debt is costly and comes with an equity commitment that is unappealing to business owners building value of the business.

Continually investing in research and development and financing claims leads to a long-term increase in sr&ed refunds and helps businesses work toward positive cash flow in a timeline that makes sense.

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

What is SR&ED Financing / What are SR ED Tax Incentives

SRED financing is a Canadian investment tax credit program for Canadian companies, offering refundable tax credits for qualifying eligible expenditures under Canada's SR&ED r&d program.

Knowledge of the claim process and qualifying work are key to claimant success. Companies can increase claim size via the filing of proper technical and financial reports required by the program demonstrating improvements to an existing technology or processes for the purpose of scientific or technological advancement.

The program is formally known as the SR&ED Scientific Research & Experimental Development program and the SR ED claim process will often involve a third-party experienced sred consultant who plays a critical role to help access capital under government funding guidelines for technical challenges researched by the claimant and proper documentation of employee salaries, technical content, etc

What is a Sr&ed loan?

Sr&ed loans are a business financing solution that allows a business to access capital via sred refundable tax credits - Sred loans do not dilute owner equity, they are a short-term working capital solution that is more cost-effective than many other types of financing, Loans are structured to allow a business to predict financing costs and fund cash flow needs. The application process is simple and any company that qualifies for r&d can apply for sred financing. Accrued sr ed claims can be financed in advance of submitting the year-end claim with their tax return. Claims are financed at competitive rates under a very streamlined process.

Eligible Companies can choose to invest the capital received under the program into their business - The key benefit of SRED Financing - ie a sred loan, is the elimination of waiting for a government refund. Both filed and accrued tax credits can be funded. The SR&ED filing is in effect an account receivable while the financing of that receivable unlocks the cash flow inside the claim. SRED loans are bridge loans that monetize the refundable tax credit while it is still on the company's books.

Is shred a refundable tax credit?

How do I claim a research and development tax credit?

What type of company qualified for the SR&ED ITC Credit?

Any private company, ie a Canadian Controlled Private Corporation can qulaify for sr&ed expenditures in the 35-50% range when combining provincial and federal refunds under the program . The tax credit is a refundable tax credit paid out in a cash refund.

HOW DOES CRA QUALIFY SRED CREDITS?

Scientific research and experimental development , according to Canada Revenue Agency sr ed program refers to a systematic exploration or inquiry conducted in the fields of science or technology using experiments or analysis in the sr ed project.

As a rule companies that encounter a technological problem and cannot find a suitable solution readily available will often be eligible for SR&ED activity.

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

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