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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
SRED (SR&ED) tax credits have the ability to create a certain amount of anxiety in Canadian business owners who utilize the program if only for the fact that from the time you start your annual claim (many businesses file year after year successfully), a major waiting game starts! The way to eliminate that wait and shorten the cycle? Finance your SR ED refund claim. Let's dig in.
For the thousands of firms that successfully claim their share of billions of dollars funded annually by the fed/prov vis the SR&ED program, the cash flow derived from those ' refundable tax credits' plays a huge role in the ongoing financing of their company. It's interesting to note that many firms that file claims are actually in start-up mode or pre-revenue/early-stage revenue.
These tax credits come in the form of a cash refund. The problem? Time! Many, many months, in some cases, a year can transpire before your R&D is completed. Along the way, you've worked with your SR&ED consultant to prepare and document the claim, ensuring it will pass the proper tests for expenditures under the spirit of the program.
The whole issue of financing your claim revolves around the fact that you can monetize an intangible asset for cash flow/working capital needs today! As an example, typical reviews of your claim after submission may take 3-4 months. Naturally, any follow-up on the claim for clarification of issues... you guessed it... adds more time/waiting!
Recent changes to the program force business owners/managers and their Sred consultants to fit a year's work of research into a very tight technical narrative. For example, you're only allowed 350 words to describe your annual claim's technical nature overview, which can often be in the hundreds of thousands of dollars.
When you finance an SR&ED claim, it's a fundamental process - reduced to a simple business application, a copy of your claim and who prepared it, and potentially some other financial info around your business. It's important to stress that your claim's real collateral is simply the SR ED refund itself. One can see, therefore, the importance of eligibility and the credibility attached to your SRED consultant. These folks work on contingency and are specialized in the industries they make claims in.
What does the structure of an SR&ED bridge loan look like? It clearly maximizes your refundable tax credit's total benefits in that the financing is structured as a bridge loan with no payments made during the duration of your wait for the refund. The most typical advance under the financing is 70% of the total value of the claim. The other 30%? You receive that as soon as the govt approves your claim, less financing costs.
If you're looking for some ' calm ' to prevail in your waiting game for SR&ED refundable tax credits, consider financing your claim. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you fund your claim.
P.S. Claims can be financed before filing, and consideration can also be given to funding the start of next year's claim. Waiting be gone!
