Borrowing Against Your R&D Tax Credit For Cash Flow Freedom

YOUR COMPANY IS LOOKING FOR SR&ED FUNDING FOR A SRED LOAN FOR YOUR R&D TAX CREDIT GRANT!

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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Although Canada’s SR&ED program seems to be going through some changes in terms of application and adjudication of your claim, the good news is that the ability to finance your SRED (SR&ED) claim is as straightforward as ever. Let’s explore some key basics around what you need to know to finance your claim and get a head start advantage on your ability to reclaim SRED funds.

Put very simply, if you have filed an SRED claim there are a number of reasons to consider financing that claim for immediate cash. It’s a simple case of staying ahead of the game and monetizing your R&D tax credit now to accelerate working capital.

There is no industry that is unable to finance an SRED claim – the program of course covers a wide variety of industries in Canada – many claims we see from clients are in the software and technology area, but virtually every industry has the ability to capture an SRED government grant that is of course, non – repayable.

We should state however that SRED claims that are prepared by proper technical advisors tend to be easier and quicker to finance – that is simply because with that experience and credibility comes the assurance to your lender that your claim has a high probability of being approved in entirety or for the most part.

That brings us to a critical point around the financing of the SRED claim, which is often our clients' most typical starting question – ‘Our Company has an SRED claim – how much can we get for it today?' SRED loans typically start out at 70% LTV. LTV is an acronym of course in finance for 'loan to value', so we are simply stating that you can immediately borrow and receive in the range of 70% for your SRED claim. Naturally, that 30% gap still remains with your firm to its credit, it’s simply that you don’t receive SRED loans for that remaining 30% which acts as a solid buffer to cover the probability that your claim might be adjusted by Canada Revenue Agency – it also covers off the financing costs.

A popular misconception around SRED financing is that it is a loan – that is not the case in the technical manner that we as business owners view loans. A term loan, or short term loan for that matter adds debt to your balance sheet, and you make payments on a loan of course. SR&ED financing of your R&D tax credit is simply the monetizing of your SRED claim, with the claim as collateral – so your firm is incurring no additional debt. Also, the beauty of a properly constructed SRED financing is that no payments are made for the duration of the financing – The financing costs are netted out against your final cheque that you receive from Ottawa and your province. (SRED funds usually have two components, the federal and the provincial portion).

SR&ED financing is efficient and can happen very quickly – as a business owner you should view the entire process in the same manner as you would any other application for financing – example – leasing some equipment, etc.

The key aspects of an SRED application are a copy of your SRED claim, a copy of your tax filing that you of course made at the same time as you filed you R&D tax credit, and typical information on your company, i.e. your financial statements. If for some reason you have made the decision to finance that claim after you have had your technical audit you are eligible for even a greater advance that our aforementioned 70% - however typically clients come to us when they have just filed a claim, or in some cases, are in the process of filing.

Financing of your SRED loan takes a couple of weeks from start to finish, in our experience. So your strategy to finance your claim and receive cash for it can often be enhanced by planning early, which is always a good thing in any aspect of business finance.

Speak to a trusted, credible, and experienced financial advisor in SR&ED TAX credit finance to determine how easy it is to monetize that claim and turn that non repayable government grant into cash flow that will accelerate your growth and profits.

' 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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