Financing SRED Claims Shred Tax Credit Loan | 7 Park Avenue Financial

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SRED FINANCING CANADA! NON DILUTIVE FUNDING THAT WORKS!

Financing Sred claims in Canada often seems to require an ' explainor ' for numerous firms we meet who either didn't know a ' SHRED ' tax credit loan is available or, equally generating curiosity... how  such a refund is  financed for basic research 

(Spoiler alert: Financing SR&ED claims couldn't be easier) Let's dig in.

What Is Sr&ed Financing?  

SR&ED financing is an innovative way to use your refundable tax credits under the SR ED program as you accrue them. 

Under the Sr&ed loan process, your business has the ability to access the sr&ed refundable tax credit in advance of receiving payment for what is in fact your government receivable - Under properly structured facilities a company can draw down on credit for valuable strategic capital that is typically used for day to day operations and general working capital needs in the area of cash flow management.

Sred loans are paid when your firm receives the Canada Revenue Agency tax credit refund payment.

Financing sred claims in this manner makes for a predictable source of funding without the concern around the timing of the payment from the government -  Your work on scientific or technological uncertainty is time-consuming and expensive!

CHOOSING NOT TO FINANCE  AND MONETIZE YOUR CLAIM?

Safe to say that if a firm chooses not to access their  SR ED refund through financing the tax credit claim they are required to fund research and wait until the fiscal year-end for preparation of their tax return and sr ed claim as part of their corporate T4. At this point, the waiting process begins which can of course be many months due to filing requirements, audits, etc. under the sr ed claim process.

  
THE KEY BENEFIT OF SR ED FUNDING?  IT'S NOT AN OPTICAL ILLUSION - ACCESS FUNDING IN A NUMBER OF BUSINESS DAYS 
 

Yes, correct... it's no ' optical illusion '.Those funds that just arrived in your company's business bank account are the proceeds today, for your refund you have been waiting... and waiting for.  Finally, this federal tax incentive makes more sense than ever, and your claim's financing enhances the ultimate benefit of the program - the cash flow refund around your efforts to advance scientific knowledge in Canada.

Borrowers under the SR&ED loan process can access up to 75% of their claim in a lump sum or partial draw - In effect, this is a Sr&ed line of credit  - no payments are made during the duration of the loan and loan interest accrues based solely on funds you have drawn down and used.

The timing and amount of your disbursements are totally up to you. Once you’re approved for a credit facility, you can choose to receive the entire amount in a single disbursement, set up quarterly disbursements, or draw from the line of credit on an as-need basis. This way, you only pay interest on the money you use to grow your business.

It should be common knowledge that Canada's Scientific Research and Experimental Development Program '   (aka '  sred'  'sred'  ' sr ed' ' shred' ) benefits private non-public companies of any size - from the start-up to large corporations. It's probably obvious to all that the cash flow generated from the SR&ED refundable tax credit is probably a bit more important to early-stage firms, who often rely on this cash refund as a major component of their financing and R&D commitment.

You of course maximize these claims for qualified expenditures typically with the assistance of qualified SR&ED consultants who have the ability to format and help file your claim under current guidelines. Though not a key factor, suffice to say that the quality and reputation of the SR ED consultant you engage is one ' positive check mark ' in financing your claim, as their reputation enhances the probability of a full refund.

So let's come back to the actual financing of your claim. Three key things to keep in mind:

1. You should probably only consider financing your SHRED Credit if there is a need for funds. If you have no reason to accelerate cash under the program, why would you take on a short-term obligation?  If you are filing late or require financing for next year's R&D issues like that, make it a positive consideration for a SHRED Loan.

SRED loans are bridge loans, short-term in nature, that collapse as soon as the govt issues your refund cheq. Loans are typically 75% of the value of your total federal /provincial refundable credit, and no monthly payments are made for the loan duration. Recipients receive the refund balance, i.e. the other 30%, less financing costs when the govt remits your refund.

WHAT  COLLATERAL IS REQUIRED FOR A SR ED LOAN?

The main collateral for the loan is, of course, your actual refund credit!!

2. Timing - most firms should be able to get a strong sense (via consultation with their accountant/CRA advisor/Sr ed Consultant) as to the timing of their claim. If you determine that refund might take months or in some cases the better part of a half-year/year that’s when financing might make the most sense from a cash flow needs perspective. It's all about putting funds to use today as opposed to waiting!

3. Dealing with the right lender. SR ED is niche financing, and it makes sense to deal with a trusted, credible and experienced Canadian business financing advisor who can ensure your financing requirements are met.

CONCLUSION - SR ED TAX CREDIT LOANS   

At 7 Park Avenue Financial we have learned that the vast amount of sred claimants are not necessarily aware that their tax credits are financeable for immediate cash - even as they spend on their research ( under properly structured facilities ) SRED advance funding is part of the large ' alternative finance ' movement in Canada.

Valuable cash flow financing secured under these loans help the SME /SMB sector in an invaluable manner - Business owners in effect become the managers of their funding needs as pertains to research.

SR ED funding is of course non-dilutive and brings no debt to the balance sheet - your firm is simply monetizing / cash flowing a valuable asset - the sr ed  claim.  Sred loans for this tax credit program and other non-dilutive funding options are asset monetization strategies to bring business capital to your firm via an efficient claim process and funding.

There’s your ‘ explainer ' on the merits, issues, and mechanics around financing SR&ED refundable credits in Canada. Speak to 7 Park Avenue  Financial, a trusted, credible and experienced Canadian Business Financing Advisor who can assist you with your Sred Claims Funding and business financing needs.

Let the 7 Park Avenue Financial team guide you through our streamlined application process,  with our total focus being to provide you with a term sheet and due diligence requirements in a matter of days - Our goal?   Legal documentation and funding/ financing within a week or two for your sr ed tax credits! Sr ed eligibility financing is as simple as that.

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What does Sred stand for?  

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