YOUR COMPANY IS LOOKING FOR SR&ED RESEARCH TAX CREDIT FINANCING!
HOW YOUR BUSINESS CAN BENEFIT FROM FINANCING SR&ED CREDITS
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Financing & Cash flow are the biggest issues facing business today
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GUIDE TO FINANCING SR&ED TAX CREDITS IN CANADA
Without SR&ED tax credit financing, you are often an 'unwilling participant' in the SR&ED refund waiting game.
That's not a game you wish to be a contestant in! So what if your SR&ED Research Tax Credit Grant could be financed for funding today via an SRED Loan / SR&ED Financing? Let's dig in on sr&ed tax credit eligibility and Sred loans around your Sred funding needs !
BACKGROUND TO THE FINANCING OF R&D TAX CREDIT INCENTIVES / SR&ED CREDITS
Industry pundits in Canada's SR&ED program are quick to point out that the combination of waiting time, client appeals, and even the whole audit process has put a certain amount of delay in the issuance of refunds.
Clients we talk to work hard to document their claim and address any questions and issues arising out of the review of their claims. They're focused on spending R&D capital, and recouping as much of those funds as they can!
Naturally that additional burden around the waiting time significantly affects the cash flow and working capital positions of many firms, many of which are start-up and early-stage firms focused on growing their business.
If your company is filing what is known as Scientific Research and Experimental Development Tax Credits, (SR & ED) your firm has expended significant funds on developing or improving products, processes, etc. Receiving that cheque from Ottawa is of course always a great thing, but why wait?
FINANCING THE R&D TAX CREDIT - WHAT IS THE SRED TAX CREDIT LOAN
One of the smartest things you can do is to consider the financing of your claim - that can be done via a short-term SRED loan - we could almost call it a bridge financing loan for your SRED claim.
Why is that a good strategy? Well, one main reason might be that since the tax credit is in the form of a non-repayable grant then receiving funding for it today, (rather than several months or a year from now) allow you to put that money back to work into your business.
That valuable cash, which you have already spent, can be redirected to general working capital, further reinvestment in R&D, reduction of payables, investments in new equipment, well you get it, for a general worthwhile corporate purpose.
When financing an SR and ED claim the lender pays careful attention to who prepared the claim for your firm. This is typically via what the industry calls SRED consultants who typically have expertise in one or a variety of industries, including such areas as computer science, technology, physics, chemistry, manufacturing, etc.
WHY DO THE MAJORITY OF COMPANIES UTILIZE SR&ED CONSULTANTS?
Businesses tend to use SRED Consultants because of the technical and practical experience these people or businesses have around the issues of making a sr&ed claim successful - they have the ability to maximize with firms to maximize claims and short claim timelines around sr ed forms and the sr&ed tax credit calculation CRA.
In connection with a firm's external accountants, they prepare and file claims to support the Canada Revenue Agency / CRA's review of the claim as well as to position the claim as not requiring additional investigation or audit. These consultants bill for their services on an hourly rate or in most cases offer contingency pricing which eliminates cost and risk to the company filing the claim as well as speeding up the approval process via their work.
Many consultants have good contacts at CRA around claim policies which provides an additional level of support. Given that SR&ED claims are filed in a multitude of industries in Canada ( software development, oil, biotech, Agriculture, etc ) the expertise they have is very valuable and helps eliminate time and ensure success.
SRED claims can be financed whether your claim is a first-time claim, but the process often goes quicker and easier if you have filed successfully in the past. Our point is simply that you should not be deterred if in fact you are filing for the first time - however as a cautionary note you should note that more focus will probably be paid to the overall quality of the claim and who prepared it for your firm. You can actually claim for a 2-year period, i.e. your current year and the previous fiscal year.
UNDERSTANDING HOW SR&ED CREDITS ARE PAID BY CRA/CANADA REVENUE
SR&ED Investment tax credits are offset against any income taxes owing by your business - For private companies and individuals filing SRED claims a refundable investment rax credit is earned over any taxes owed- That money is sent to the business via a cheque or deposit.
Clearly, most business owners and financial managers who utilize the program recognize the tremendous benefit of increasing your overall return on R&D by filing a claim and recapturing your funds. And if you can utilize those funds sooner rather than later, why not consider financing, or in effect monetizing the claim?
HOW DOES THE SRED LOAN WORK?
Financing your SR and ED claim can of course assist in your overall cash flow and working capital position. Claims are generally financed at 75% of their filed value, which allows a 30% buffer in case adjustments are made to the claim, and, guess what, you make no payments on the SRED loan.
Funds you receive are netted out against the final cheque from Ottawa and your provincial jurisdiction when your claim is ultimately audited, approved, and funded. If you wish to finance your claim before you file via your annual tax return and accrued credits can be financed!
Clients often ask how complex an SRED loan is, and what the timing is to receive funds. With your full cooperation, funding can usually be done within a couple of weeks of your application, and the reality is the SRED funding is no different than any other business financing you might entertain. It's that simple, you complete a standard business application, and at the same time provide details of your SRED claim which in effect is the collateral for the financing.
Your firm takes on no debt when it comes to SR&ED tax credit Canada financing - you're simply monetizing a receivable, i.e. your refund claim.
CONCLUSION - SR&ED CREDIT LOANS / SRED TAX CREDIT FINANCING
Speak to 7 Park Avenue Financial, a trusted, credible, and experienced advisor in SRED loans, and determine the advantages of monetizing your SRED claim into valuable cash flow and working capital. With SR ED financing Canadian companies can receive cash in a matter of a few weeks.
FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
Is Sred a tax credit?
Qualifying corporations can qualify for the investment tax credit around SR&ed if they are Canadian-controlled private corporations (CCPCs) and they can claim a refundable tax around qualified expenditures for refundable investment tax credit and tax incentives under the single largest federal program.
Canadian businesses qualifying for SRED receive a refundable tax credit or a tax deduction around market research and scientific knowledge. The program's focus is to encourage Canadian businesses to achieve technological advancement and applied research / basic research around technological uncertainty in new products and services and processes. Any Canadian controlled private corporation can apply for refundable tax credits under this tax credit program and can qualify for sr ed funding.
Who can claim SRED credits?
Both individuals and companies that are doing work around scientific or technological uncertainty can file for an sr ed tax credit claim - Businesses can also obtain an sr ed tax credit loan from a commercial finance firm for sr ed tax incentives under the federal tax credit program administered by CRA. Eligible projects typically revolved around new or improved material or product and services.
Qualified expenditures for firms that do work to achieve scientific or technological advancement and increase scientific knowledge in their business and industry qualify for sr ed eligibility and the income tax deduction. Subcontractor fees to conduct research are one of the allowed sr ed expenditures.
Some businesses may be subject to an sr ed audit.
