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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 416 319 5769
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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 is such a refund financed. (Spoiler alert: Financing SR&ED claims couldn't be easier) Let's dig in.
Yes, correct... its 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 every, and the ultimate benefit of the program - the cash flow refund is enhanced by the financing of your claim.
It should be common knowledge that Canada's ' Scientific Research and Experimental Development Program ' (aka ' sred' 'sred' ' sr ed' ' shred' ) benefits private non pubic companies of any size - from start up to large corporation. 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 simply enhances the probability of a full refund .
So let's circle 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 years 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 70% of the value of your total fed/prov refundable credit, and no monthly payments are made for the duration of the loan. Recipients receive the balance of the refund, i.e. the other 30%, less financing costs, when the govt remits your refund.
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 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.
There’s your ‘ explainor ‘on the merits, issues, and mechanics around financing SR&ED refundable credits in Canada.