Unleashing Innovation: Guide to SR ED Cash Flow Financing in Canada | 7 Park Avenue Financial

Tweet

YOUR COMPANY IS LOOKING FOR CANADIAN SR&ED FINANCING! 

SR&ED Financing: The Lifeline for Cash Flow For Your R&D Capital Investments

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

Why SR&ED Financing is a Smart Investment for Your Business Growth

SR&ED Financing is an immediate financing strategy to convert your filed Canadian SR ED claim into working capital and cash flow for your business.  

INTRODUCTION 

SR&ED Financing for Canada's Scientific Research and Experimental Development (SR&ED)  program is a catalyst for helping Canadian technology companies ( and any company focusing on r&d) grow their business.

Unlocking the cash flow potential of sr&ed refundable tax credits helps transform the business while helping ensure viability . Understanding how sr&ed financing works helps a company tap into continued innovation in the business - helping to reduce financial constraints .

If your company needs additional cash flow, the SR ED financing strategy is a great source of financing and working capital of an 'alternative' nature.  Naturally, Canadian business owners and financial managers can wait up to 18 months (sometimes longer?) for your non-repayable SR ED refund. Still, if you need the capital, you can access those funds now.

FINANCING YOUR SR&ED CLAIM VERSUS WAITING FOR YOUR REFUND

When companies submit a claim under their sr red refund the waiting process begins, and it has the potential to be a lengthy process - Anyway from 2-12 months under different conditions - For a faster route to your business refund businesses should consider monetizing their sred investment tax credit.

Unlocking the sred credit  even allows a company to obtain financing for their claim as research and development work is documented and accrues towards the year end filing to Canada Revenue Agency /CRA  of the claim . That brings immediate liquidity back into the business -

A company can choose to reinvest funds back into day to day working capital and avoid the waiting for the refund . When companies use qualified  SR&ED consultants to prepare their claim that brings a greater chance to maximize the claims amount and approval.  While the use of a sred consultant is not required to fund a claim it often helps and lends credibility to the claim and expedites financing approval .

When we meet with customers and ask them what they will use the proceeds of the SR ED financing, they indicate that it will be for fundamental working capital requirements - suppliers, payroll, further investment into their R&D processes, purchases of equipment, etc.

SR ED financing is absolutely a boutique, somewhat unknown type of financing in Canada. We recommend that you work with a trusted SR ED advisor who can both maximize your claim (usually 75% of the total value of your claim) and assist you in ensuring the claim can be financed in a relatively short period of time. In claims for our customers, that process usually takes 2-3 weeks with your full cooperation, of course.

WHAT IS THE APPLICATION AND DISBURSEMENT PROCESS FOR SR&ED FINANCING? 

Accessing SR&ED financing  could not be a more simple process  - A simple business application as well as providing  detail around the sr&ed filing usually takes only a matter of days - As we've noted companies are eligible for a short term bridge sred refund loan  for approximately 75% of claim value - 

Even more flexibility comes with the ability of the company to request refunds in a lump sum loan or the ability to arrange for regular distributions - for example on a quarterly basis as r&d  work continues and accrues. Think of it as your sr&ed line of credit!

SR&ED  IS ONE OF THE TWO MOST POPULAR GOVERNMENT FINANCING PROGRAMS IN CANADA!

Almost everyone agrees that the SR ED credit , which, as noted, is non-repayable(!), is one of the best government assistance programs in Canada. In our firm's opinion, both the SR ED grant and the Canadian government's CSBF loan program are the two most clear and viable financing assistance strategies for Canadian businesses.

When we meet with customers to discuss their cash flow and working capital challenges, customers always ask us what SR ED financing funds can be used for - the simple answer is any general corporate purpose.  We also point out that your claim, to be financed, must demonstrate that you have no CRA (the old 'Revenue Canada ') arrears for any government super priorities such as source deductions, GST/HST arrears, etc.

Although your claim might not be able to be financed with those arrears in place that you still should file your claim for funding as the claim will reduce or eliminate your arrears, depending on how much is owing to CRA and the value of your filing.

In certain cases, we work with customers to pay any of those government arrears out of the financing of the claim - that’s a good thing!

Businesses that finance SR ED claims clearly understand the program's value - it gets your firm a significant refund in any research your firm does in products, processes, software, etc.

It is our understanding that over the last couple of years, the government has sent out cheques for 3  Billion dollars in funds for SR ED claims, so:

1. Why wouldn’t your firm consider filing a claim for your funding?

2. Why wouldn’t you consider an SR ED financing strategy for immediate funding of that claim?!

There is no real maximum on the amount of SR ED claim that you can finance. In our own experience, claims are generally under one million dollars, but that is not a hard and fast rule.

A SAMPLE  SR ED LOAN STRUCTURE 

We referenced working with a good SR ED financing advisor who can both maximize your cash out of the claim financing and steer you through the process as well. In certain instances, your bank might have a general security agreement on the claim (even though they are not financing it?!), so a release is required from the bank, which is generally easy to obtain once we explain what we are trying to achieve.

WHAT IS THE CRITERIA FOR SRED FINANCING APPROVAL ? 

Many firms ask us what the general criteria are for SR ED financing approval. It is essentially a standard business application process; however, we clearly note that the emphasis is on the amount and quality of your claim, with significantly less reliance on your balance sheet and income statement.  That is because your actual SR ED filing secures the SR ED financing - it’s as simple as that. 

Naturally, it helps if your overall business outlook is generally positive or if you are on track to recovering from any setbacks such as a financial loss, or balance sheet issue, etc.

REPAYING YOUR SR&ED LOAN  

SR&ED Loan Repayment The repayment of SR&ED loans typically coincides with the receipt of the anticipated tax refund. In the event the SR&ED refund falls short of covering the loan, lenders typically offer alternative repayment options, collaboratively working with the borrower to devise a suitable plan.

BENEFITS OF SR&ED LOAN FINANCING   

The Benefits of SR&ED Financing SR&ED financing offers several benefits, offering swift access to capital that can be channelled into various areas, from research and development (R&D) to sales and marketing. Whether a company is facing an urgent need for cash due to a major event or looking to double down on scaling without relinquishing equity, SR&ED loan financing presents a strategic solution. This unique form of financing offers not only monetary benefits but also preserves the ownership structure of a company.

 CONCLUSION 

SR&ED financing is a source of flexible funding that helps propel business innovation for businesses engaging in r&d. Financing sr ed claims allows a business to access cash sooner and helps the business to continue r&d efforts . SR ED financing is non-dilutive in nature and less expensive than many other types of financing such as short term working capital loans, or term loans with longer amortizations . The sred short term bridge loan helps the business to continue the r&d journey while increasing owner equity / valuation. 

Cash flow and working capital needs? Filing SR ED?  Then consider your SR ED financing options! Call 7 Park Avenue Financial,  a trusted, credible and experienced Canadian Business Financing advisor who can assist you to access capital via  sr&ed refund financing and funding solutions for a filed claim or accrued sr ed.

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

WHAT IS THE ELIGIBILITY REQUIREMENT FOR A SR&ED CLAIM UNDER THE FEDERAL TAX INCENTIVE PROGRAM

SR ED tax incentives require the business to meet certain eligibility  requirements in the realm of SR ed tax credits . Three primary components of being eligible include : Scientific or Technical Advancement, Technical Uncertainty, and Technical Content. Applicants must demonstrate that their work promotes technical knowledge, tackles significant technical challenges, and employs a systematic process to resolve these challenges under the sr ed claim process

 HOW CAN BUSINESSES OPTIMIZE SR&ED REFUNDS AND MITIGATE AUDIT RISK? 

To maximize the value of SR&ED claims and diminish the risk of audits, businesses need to adhere to a systematic documentation process, accurately tracking time and expenses and the eligible expenditures tied to the SR&ED project. This diligent record-keeping not only fortifies the claim but also streamlines the review process by the CRA and encourages Canadian businesses to participate in the program.

WHAT IS THE ROLE OF THE SR&ED CONSULTANT  IN PREPARING YOUR REFUND FILING ?  

SR&ED financing providers and consultants play a critical role in the SR&ED ecosystem. Service providers / consultants have become instrumental in guiding companies through the claims process, offering full-service support including preparation of technical narratives, financial reports, audit defense, and faster access to refunds for their sr ed credits.

 WHY SHOULD A COMPANY USE SR&ED FINANCING? 

Businesses should consider using SR&ED financing to fund their research and development activities. Financing SR&ED can be a  significant source of funding that can help businesses invest in R&D without having to rely on their own finance resources.

Second, SR&ED financing can help businesses reduce their tax liabilities. The program provides tax credits and refunds that can be used to offset taxes.  

Cash flow improves ! The program provides funding in the form of refundable investment tax credits and refunds, which can be used to pay for further R&D expenses. Businesses  can avoid cash flow problems and ensure that they have adequate resources they need to complete their R&D projects.

 HOW CAN A BUSINESS PREPARE FOR A SR&ED CLAIM FILING? 

Preparing for SR&ED financing requires careful planning and attention to detail.  To prepare for successful preparation and filing of a claim a business should "

1. Maintain detailed records of all R&D activities and eligible expenditures

2. Ensure that all R&D activities meet the criteria set out by the Canada Revenue Agency

3. Consult with a accounting or  tax professionals or an industry SR&ED consultant to ensure that the claim is prepared properly

4. Submit claims in a timely manner to avoid delays or penalties

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