How To Get Your SR ED Financing Sred Loans & Tax Credit Loan Financing

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SR&ED FINANCING IS GROWTH FINANCING 101!

SR&ED financing may often play a key part in your overall cash flow strategy related to your R&D capital investment.

Canadian entrepreneurs and business owners know the value of their investment in r&d capital in their quest for innovation - SR&ED Tax credits are at the forefront of Canadian innovation.

HOW DOES A SRED TAX CREDIT LOAN WORK?

How can your firm access SRED loans that make sense for your business? If an alternative cash flow financing solution to cash flow your refundable tax credit makes sense for your firm and you're eligible under the program, then why wait? Let us get working on your sr&ed tax credit loan today!

Whether its ITC sr&ed tax credit financing or additional funding related to a government grant businesses can now access funding for even the accrued credit they have accumulated prior to filing.

ARE YOU MAXIMIZING YOUR SR&ED FINANCING POTENTIAL

Thousands of Canadian businesses benefit from the tax incentives provided by Canada Revenue Agency / CRA - That agency awards over 4 Billion dollars each year to businesses like yours who are filing SR&ED claims after year-end corporate tax firms are filed and SR&ED claims are applied for . For businesses that choose to wait for their funds which come in the form of a lump sum refund that can be close to a year's wait! That allows CRA to review claims filed and commence the refund processing - That waiting period can seriously restrict cash flow that is due to your business around the claim.

Waiting is the one thing business owners don't necessarily want to do when it comes to cash flowing their government receivable- the sr&ed claim, a process that might take months regarding claim reviews, audit, etc.

By financing your refund you have the immediate opportunity to leverage the cash flow pertaining to your claim - that entire process is typically handled in a couple of weeks via your sred funding application. Grants can be financed in the same manner.

The opportunity of turning your research investment into a short-term loan for cash flow is appealing to all owners of small, new, or growing and emerging firms. Treat your r&d investment as a receivable with the ability to fund it. Bottom line - your loan is repaid in full with your refund! Let's dig in.

The alternative to financing your SR&ED claim isn't often an easy one - it's called 'Waiting‘! That process can be anywhere from 6-18 months for the government refund. That's a combo of your federal and provincial SR&ED claim. It's plain to see that financing a claim is all about taking advantage of the valuable cash flow that's tied up in your claim filing/refund.

Typically Canadian chartered banks seldom finance an SR&ED claim. There are probably a few reasons why that is the banks' position, one of them being that claim ultimately might not be approved/processed for a refund. That, of course, simply strengthens the case to ensure you've got a solid SR&ED consultant preparing your claim. That's key.

Note that even first-time claims can be financed, although it's safe to say that firms that have filed previously clearly enhance the chances of getting their claim financed. But to our point, first-time filers can finance, and many firms we have worked with are a start-up and pre-revenue stage companies.

Why do firms consider financing their R&D refund? Simply because the r&d tax credit in Canada is a method to recover a large portion of your research investment!

In general, it's always about their cash flow and capital needs - in many cases, the cash is actually used to continue to further research on the next year's claim!

Hopefully, that R&D investment helps them position future success as translated into sales and profits. And when it comes to your financials, remember that SR&ED debt financing is not a loan that brings debt to the balance sheet. It is simply a monetization of research and development grants in Canada.

Clients we talk to are also happy to hear that they can also finance claims that have not yet been filed. We can call this a form of an SR&ED credit line, allowing them to fund as they invest. That clearly shortens the waiting period given those interim advances.

HOW DOES THE SR&ED FINANCING & FUNDING PROCESS WORK?

Your SR&ED Financing is a very defined, and easy process - Participants being your privately owned Canadian firm as the SR ED applicant, your SR ED preparer or consultant, CRA itself, and of course the finance firm as the final piece of the puzzle. The funding process is straightforward, starting with a fundamental application form that would apply to any business financing. That means a short review around your cash flow and growth goals.

SUMMARY OF THE SR&ED LOAN PROCESS

Application / Normal business due diligence regarding your claim/consultant/company business/ financing! It's as simple as that, and your loan is retired immediately upon government processing of your claim. It's as simple as that!

Typical SRED claims tend to be for a substantial portion of your total r&d capital investment - Those statistics come from the government of Canada, which advises that CCPC claims will often be in that range. Your sr&ed consultant prepares those numbers, and funding is within days of your approval loan claim.

No owner we have met ever wants to choose additional equity into the company versus the monetization of a tax credit, especially when your firm is young and growing and hasn't reached anywhere near full value. It's all about return on equity.

WHY DON'T ALL INNOVATORS IN CANADA FILE SR&ED TAX CREDIT CLAIMS?

We meet with many firms that actually have qualified for SR ED cash grants for years and have not taken advantage of these funds. Unbelievably some business owners tell us they viewed the process as too time-consuming. Therefore they simply did not apply for the funds. In today's business environment, with a total focus on cash flow, working capital, and global competitiveness, we feel you can't afford to not take advantage of both the SR ED funds and SR ED financing.

The basics are straightforward - establish that you qualify for SR ED cash refunds, work with your accountant or an independent consult to set up a process and prepare claims on an annual basis, and, finally, unlock the cash flow in those SR Ed claims if you wish to finance the claim.

What is the actual finance process? Essentially consider your tax credit loan as a 'bridge loan' with the actual collateral being the claim itself. In a way, you're creating a special government account receivable finance strategy.

SR&ED LOAN EXAMPLE

Loans are typically 75% of the total value of your combined federal /provincial claim - or if you choose, your accrued spending prior to filing.Using a 350k SR&ED claim as an example, your tax credit loan would be in the 260kk range. Key point: No payments are made for the loan duration - financing costs accrue and are paid at the end when the loan is closed.

KEY STEPS TO SUCCESS IN SR ED FINANCING

Preparing a clean claim with documentation (with your accountant or consultant). We further note that many consultants will prepare your claim on a contingency basis, therefore ensuring you have zero out-of-pocket expenses in claim preparation.

The financing portion of the SR ED claim process typically takes up to 2-3 weeks in our experience. Is that a long time? Well, of course, the alternative is to get your aforementioned example $260,000 now or wait one year for the government to send you the cheque.

Could the process be more simple? We don't think so - provide basic information about the company and the SR&ED investment tax credit you are claiming - sign back your term sheet and loan agreement and access your funding .

Remember that Sred loans don't require a monthly payment - no payments are made for the duration of the loan - your loan is closed off when you received your full funds from CRA, less financing costs for the transaction which are competitive!

Specialized finance companies in Canada, such as 7 Park Avenue Financial, allow you to monetize the capital you invest in r&d. It's interim financing that works via better cash management through the advance funding process in the sred loan. Shorten that funding timeline around your refundable tax credits!

We provide a funding source for all firms participating in the program, from startups to established firms that are investing in research and development in Canada. Our goal? Simple. Providing your firm with effective finance to access the cash value of your sr&ed tax credit, and we do it quickly!

GRANT FINANCING

Many Canadian businesses choose to access grant funding to support their innovation around products and service offerings. The Canadian government funds many programs on a grant basis - If your firm is eligible and has been approved for funding your company's matching requirement can be funded - allowing quicker access to funding under approved grants.

CONCLUSION - SRED FINANCING

If you are looking for innovative financing from one of Canada's most popular alternative financing programs and want to enhance your cash flow position talk to the 7 Park Avenue Financial team today. Our goal is to ensure you have financing for the funding you are eligible for. Get the funding you need on your timelines, not the timeline of those good folks at CRA! Whether it's Grant financing or funding sred claims access your capital today.

Today's business financing landscape is challenging, whether you are looking for financing from traditional financial institutions, alternative finance firms, or even venture capital. Tax credit financing and grant financing are solid and accessible sources of business funding for all companies participating in Canada's Scientific Research & Experimental Development ( ' SR&ED") or other grant programs.

The benefit to Canadian companies around r&d finance sr&ed financing via funding your tax credits and grants without resorting to other types of financing or diluting ownership through additional equity funding couldn't be more clear - Taking maximum advantage of The Canadian government tax credit program and grant programs can be a major benefit to your firm. Whether your firm is a startup, or if you are growing and scaling revenues cash flow will always be king - unlocking those cash flows accelerates success via the sr ed program.

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

What is SR&ED Debt Finance?

SR&ED debt financing allows a business to access their government refundable tax credit via a short-term loan - The government receivable around the sr ed refund credit is the collateral for the loan advance - Funds can be used for any general corporate purpose as well of course as utilizing funds for additional research. SRED loans are repaid when the tax credit refund is received, with no payments required in the interim loan period prior to federal funding of the refundable tax credit. The advantage for early-stage firms is that sred finance growth funding is a cheaper form of finance versus issuing equity or taking on more costly long term financing,

What is the R&D tax credit?

The sr&ed investment tax credit is a Canadian federal government tax credit incentive program administered by Canada Revenue Agency - the program typically provides in the area of 35% of eligible expenditures in the form of a refundable tax credit cash payment - The entire program is a combination of both provincial and federal programs for Canadian controlled private corporations working in scientific and technological advancement in their industry.

What are the SR&ED tax incentives?

SR&ED tax credit incentives allow Canadian businesses to claim an investment tax credit for approved research and development under their work in technical challenges they face - The incentives can come as a deduction against reported income, or a refundable tax credit. All types of companies including corporations, partnerships, and trusts can claim the tax incentive - Businesses can verify with CRA if they are eligible for the credit.

' 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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