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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
Financing SRED (‘SR&ED’) credits in Canada is almost like rebooting your SR ED claim. A tax credit loan allows you to get an immediate reimbursement under Canada's Scientific Research & Experimental Development program.
Utilizing the cash from your refund has a dual benefit - you've eliminated the wait period in what for many firms is in effect a very important ' receivable', and at the same time it allows you to forge on in your competitiveness in today’s global marketplace.
Financing your claim, of course, has nothing to do with your actual eligibility for the program... that's up to you and your ' Sred Consultant. ' That whole process becomes the actual determination of how your products or processes qualify. Consultants on your claim work on either a fixed fee or a contingency fee basis - it's your decision although most appear to take contingency given it transfers all risk to the consultant!
Timing not only involves the financing of your claim and its monetization - you also have to ensure your filing deadline under your actual claim submission are in accordance with CRA guidelines.
Your SR&ED claim has several key elements, all of which hopefully maximize the total amount of your refund, and therefore your eligible financing. (NOTE - The tax credit loan is typically 70% of the total value of both your provincial and federal claim - the larger the refund, the more you, of course can finance)
Financing your claim simply involves a basic business credit application that you would anticipate with any other financing type. Naturally, the ' collateral ' for the loan is in essence the actual refund itself. That refund depends on your narrative's quality in the claim, the number of contractors paid and participated in the claim, etc.
The true power of the ' SHRED' refund is of course your ability to recoup the maximum amount of cash - the total cash refunded under the program is in the Billions of dollars in Canada under combined federal and provincial parts of the program. Typical refunds are in the 30-40% range based on the total amount of your R&D. Again, it’s your Sred consultant and accountant that have the obligation to maximize that claim for your company.
Your actual SR&ED is filed along with your T2 tax return. You can start to see the benefits of an sr ed tax credit loan by looking at the total timelines we're talking about - i.e. actually doing your r&d, preparing a claim with your consultant, and then filing it after your year-end finances are prepared. Then, of course, potential audits and reviews by CRA of your claim kick in.
As we have noted financing refundable SR&ED credits is a very simple process. You typically would only consider financing a claim if you have a need for cash. Financing your claim should be measured against your needs and uses of the cash. Typical claims can be financed in a manner of weeks.
If you're looking for a SRED ' reboot ' - i.e. in our case, the monetizing of your refund seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your tax credit loan needs.
Stan Prokop
