YOUR COMPANY IS LOOKING FOR AN SR&ED BRIDGE LOAN!
Information and Guide To Sr&ed Financing Loans
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Financing & Cash flow are the biggest issues facing businesses today
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SR&ED DEBT FINANCE 101
The SR&ED bridge loan in Canada. ? Fear not as SR&ED advance funding loans are here to stay for those refundable tax credits under the program.
In any business the owner's ability to access and manage cash is one of the keys to business success - Accessing working capital at a time when your company needs it most is a key to ongoing growth and success - Business owners know the value of debt financing when balanced against the high cost of equity at a time when the business is growing and hasn't achieved optimal valuation.
The real secret of SRED loans in Canada is that they were available for your tax credit prior to the current budget, and, guess what?... They remain in place today for your tax credit financing strategy!
Most Canadian business owners who utilize the SR&ED program in Canada were keenly aware that the very existence of the tax credit and the sr ed claim seemed in doubt in recent years - That concern is long since gone!!! ... and the Canadian government via Canada Revenue Agency/CRA seems as committed to the program as ever.
DOES YOUR BUSINESS QUALIFY FOR THE SR&ED TAX CREDIT REFUND?
Your ability to satisfy basic criteria under the program is the key to achieving eligibility under the program - You or your sr&ed consultant must be able to demonstrate technological advancement in your field of interest, as well as demonstrate you have technical uncertainty in your r&d efforts. That, and your ability to detail your work on those technical content challenges is the key to claim approvals.
Thousands of Canadian businesses received billions of dollars every year under the program funding, the formal name, of course, being Scientific Research & Experimental Development. Hence SR&ED. Your firm’s ability to demonstrate you have improved a process or processes, or come up with new technology or software qualified you for SRED.
HOW DO BUSINESSES USE THEIR SR&ED REFUND
Many firms simply continue to invest in their work in their r&d efforts Funds basically can be used for any general corporate purpose - that includes new employees and salary commitments, of marketing and sales efforts around your products and services . More r&d successfully completed will almost always translate to a higher valuation as the firm continues to raise more capital.
THE ROLE OF THE SR&ED CONSULTANT
Many companies want to know if they do in fact need a sr&ed consultant - While utilizing one is not required most people in the sr&ed industry do believe that they have stronger chances of qualifying for the tax refund as these consultants usually have industry pertinent experienced and have an excellent track record of qualifying your firm's eligibility, Most sred consultants also tend to work on a contingency basis, eliminating the risk to the applicant for time and work spent on the sr ed claim.
We’re not (fortunately?) accountants, we're financiers, so we'll let you talk to your SRED consultant or advisor on the various rate changes that took place in sr&ed over the years, some up, some down, under the program.
We would note that the biggest change seems to be the fact that capital expenditures no longer qualify under the program, but salaries and materials and portions of your overhead still qualify. In SRED it's all about a qualified expenditure as approved by Canada Revenue Agency.
We'd love to take a poll one day on how many Canadian firms know that SRED Tax Credit Financing exists in Canada. We'd venture to say is clearly the majority, not the minority. So if we had to reveal that 'hushed secret' on this major Canadian tax credit incentive it's simply "Hey, you've got options on your SR&ED tax credit... You can wait for months, or much longer for your refund cheque" OR... "you can finance your claim".
HOW DOES THE SR&ED BRIDGE LOAN WORK?
SR ED Bridge finance loans offer a very high loan to value around the financing of your claim. So borrowing against your sr&ed will qualify you for 75% advances of the total claim.
If you do have a claim that's prepared by an experienced and credible SRED consultant that claim can easily be financed. The basic rules around that are as follows - The SR ED bridge loan gives you approximately 75% of the face value of your claim.
No payments are made during the loan period! Your loan is repaid only when your refund is approved and received from the government. The actual Sred tax credit itself is the collateral for the claim.
On final approval and payment of your claim by Ottawa and the province, you receive your remaining 30%, less financing costs.
A simple application and your ability to provide the SRED tax credit as collateral is all that’s required.
CAN SR&ED CLAIMS BE FINANCED PRIOR TO FILING FOR YOUR REFUND? SPOILER ALERT - THE ANSWER IS YES!
So is SRED dead? It looks like it isn’t. We can hear the sigh of relief among all those SR&ED consultants who provide the majority of the writes ups on claims in Canada.
And, don’t forget. SRED tax credit financing loans are here today, they were here yesterday, and they will be here tomorrow for cash management benefits.
GRANT FINANCING
While many firms in Canada use Sr&ed financing as a method to access capital some firms also pursue grant financing under various federal and provincial programs in Canada
The good news? Grant financing for grant programs is also available for many programs offered in Canada. Funding is available under most matching programs allowing firms to continue to maximize the development of their products and services under various research programs.
Using programs such as IRAP in Canada will also allow to access grant financing under the program.
Canadian government grant funding is available for many small businesses in Canada - these are both federal and provincial as well as local grants available to small businesses and large companies- When companies qualify funds can be utilized for business expansion, business leases, acquiring assets or furthering efforts in r&d in your industry,
KEY TAKEAWAY - THE BENEFITS OF SRED FINANCING CASH ADVANCE SOLUTIONS
By now you have realized many of the benefits of a sr&ed bridge loan on a finalized or partial credit of your refundable tax credit. That access to capital alleviates other aspects of your business requiring cash, such as funding day-to-day operations, payroll, etc.
Investing in sales and marketing is always a key priority and r&d cash flows can help you to achieve that goal. Many earlier stage firms do not have any access to traditional financial institutions such as banks, re-enforcing the importance of sred cash flow financing,
Taking on short-term sred debt at competitive rates versus the challenge of obtaining additional equity and equity dilution makes common sense for your business.
CONCLUSION - SR&ED FINANCING
The SR&ED Financing program could not be more simple and easy - after your firm and your SR&ED Consultant has completed your filing a simple business application is completed, along with the appropriate info on your claim, amount, etc. After basic due diligence that would be required on any business loan your company receives your funds - No payments are made for the duration of the loan and the key collateral on the loan is of course your SR&ED claim and the government funds owing to you under the refundable tax credit program in Canada.
Speak to 7 Park Avenue Financial , a trusted, credible and experienced Canadian business financing advisor on help for SR&ED BRIDGE LOANS and funding those tax incentives for working capital and cash flow for your Canadian firm.
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