Canadian SR ED Financing - Financing Canadian SR&ED Tax Credits

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FUNDING SR ED TAX CREDITS

The only thing worse, we think, than not knowing about Canada’s SR ED grant program is probably the fact that Canadian business owners and financial managers don’t know that their investment tax credit program claims can be financed immediately to access cash flow and working capital now!

The SR&ED tax incentive program and Canadian grant programs for Canadian companies are invaluable assets to companies operating in the country. SR ED tax incentives help ease the burden of investing in projects that may have uncertain returns but are essential to fostering innovation. A SR ED Loan complements these programs, making them more accessible to the companies innovating today and building tomorrow.

What is SR&ED FINANCING / SR ED FUNDING

SR&ED finance solutions allow a business to cash flow their SR&ED credits as claims are filed, or, as the company spends and accrues the credits for the next SR ED filing. The ability to continually reinvest this valuable business capital via Canada's Scientific Research and Experimental Development program to avoid any processing delays by Canada Revenue Agency - aka CRA!

SR&ED loans are paid back when your company receives the refund for the refundable tax credit under the program

WHY FINANCING YOUR SR ED CLAIM MAKES SENSE?

Business capital is all about investing, and your investment in r&d capital and accessing sr&ed financing allows you to potentially bring on further staffing to further your work in research and product and process development. The ability to bring those products and services to market in a competitive manner enhances your company's position relative to attracting further equity or debt financing.

FINANCING INNOVATION

Yes, SR ED claims in Canada can be financed. Clients are always asking us how these claims are financed, what amount can they receive, and how can an SR ED claim be financed when it fact it could be challenged by an SR ED reviewer. Let’s cover some of those issues. The ability to finance your claim when it has not been filed is one of the recent breakthroughs in SR ED - Business owners and financial managers can almost consider it their ' SR&ED LINE OF CREDIT! One strategy is to set up periodic funding of your r&d works as financing eligibility accrues!

THE SR&ED FINANCE PROCESS

First of all your SR ED claim is generally financeable at 75% loan to value. That technical jargon of course simply means that if you can receive, as interim cash flow and working capital loan approximately 705cents on the dollar now for your claim.

You of course are fully entitled to the other 30% - we are simply saying that portion is not financed – It essentially works as a buffer for any reduction in the claim by Ottawa. Those reductions in your claim might be simply temporary clarification that is needed by CRA in Ottawa to approve that claim in its entirety. Accrued sr ed credits can also be funded now.

Clients ask us if there is a surefire way of allowing their claim to be approved in full. Probably the best answer we can provide is simply to say that by working with a good SR ED claim preparation consultant you are of course ensured more integrity in your claim.

Your accountant can in fact submit a claim on your behalf, but we caution Canadian business owners and financial managers to ensure that they have a solid understanding of their accountant’s specialization in this very boutique area of accounting and business.

Do I need a SR&ED consultant to prepare my claim? We get that one a lot at 7 Park Avenue Financial - the reality is that it is not a strict legal necessity to file a claim to qualify for your refund or financing but typically companies benefit from the expertise of utilizing an experienced consultant if only to maximize the dollar value of their claim and help ensure CRA and financing approval - the vast majority of companies in Canada do utilize third-party expertise to the technical write-ups around their claims.

Quite often if a claim is temporarily clawed back and credible and experienced SR ED advisor can submit an additional proper backup on your behalf to help ensure FULL approval of the claim!

Claims for the SR ED refund must be filed within 18 months of the fiscal year end of the business - In some cases, CRA conducts reviews to ensure that the work claim is ' sred eligible ' under the Income Tax Act in Canada.

CAN ALL SR&ED CLAIMS BE FINANCED?

All SR ED claims can be financed – however, it is a bit easier to obtain full financing of your claim if you have successfully filed in the past. That’s just simple logic which indicates that your firm has a higher ability to be approved. However the bottom line is that a first-time SR ED claim can be financed - if properly documented and prepared, it is fully eligible for the 75% loan-to-value – in some cases the first-time claim might be financed at a lower loan-to-value ratio.

The bottom line, cash flow and working capital are still accessible for that claim!

That is important because access to financing that does not dilute owner equity in your business and helps with overall cash management is the key to success. The ability of a company to have a process in place that easily facilitates ongoing funding of the SR&ED helps a business in its strategic plans to row the business, accelerating cash inflows with predictability when it comes to cash flow projections/budges, etc. And the ability to access financing that is affordable and competitive is icing on the cake!

THE BENEFIT AND ADVANTAGES OF SRED FINANCING!

The total advantage of financing your SR ED claim is very simple. You have the choice of waiting for your cheque from Ottawa. (That might also involve delays in the final adjudication of the technical aspects of your claim). Alternatively, you can access cash flow and working capital now for your SRED claim.

GRANT FINANCING IN CANADA

Financing grants in Canada allows some eligible businesses to access business capital for investment into their company - Certain grants are financeable after a company has taken the time to explore the grant process and eligibility - the time from that period to final disbursements from the government can be significant - that's where grant finance comes in!

The ability to maximize grant funding and speed up growth capital into your business becomes not only cost-effective but carries with it all the benefit of funding your refundable sr&ed credits. That flexibility has value to your business and in certain cases, grant loans can be adjusted to meet the challenges of making principal and interest payments tailored to your particular situation.

Firms that are generally eligible for forms of grant financing should be past the start-up stage and must demonstrate grant eligibility for government disbursement of funds. The IRAP ( INDUSTRIAL RESEARCH ASSISTANCE PROGRAM ) is one of the more popular forms of grants that will qualify for grant finance solutions. Accelerating R&D is job 1 when it comes to effective grant financing.

CONCLUSION

In summary, if you are filing SR ED claims, take advantage of financing those claims. Cash and working capital are available now. Monetize your claim and use that cash flow to further increase your sales and reduce business liabilities.

That is a solid financial strategy! Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing Advisor who can assist you with your cash flow financing via alternative and innovative finance solutions for growing businesses who want to better control their financing timelines and access to capital.

SR&ED Financing is all about non-dilutive capital into businesses making an r&d commitment. Let SR ED finance solutions take some of the worries out of the cash flow of your business based on unlocking the value of your s&red and grant receivables.

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

What is SR&ED Debt Finance?

Sr&ed debt finance solutions allow a business to cash flow their sr&ed refundable tax credit receivable via a short-term loan collateralized by the receivable from the government sr&ed credit tax program. The sr&ed tax credit calculation is under CRA sr&ed guidelines around the amount of the sr&ed claim refund. Companies determine sr&ed eligibility based on submissions usually prepared by a qualified sr&ed consultant.

Businesses can utilize the sr&ed financing for general working capital purposes within the business and sr&ed loans are repaid by the company when the Canadian Government / CRA issues the tax credit refund, allowing for a short funding timeline to access capital.

HOW DOES A BUSINESS QUALIFY FOR THE SR&ED PROGRAM

Companies must ensure they meet criteria to improve existing technologies under the SRED program around issues such as technical advancement, technical uncertainty and the technical content that allowed a company via eligible expenditures to address the technical challenges of a business or industry.

' 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

SR ED Financing Canadian SR&ED Financing For R&D | 7 Park Avenue Financial

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