Maximize Your SR&ED Potential with Comprehensive SRED Financing, SRED Loans, and SRED Tax Credit Loan Solutions | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR  SR&ED R&D FINANCING!

FUNDING GROWTH VIA  SR&ED FINANCING / SR&ED LOANS FOR CANADIAN COMPANIES

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Financing & Cash flow are the  biggest issues facing businesses today

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

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

Email  - sprokop@7parkavenuefinancial.com

 

 

 

Grow Your Business with  Fast, Cost-Effective SR&ED Financing Solutions 

 

SR&ED refundable tax credits and financing r&d   are in the news a lot these days. Things seem to be always changing, sometimes in a big way, sometimes less.

 

The one constant? SR&ED Financing! It's always there - consider it growth funding and always available. Let's dig in.

INTRODUCTION

 

 

  

 

Canada's Scientific Research and Experimental Development (SR&ED) program is a federal investment tax credit that is refundable -  this encourages Canadian companies to conduct r&d in Canada via financial support via tax credit refunds.

SR&ED financing is a financial solution which allows businesses to access funding early prior to receipt of the Canada Revenue Agency/CRA refund.   SR&ED lona allows the business to receive funding based on the collateral provided by the sr&ed tax credit claim - Companies can continue to invest in r&d activities knowing they have that financial support.

This type of financing is non-dilutive in nature and is a solid solution for businesses requiring financing and who need to access cash flow for ongoing operations and research and development. We'll review the many benefits and the  ' how to ' in the sr&ed loan process - which is easier than you think! 

 

WHAT IS THE SRED CREDIT?

  

 

 

     

 

 

Sometimes called ' Shred  Credits ' they are one of Canada's most accessible, popular, and widely used tax incentive programs under the auspices of the federal government /  Canada Revenue Agency, allowing you to claim for either a cash grant or in some cases a deduction against income taxes owing.

R&D capital investments that your company makes use cash flow resources, so collateralizing your sr&ed claim encourages businesses to continue with  r&d and makes a lot of sense when other traditional sources of financing are not available.

 

Corporations that are in need of liquidity cannot afford to wait until the end of the fiscal year to receive payment of refundable tax credits for their cash management needs. For this reason, lenders offer sred funding, an advance (or loan) to eligible corporations for eligible expenditures, while using the future receipt of the SR&ED refundable tax credits as collateral.

 

  

  

BENEFITS OF SR&ED FINANCING    

 

By leveraging SR&ED financing, you can access funds from your SR&ED claim prior to receiving the tax credit from the Canadian Revenue Agency (CRA). Early access to capital allows the company  to reinvest in key areas of your business, such as:

 

Salaries/wages/contractor payments

 

Focusing on continued product and service development

 

Focusing on new domestic or international markets

 

Investing in sales and marketing programs

 

Increasing the valuation of the business via financing that does not dilute equity

 

THE ROLE OF THE SR&ED CONSULTANT IN PREPARING AND MAXIMIZING YOUR CLAIM

 

In the majority of cases, you are eligible for tax incentives for amounts in the 35-40% range of your total expenditures. The amount of that refund can go over 5O% when your Sred Consultant and accountant, typically working in combination, take advantage of both the federal and provincial parts of the sr ed credits program.

 

At 7 Park Avenue Financial, we can't overemphasize the role of ensuring you have an experienced and reputable sr&ed consultant preparing your claim. Their track records and reputations are invaluable both in the financing process as well as the CRA audit process for the SR ED claim process.

 

The formal name of the program is ' Scientific Research and Experimental Development ', hence ' SR&ED '! It is one of the most popular government programs via its ability to encourage Canadian businesses to conduct r&d in Canada, as well as providing refundable tax credits for those investments made by your firm.

 

Why a Sred  Loan / Sred Financing? SR&ED Debt Finance

 

Simply because its a method of allowing you to use your refund owing, which is essentially an account receivable, as a source of operating cash in the same manner in which any company would finance their receivables via either a bank or a commercial a/r financing firm.

 

It's a good example of  ' specialty financing '. Note that this does not involve government grants or grant financing - that's a whole different category of accessing funding from the government.

 

 Essentially you are unlocking the value of your tax credit, which is, in fact, a real asset on your balance sheet, although many companies we have worked with sometimes do not book that as a receivable. 

 

Companies using the Sred tax credit program tend to always be looking for business growth capital via these sr ed tax incentives. Most but not all are early-stage companies looking to commercialize their products and services. Just the ability to finance their r&d prior to their claim filing is appealing to firms who are always looking to generate cash.

 

Many firms are in new or emerging sectors such as digital media, environment, biotech, etc but firms in every industry utilize SR&ED. Accessing traditional financing is very challenging for many of the firms involved in SRED, and going the equity raise route is both time-consuming and even more so, costly!

 

 Claimants under the program may be surprised to know that if your firm has ongoing multi-year activity in research you can set up a Sred Line Of Credit, allowing you to accrue and then finance ongoing work. Here is where a track record in' Shred ', as well as a good consultant, is important.  Also, your claim can be financed before filing with the proper level of due diligence around claim content.

 

We can make the case that SR&ED finance is really  SRED factoring, namely the factoring of your sred receivables. And as we have mentioned elsewhere, owners should consider sred accrual financing allowing you to accelerate cash flow.

 

The challenge around receivables of course is ' waiting for payment '! Historically the timing around SRED REFUNDS has been a major point of discussion and is one of the reasons why a SR&ED FINANCING COMPANY is often utilized to monetize your tax credit. Depending on the size of your claim, and the technical aspects around it a firm can easily wait for many months to receive their refund.

 

 Another issue around the timing of claims is that your claim is filed by your accountant and Sr&ed consultant, typically working together, at the time of your year-end tax filing. You can see that it could add a further delay to payment by the government to your firm.

 

 

SR&ED FINANCING  101 

 

SR&ED financing is a business financing solution  - it is a short-term bridge loan that enables a company to cash flow their SR&ED refundable tax credits as they accrue them, rather than waiting until the CRA processes and approves the claim.

 

While you do not necessarily need an SR&ED consultant to write and file your tax credit claim or qualify for financing, but hiring one can improve the success rate of claims and provide the lender with more confidence in your eligibility for a credit facility.

 

Lenders typically offer the highest loan-to-value ratio in the market for SR&ED financing. To qualify, your company must have an SR&ED claim worth more than $100,000. If your claim is smaller than the minimum it can still be considered, your company's financials and a combination of accrued sr&ed or other tax credits or recurring revenue sources for a larger loan.

 

Processing time for SR&ED  tax credit claims varies. Companies have 18 months after your fiscal year-end to claim their SR&ED  credits. If you are a Canadian-controlled private corporation (CCPC) and if you file within six months of your fiscal year-end, the CRA usually processes your claim within a several-month period if it is not audited for technical or financial reasons.

 

For not private and publicly listed companies claims can take up to 12 months. If your claim is selected for review, it may take a few extra months to receive your refund.

 

 

WHAT ARE THE BASIC QUALIFICATIONS FOR THE SR&ED PROGRAM

 

To qualify for the SR&ED program, companies must meet three basic criteria:

1. Technical advancement: Projects must contribute to the advancement of technical knowledge.

2. Technical uncertainty: Technical challenges must exist and be attempted to be solved

3. Technical content: Research and Development must involve a systematic process to mitigate or fix the identified technical challenge.

 

 

 

SR&ED CLAIMS CAN BE FINANCED BEFORE FILING!  

 

Businesses will always need cash flow and that need doesn't necessarily coincide with cash infusions and the receipt of the SR&ED refund.

 

Businesses can still access SR&ED financing for claims that have not yet been filed during their year-end process - Your business can arrange for quarterly disbursements based on your sr&ed tax credit eligibility for work done in the previous quarter as an example.  Think of it as a sr&ed line of credit. Companies of course pay interest on only the funds drawn down under your sr&ed facility.

 

KEY TAKEAWAY POINTS IN SR&ED LOANS

 

A  SRED CLAIM  can often be financed and funded in just a few weeks if you are working with expert help and someone who has a track record of financing success in the tax credit area.

 

Although many business people use the term ' loan ' when it comes to this type of debt facility -   SR&ED financing brings no debt to the balance sheet, you are just monetizing your claim as a manner of advanced funding to access capital. Although the formal filing of your claim is at fiscal year-end, claims can be financed in advance of the filings!

 

Utilizing SRED TAX CREDITS is simply an additional source of funding for many companies, many of which are new, emerging, and even startups. Although many firms are technology companies almost every industry is eligible for SRED CREDITS based on their commitment to r&d.  It's all about growing their business.

 

New clients at 7 Park Avenue Financial always want to know if they are in fact eligible for SRED CREDITS.  If your business is what is known as  CCPC,  essentially meaning a private, not public company and you are doing qualified experimental research to develop your products you are eligible.

 

Industry statistics around SR&ED tell us that in the last 7 years, payouts on SR&ED claims have reduced by over 5 Billion dollars - suffice to say billions are still being paid on thousands of current claims. The government seems to be asking anyone with interest to provide guidance on the future of the program.  Canada Revenue Agency provides great information on the CRA website on both the qualifications around your claim and overall eligibility. 

 

All of that  information essentially comes down to 3 issues -

 

Is your firm investing in r&d capital to advance technologically

Are there uncertainties in your research,

Has the research become a process whereby technical challenges are overcome

 

ELIMINATING CASH FLOW UNCERTAINTY 

Talk about uncertainty! Business owners hate uncertainty. Who doesn’t? The one constant in SRED? Cash Flowing Your Claim! SR & ED (SR ED) factoring is a viable consideration for any Canadian company that files SR ED claims and is looking for additional working capital.

 

Not all Canadian business owners and financial managers are aware that SR ED claims can be monetized (financed!). For an overview of SR ED financing, it’s important for us to validate some of the basics

 

- Have you filed an SR ED CLAIM?

- How much was the dollar amount of the claim?

- Who prepared the claim?

- What amount of cash or working capital do you need in conjunction with the claim filed?

 

If you are looking for cash flow with respect to your Canadian SR ED claim you either have working capital financing in place now with your bank or finance firm (a factoring company perhaps) or your firm is self-financing and you are looking for the SR ED to supplement additional cash flow.

 

Risk capital /equity capital and Canadian venture capital is challenging to raise in Canada. Financing r&d makes a lot of sense.

 

Canadian business owners and financial managers are aware that when they finance their receivables and inventory these 'current assets' are 'margined'. By margining we of course mean the amount of funds you can borrow against these assets.

 

SR&ED FINANCING 101

 

SR&ED financing is a financial solution that enables companies to access their SR&ED tax credits as they accrue them, rather than waiting until the CRA processes their claims.

 

While you do not necessarily need an SR&ED consultant to file your claim or qualify for financing, hiring one can improve the success rate of your claim and provide lenders with more confidence in your eligibility for a credit facility.

 

Lenders typically offer the highest loan-to-value ratio in the market for SR&ED financing. To qualify, your company must have an SR&ED claim worth more than $100,000.

 

If your claim is smaller than the minimum, lenders may consider your company's financials and combine other tax credits or recurring revenue sources for a larger loan.

 

Processing times for SR&ED claims can vary. You have 18 months after your fiscal year-end to claim your SR&ED tax credit. If you are a Canadian-controlled private corporation (CCPC) and file within six months of your fiscal year-end, the CRA usually processes your claim within two months. For non-CCPCs, claims can take up to 12 months. If your claim is selected for review, it may take a few extra months to receive your refund.

 

 QUALIFICATIONS FOR THE SR&ED PROGRAM 

 

To qualify for the SR&ED program, your company must meet three basic criteria:

1. Technical advancement: Your project must contribute to the advancement of technical knowledge.

2. Technical uncertainty: Your project must involve addressing technical challenges or attempting to solve them.

3. Technical content: Your project must involve a systematic process to mitigate or fix the identified technical challenges.

 

FINANCE  YOUR SRED CLAIMS BEFORE YOU FILE!  YES YOU CAN!

Many companies require cash infusions that do not coincide with the filing of their SR&ED claims. In these cases, you can still access SR&ED financing for claims that have not yet been filed. Many businesses take advantage of quarterly disbursements, which provide funding based on the SR&ED tax credits accrued during the past quarter.

  

HOW ARE SR&ED LOANS REPAID?  

 

SR&ED loans are paid via the refund of your sred credit which is the collateral for the loan. No payments are made for the term of the loan.

 

 HOW MUCH CAN YOU RECEIVE ON YOUR SR&ED CREDIT? 

 

In SR ED financing you are generally financed 75% of the value of your sr&ed investment tax credit claim and that is the combined total of the Federal Government and Provincial claim. So if you have filed an SR ED claim, of say, for example, $350,000.00 you are eligible for 75% of that amount, or $245,000.00 ++  Funds can be advanced as soon as you have filed the claim, but not before.

 

Naturally, it is somewhat important to ensure your claim was filed by a qualified party - usually an accounting firm or consultant. It's these consultants that are in the field daily on the program, wresting with all sorts of changes around Form 4088! ...

 

Defining and backing up your project. SR ED financing is outside your normal current financing arrangements. The SR ED is collateralized separately - it is, in essence, a short-term working capital loan that is repaid when the government sends you your cheque.

 

Most Canadian business owners do not want to wait, 3, 6, or 12 months or more for a cheque for a substantial amount that is in effect a non-repayable grant from the government.

 

The Canadian government continues to pour well in excess of a billion dollars into the program, and if your firm qualifies for an SR ED program claim 

 

1. Why wouldn’t you use the program?

2. Why wouldn’t you accelerate the cash flow from the grant by financing your SR ED claim?

 

SR ED tax credits finance is a boutique small industry in Canada - business owners are cautioned to work with a qualified, credible, and experienced firm such as 7 Park Avenue Financial - we will ensure you are maximizing financing capabilities under the program.

 

Naturally, any firm can wait for its refund, but using the cash from financing your claim allows you to move on to new opportunities in your business, including even more investments in r&d. 

 

Typically companies investing in research are in highly competitive industries, and rather than considering external equity this type of financing is simply one way of increasing value and time to market without the dilution of additional ownership to your company.

 

Utilizing internal cash resources in the early stage of growth allows you to increase the value of your firm at a later point.

Companies financing their r&d claims use funds for a variety of reasons - that might include further research, general working capital purposes, marketing, new employee hires, or geographical expansion.

  

HOW DOES THE SR ED CLAIM FINANCING APPLICATION PROCESS WORK?  

 

 

 

Business owners and their financial managers should view the financing process as the most simple of loan applications. The minimum amount of the claim is in the 100k range - There is really no upper limit on the amount that can be financed

 

With a client's full cooperation, we have had clients' financing in place in a week or two, sometimes sooner.

 

Typical loan amounts are in the 75% range based on your total claim. Simple business application information applies, ie years in business, articles of incorporation, copy of your sr&ed claim or accrued credits summary.

 

No payments are made for the duration of the financing! The loan interest accrues and is deducted from the final payment by the government of your claim. Your current lender security stays in place, and significantly less emphasis is paid to typical bank focus on personal guarantees, the net worth of principals, etc.

 

A track record in previous SR&ED claims is helpful, but not necessary, and first-time claimants may apply to fund their claims.

 

It should not come as a surprise that certain other refundable tax credit programs can also be financed, they include:

 

Carbon Credits

 

Grant Financing

 

Digital Multimedia Tax Credits

 

E-Business Development

 

Multimedia Gaming/software development

 

Film Tax Credits in Many Canadian Provinces

 

In summary, Canadian firms that are eligible to file an SR ED claim should do so. What firm would not want to receive a cash non-repayable cheque from Ottawa?

 

If you can wait for the funding, and don’t need additional cash flow, great. That's why sred tax credit loans make sense.

 

  CONCLUSION 

 

7 Park Avenue Financial offers a range of benefits for businesses seeking SR&ED financing, including a fast financing process, cost-effectiveness, flexibility, and the most competitive rates. By choosing this leading tax credit financing company, businesses can make the most of their SR&ED tax credits to support growth and innovation.

 

If you wish to arrange interim financing for your claim via a sred tax credit loan enlist the services of 7 Park Avenue Financial,  a trusted and credible SR ED financier. In a matter of a couple of weeks, your working capital and cash flow will be augmented vis a vis your SR ED financing tax refund solution.

 

SR ED Financing and factoring - a great Canadian alternative financing strategy for Canadian businesses to meet their funding timeline needs.

 

 

 

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

 

 What Are The Benefits of SR&ED Financing via 7 Park Avenue Financial 

 

A fast financing process

Cost-effective competitive financing

Flexible custom-tailored finance and a simple quick application process

Sr&ed finance solutions are smart financing  and often more cost-effective and cheaper than alternative sources of financing

 

Click here for the business finance track record of 7 Park Avenue Financial