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Financing & Cash flow are the biggest issues facing business today
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
A SRED business credit replenishes the cash your firm has spent on qualified expenditures under the SR&ED refundable claim program in Canada - however that only happens when you receive your govt check for 'SHRED' refundable tax credits. That's why we make the case to finance your claim to shorten that whole process - it's our mini version of ‘money is no longer an object,' so to speak. Let's dig in.
Any external funding that helps a business survive, compete and grow is a valuable commodity... Whether your firm is in the early stages of development, early stages of sales, or fighting a head-to-head battle with your competitors, it's almost always about ‘ cash flow.'
Many business owners/managers that file SR&ED claims might not be aware that the program is pretty well the largest ' direct support ' ( direct support = cash!) program in Canada, providing billions of $ for any firm that qualifies and files.
Since you have no requirement to repay these funds to the govt, it seems that it makes even more sense to monetize your claim as quickly as possible - taking full advantage of the unique structure of SR ED financing loans.
How do these loans work? The concept of a SRED BUSINESS CREDIT loan is essentially a 'bridge loan,' carrying you over for the full duration of the waiting that comes with any govt process. That is not to say the govt hasn’t been committed to speeding up the process. They've simplified the application process, scrutinized more effectively the folks that prepare these claims for you (aka ' SR&ED Consultants), and even committed to specific timelines around processing, auditing, and paying your claim.
Having said all that, your firm's R&D process can well take the better part of a year. Then your SRED Consultant prepares and documents your claim. That claim is filed along with your annual financial statements. So it's not hard to see the benefits of financing your claim, which, by the way, can also be financed before filing, and financing can even commence on next year's claim if you should so choose.
We spoke of ' SHRED CREDITS' being financed via a type of bridge loan process. Let's recap that process. Once the total value of a claim is determined by yourself, your accountant, and your SR ED consultant, a financing offer is issued, typically for 70% of the total amt of your claim. (That covers both the fed/prov portions of the tax credit.
The essence of the collateral of the loan is, of course, the SR&ED credit itself. That again raises the point of a qualified and reputable consultant's role, as the lender is relying on the legitimacy of your claim. During the last several years, many less than reliable Sr ed consultants have been slowly weeded out of the industry.
When you receive your funding under your financing claim, no payments are made for the loan duration. That lack of cash outflow strengthens the case for financing a refundable tax credit under the program. By the way, when the govt funds your claim, you immediately receive the balance (i.e. 30%) of the refund, less financing costs that accrue along the way for the loan.
If you think the case can be made for financing your SRED Business credit, seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you to monetize SHRED refundable tax credits for value cash flow - our version of ' money is no longer an object!
Stan Prokop
