Introducing SR&ED Tax Credit Loans For Improved Cash Flow

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SRED Tax credit financing, even just the concept of SR ED loans to monetize your R&D capital investment can be a confusing scenario for Canadian businesses who take advantage of the most popular of Government refund credits. So we're officially forgiving those who don't know the basics - and we'll fix that with some solid tips and info. Let's dig in.

Looking for a breath of fresh air in the SR&ED world? When it comes to financing and monetizing your claim 2 simple facts remain and we'll simplify that as follows:

1. If you have an SRED claim it’s financeable for cash and working capital now

Your ability to monetize or cash flow a claim is in fact a superior way of generating additional working capital and cash flow now based on the value of your filing. We will add one technical point here, in that claims are generally financed at 70% LTV. LTV means ' loan to value ‘, so we are simply saying that for every one hundred thousand dollars of SRED claim filing you can generate seventy thousand dollars via a short term SRED bridge loan.

We can expand on that point a bit to ensure you are well informed. After filing a claim it is clear you are in a ‘waiting mode ' for your claim to be analyzed, potentially audited, and then of course waiting for the proverbial government cheque - shall we say ' it's in the mail ‘!

With Ottawa backing your non-repayable cheque you of course have the assurance funds will come, but you just don't know when!

We recommend that if you have filed a claim that you investigate the ability to finance that claim now.

Why wouldn't you consider a financing option to accelerate cash flow and start using those funds now?

Uses of funds under SR&ED financing are totally within your control. We see clients utilize SR&ED loans to further invest in even more R&D, i.e. next year's claim! Or you can choose to reduce payables, invest in additional equipment or business assets, etc.

In a small handful of cases we meet with firms who have a tax liability to Ottawa or the province re: source deductions, HST, etc. If you work with a trusted, credible, and experienced SR&ED finance advisor you can structure your financing to ensure that you're past due remittances are taken care of during the SRED financing process. No firm wants to be in the government's bad books re past due government super priority issues.

The actual SR&ED financing process should be treated by yourself as any other business financing - we try and actually make the case it's easier in some cases because the actual asset behind the SRED loan is the SRED claim itself, so even if you think your firm might not qualify for financing for other forms of traditional borrowing your probably qualify for the SRED - why?? Because you have an SRED claim as an asset that's verifiable!

Given that billions of dollars are refunded under the SR&ED refundable tax credit you want to ensure you're getting your share - no argument about that. SR&ED loans simply speed up that process. Yes you can wait for funds, which may take a couple of months or the better part of a year - if you can’t wait consider financing your SR&ED claim via a short term SRED loan which is collateralized against your filing.

We strongly recommend you have a professional filing prepared, by your accountant or SRED consultant (there are many) - this will significantly positively impact your ability to finance your claim.

Looking for a great cash flow and working capital strategy around that R&D capital investment - Monetize your tax credit. No new debt is on your balance sheet, as it is offset by your SRED asset that is in fact a monetizable account receivable. Seek out and speak to a trusted credible and experienced Canadian business financing advisor who can assist you with your claim financing.

' 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

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