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Fast-Track R&D Success: SR&ED Tax Credit Loan Strategies for Financing Canadian Innovation
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SR&ED Tax Credit Loan Secrets: How to Fuel Business Expansion by Financing SR&ED Credits
Financing SRED (SR&ED) credits in Canada is one fundamental way business owners/managers participating in the program can ' optimize ' this popular program's benefits.
We're maintaining that an SR ED Tax Credit Loan is, in effect, a great ' silver lining in the dark cloud “of ... waiting for your refund! Let's dig in!
MAXIMIZING GROWTH WITH SR&ED TAX CREDIT FINANCE IN CANADA
No secret to us at 7 Park Avenue Financial that innovation drives a lot of the growth of the new economy. The government of Canada helps prove this by supporting research and development under Canada's Scientific Research and Experimental Development (SR&ED) tax credit program.
This refundable tax credit is administered by Canada Revenue Agency/CCRA to assist businesses in obtaining cash refunds on investment tax credits under the program - It's immediate capital and cash flow to help support the growth of businesses innovating via investing gin r&d efforts- ultimately that helps Canadian companies win in an ultra-competitive domestic and global economy.
SRED FUNDING BASICS
Companies that use sred financing know it as an innovative alternative financing form, a type of ' venture debt ' that allows businesses to access the capital they have coming in their refundable tax credit - versus waiting for funding approval. That helps companies fund ongoing day-to-day operations and help with growth objectives.
Waiting for the final approval of a sred claim can be time-consuming for several reasons, so the ability to leverage tax credit for cash today relieves the cash flow constraints faced by many tech companies or companies in any other industry in Canada.
There are also other ways to monetize your SR&ED filing each year effectively. It's your way to participate in the 3 Billion $+ the federal and provincial governments typically spend on the program each year. The double whammy of receiving a refundable tax credit while at the same time maintaining your competitive stance is a key driver in the utilization of the program.
Whether it's simply filing your claim or financing it, your company is constantly in a 'waiting game.’ In fact, certain deadlines for filing and having your claim adjudicated are cast in stone in Canada Revenue Agency rules. Their service standards are laid out. By the way, financing your refund allows you to leapfrog the timelines in question.
QUALIFYING FOR THE SR&ED PROGRAM IN CANADA
Companies qualifying for the sr&ed program in Canada are judged on 3 basic criteria :
1. Are they performing r&d for true technical advancement in their industry
2. Is there an element of uncertainty in their research and development efforts requiring solving a problem
3. Can the company provide proof of systematic processes they follow in their technical challenge
WHAT IS THE ROLE OF ' SRED CONSULTANTS' IN CLAIM PREPARATION?
Optimizing your claim, including considering an SR ED tax credit loan, revolves around properly preparing your refund claim. While a tiny portion of firms prepares and write their own claims typically, this work is most effectively completed with an ' SR&ED Consultant's services.
Companies do not have to use a sr&ed consultant to prepare and help file their claim. Still, most companies use these third-party firms to file claims, and most business owners agree they can play a key role in validating and maximizing their claims. Using these consultants also helps with the eligibility of financing your claim under a sr&ed tax credit loan.
SRED consultants provide confidence to both CRA to a certain degree, as well as the sr&ed lender based on their knowledge of the program and its very specific guidelines.
While not required, SR&ED consultants play a crucial role in the claim process, ensuring the success of your application and providing confidence to lenders when assessing your eligibility for a credit facility.
A good consultant will also lend credibility to your SRED finance loan application. Their work in writing the narrative to your claim and adequately itemizing the costs is to key our ' optimization ' them. Who wouldn’t want to have a goal of 'fast-tracking ' CRA' in areas of eligibility, expenses incurred and co-coordinating the filing with your accountants? That ' notice of assessment ' followed by your refund cheque is the goal line!
These R&D tax credit consultants have in-depth knowledge of the SR&ED program guidelines and can maximize claims while reducing claim rejection or audit review of the claim.
The ability to prepare a claim promptly and navigate any complexity around key issues is a crucial benefit for r&d tax credit claimants.
It's important to note that since SR&ED refund claims are filed only when you have completed your year-end financials and corporate tax return, this enhances the temptation of accelerating your refund via an SR ED tax credit loan.
THE BENEFITS OF SR&ED FINANCING
SR&ED Tax credit financing is a flexible alternative financing solution that benefits a company engaged in r&d in several key ways:
Access to immediate cash flow and advance funding allows a business to fund ongoing expenses without taking on additional debt or equity financing - its a ' non-dilutive ' form of capital
Companies can grow revenues and expand operations to scale the business and enhance shareholder value via accessing more tax credits and funding under the program
SR&ED loans can accelerate short-term and long-term r&d objectives while providing cash flow injections along the way
Very few could argue that the funds you receive under the program (typically 35% of all expenses incurred in R&D) are valuable cash flow via the tax refund. Many firms that are start-ups or early revenue will attest to this!
WHY FINANCE YOUR CLAIM?
Financing SRED Credits is, of course, an option, not a requirement. Only firms looking to accelerate cash flow should consider the SR ED tax credit loan. You need to consider the overall timing of your claim and the actual need for funds. Typically, your firm would use the proceeds of an SR&ED bridge loan for general working capital purposes in any business area.
SR&ED LOAN ELIGIBILITY - HOW MUCH FUNDING CAN YOU ACCESS FOR YOUR CLAIM
Talk to the 7 Park Avenue Financial team about how you can achieve the highest loan-to-value ratio on your claim and the most competitive financing interest rate in Canada. The ability to borrow a substantial percentage of funds on the expected value of your claim is the actual value of a sr&ed bridge loan.
As a general guideline, it makes sense to finance claims larger than 100k, although small claims can always be considered. In some cases, past or future tax credits can be combined to maximize financing and make sense for all parties.
THE SR&ED FINANCE LOAN-TO-VALUE RATIO
Financing your refundable sred tax credit couldn’t be simpler. The loan is structured as a bridge loan for 75% of the total value of your claim. No monthly payments are required, as financing costs ' accrue’, making the loan even more attractive from the viewpoint of cash outlay.
And by the way, you can start financing yesterday's SRED, today’s and next year's claims... whenever you wish!
FINANCING YOUR CURRENT SR&ED ACCRUAL - UNDERSTANDING DISBURSEMENTS / REPAYMENT
The ability to access funding before filing your claim is solid evidence that sr&ed tax credit loans are a viable source of cash flows for a business. Cash needs in any new or growing business are constant and don't necessarily follow the timelines on the whole sr ed filing process for current or future sr ed claims.
Financing your accrued sred work allows for solid cash management and funding tailored to your business needs. Companies can access all or some of their accrual or filed claims - In that way companies are paying only on the financing you use.
The sr&ed claim is the collateral for the loan and will almost always cover the loan amount. No repayment is made during the loan term, and borrowers receive the valance of the claim, less financing costs, when CRA approves refunds.
WHY CHOOSE 7 PARK AVENUE FINANCIAL FOR SR&ED FINANCING
We're committed to fast funding your claim - typically a couple of weeks from start to finish!
Competitive interest rates and access to the lowest cost financing in Canada for funding sr&ed
Tailored financial solutions for filed claims or accrued expenses as a source of capital for business
Solid high loan-to-value financing and customized disbursements
The ability to avoid higher cost forms of capital such as short-term working capital financing/merchant advances and other financings that brings debt to the balance sheet or that dilute owner equity
An efficient and defined application process for approval
KEY TAKEAWAYS - MAXIMIZING SR&ED CLAIMS & SR&ED FINANCE SOLUTIONS
Companies focusing on r&d efforts should take time to understand the SR&ED program, its eligibility requirements, and the types of expenses that can be recouped via the approval process.
There are other forms of government and alternative financings such as government loans, venture capital and angel investors, and traditional financial institutions provide funding - but thousands of businesses choose Canada's sr&ed program as a way of maximizing refundable tax credits the program -
The program provides over 3 Billion dollars of refunds annually to eligible companies.
CONCLUSION - FINANCING SRED CREDITS SRED TAX CREDIT LOANS
Thousand of companies can benefit from the sr&ed tax credit program based on eligibility criteria around claims for eligible expenses.
Talk to a sr&ed financing expert to benefit from the best rates and flexible terms, including no personal guarantee requirements.
The positive impact of financing sr&ed claims accelerates business growth via the sr ed claim process
Looking to ' optimize' the benefits of the Canadian govt R&D program? Finance your refund via
7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs.
FAQ: FREQUENTLY ASKED QUESTIONS /PEOPLE ALSO ASK/MORE INFORMATION
What is the SR&ED investment tax credit?
The SR&ED investment tax credit is a Canadian government incentive that helps eligible Canadian controlled private corporations/businesses with refundable tax credits or tax reductions for qualified research and development expenses via eligible expenditures under the program. Encourage Canadian businesses to invest in R&D is a main goal of the program in all areas of the Canadian economy including software development.
How do I know if my company is eligible for SR&ED tax credits?
To determine your company's eligibility for SR&ED tax credits, consult an independent SR&ED consultant or investigate Canada Revenue Agency guidelines regarding what expenses and activity can be claimed via sr&ed tax incentives for work done around scientific or technological uncertainty.
W hat is an SR&ED tax credit loan?
A sr&ed tax credit loan is a short-term bridge loan that allows a business to use accrued or filed sr&ed claims as a source of financing for cash flow and working capital and overall cash flow management - The sr&ed claim is the collateral for the loan - Sr&ed loans can be financed prior to filing the income tax return via accrued sr ed financing
What is the SR&ED Claim Processing Timeline
Businesses in Canada have 18 months after filing their fiscal year-end financial statement to claim a sr&ed tax credit refund, Claims can often be processed within several months but many companies can have claims reviewed or audited prior to receiving the cash refund. Any technology focused companies appreciates the value of r&d funding to access capital.
How does a SR&ED Claim work?
A SR&ED claim is a tax incentive program in Canada that encourages businesses to conduct research and development activities. To claim SR&ED, eligible expenditures must be identified, such as eligible salaries and qualified expenditures, and supporting documentation must be provided, including technical reports and hypothesis tested.
The process of claiming SR&ED involves formulating a hypothesis specifically aimed at advancing scientific or technological knowledge, faced with technical challenges that require furthered technical knowledge to overcome, and conducting a systematic investigation using the scientific method. The work involved in the SR&ED claim progresses through an iterative process, where technical content is developed, and technical uncertainty is addressed.
In addition to documenting the technical aspects of the SR&ED claim, businesses must also ensure that their procedures are consistent with adopted procedures and that the work is conducted in a cost-effective and streamlined process. Once the SR&ED claim is submitted, it is reviewed by the Canadian government, and if approved, the business can receive tax incentives in the form of a tax credit or deduction.
Overall, claiming SR&ED involves conducting scientific or technological advancement work that results in technical challenges, facing technological uncertainty, and developing eligible projects that support research and development while ensuring that the work is conducted in a business strategically cost-effective manner.
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