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How To Win The War On The Wait For Your SR ED Tax Incentive Program Refund



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sr&ed financing and sr&ed loans in Canada





You have filed your SRED (SR&ED) tax credit. The benefits of this program can’t be overstated. Now all you have to do is wait for the cheque/ cash refund from the government.  Financing your SR&ED ('scientific research & experimental development' ) claim - Let’s dig in on that sr ed loan/sr ed refund!




There is another option. As a Canadian business owner and financial manager, you may have chosen to ‘book' your SR ED claims as an account receivable – money owing to you that is non-payable from the government. Some of our customers choose to book the claim around the tax credits as an asset/receivable, some choose not to, or in some cases, they book a conservative estimate of their final cheque.


Business owners know it makes sense to take a hard look at the potential timelines on their refund to determine if financing the claim makes sense.


qualifying for sr&ed finance in Canada


Assets can be financed – your federal tax incentive  SRED claim is an asset and is, in effect, a receivable, somewhat longer in nature than your other receivables (hopefully).  Those Canadian firms with bank lines in place have probably realized that most chartered banks in Canada do not include your SRED project claim as a true receivable or eligible for a sred loan. Additional equity financing is, of course, expensive for growing businesses.


So, can that receivable be financed and monetized?? It absolutely can via the process of SR&ED tax credit financing / sred funding.  We hear more often than not the term ‘factoring' in business – which is, of course, the sale of a specific or group of receivables.


That’s what SRED financing is about.  A carefully constructed SRED financing allows you to ‘cash in' – the finance people say ‘monetize' the SRED claim. That’s valuable cash flow that might not have come into our working capital for many months, in some cases a year, based upon the timing of your filing, the complexity of the claim, the technical audit, etc.


We strongly recommend to business owners that if they are looking to finance an SRED claim that they work with an experienced and trusted advisor in this area. Of course, the other' go to' is a good SR&ED accountant/consultant on the technical content in your claim - that claim being filed every year at your fiscal year-end. Those consultants are the real sr ed experts.


Whenever we meet with a client or business owner who wishes to inquire about our SRED financing work, the company invariably wants to know several key things including any common misconception about the investment tax program  –


How does it work?

What does it cost?

How much do I get on the claim?

What’s involved?

When do we get our funds?!


sr&ed financing tips


Let's discuss those issues in a general way.  We honestly think our comments will apply to almost 95% of SRED financing claimants. Note that non-CCPC firms aren't eligible  ( example = public companies ) You want facts? We’ll give you the facts!


By reinvesting your refund in growth & R&D, you have the ability to increase claim size and future value in your firm. It is safe to say a good sr&ed consultant / sred experts can certainly help in ensuring a respectable claim size for your r&d capital funding. It's safe to say your technical talent is not ' low cost, 'and those higher wages make up a large part of your claim and expenses in r&D.


SRED 101 – Everything you wanted to know about SR&ED  tax credit Financing but were afraid to ask.  Your SRED claim is sold/assigned to the financier - Similar to the factoring practice of selling a receivable, you sell your claim to get the cash – it’s a sooner rather than later scenario! 


scientific research and experimental tax incentive




SRED financing is a form of alternative financing, rates vary with the size and complexity of the claim, and rates are higher than bank financing.


In our experience, firms financing their SR ED tax credits are totally focused on generating additional cash flow and working capital so they can continue to grow sales and profits.   SR ED Program claims are financed at approximately 75% of their LTV.


Accrual debt financing, a form of ' line of credit ' for your sr&ed work, is available for firms that file successfully.


By LTV, we mean 'loan to value,' so a company filing a $300,000.00 SRED claim would receive $225,000.00. The balance owing to you (less financing costs) is funded when the claim is finalized and paid by CRA – Canada Revenue Agency / Revenue Canada.


Oh, and what’s involved?  Our work with clients maintains that SRED financing for tax credits is not unlike any other financing: an application, some backup information, some due diligence around your company and your SRED, then documentation, and you’re funded. We typically have been able to originate and complete financings for our clients in 2-3 weeks.




Financing  SR&ED  claims is a great way to fund your  R&D operations and maximize growth potential. Funds are used for  hiring new personnel/consultants for research purposes, purchasing materials & equipment necessary for progress in R&D projects, scaling up production methods related to those activities, etc


SR&ED financing is your solution for assistance in investing in research and development, as it's a flexible tool with many uses. As well as helping to cover a large part of  R&D costs, it can also help pay for professional SR&ED claim preparation services - freeing up cash flow to be used to fund operations or other business needs.


Canadian businesses can significantly benefit from the SR&ED program in Canada - as the Financial Post pointed out in a June 3/2021 article by Barrie Mckenna, it's all about ' commercializing IP,' not just 'owning' it! when it comes to tech companies and other industries.


Bottom Line? SR&ED Financing lending is a viable and valuable alternate form for working capital financing in Canada! Speak to the  7 Park Avenue Financial team,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your claim process and tax credit financing needs around refundable tax credit incentives and the sr ed claim program - as well as other business funding solutions to access capital.


Our business focuses on specialty financing and your eligibility in alternative cash flow financing solutions for small and medium-sized businesses in Canada - new types of growth financing for the innovative funding most companies need to run and grow your business. The sound management and financing of your tax credits on a solid funding timeline is the ultimate win/win.


what is sred financing



What is SR&ED finance?

Many innovative companies in Canada use the SRED Program to reclaim r&d expenses. SR&ED finance allows a company to use a tax credit early in the form of an affordable loan. The tax credit is expected to be refunded by the CRA in the next year. The way it works: The estimated future credit is collateral for an affordable, early loan. SRED is one of the most predictable receivables that a company can have in a lifetime.

The main condition for accessing SRED finance is, of course, qualifying for the SRED tax credit.  The r&d tax credit program is one of the most popular government financing programs in Canada and provides support for r&d efforts in Canada - ie financing innovation! Companies must ensure they meet the sr&ed filing tax deadline for their eligible expenditures.

Typically companies engage sr&ed consultants to prepare their claims and validate sr&ed eligibility.

  Companies using short-term sred loans via sr ed funding of sr&ed credits access non dilutive funding for additional working capital/cash flow sources via the CRA sr&ed finance solution.

The sred program is not a grant, unlike the government research IRAP program. The program is somewhat similar to the funding of digital media tax credits.




SR&ED Financing Tips To Get Your Refund Before Your Claim Is Filed 

The Canadian government provides billions of dollars to businesses for developing new or improving existing technologies, products, and materials under the Scientific Research and Experimental Development (SR&ED) tax credit program. The SR&ED program is complex and requires a technical and financial justification of criteria for your R&D efforts and technical challenges.


The program was designed to support research and experimentation in all industries, from life science and manufacturing to software development, oil and gas, agriculture and beyond. It takes 18+ months from the start of your fiscal year until you receive your refund - most experts agree it takes in general approx 4 months to process a claim after you file sr ed typically. That is why cash management via  sr&ed advance funding works!



Scientific Research and Experimental Development 


The SR&ED tax incentive program is a Canadian government program that encourages businesses to conduct and finance research and development and scientific and technological advancement in Canada via the sr ed claim process.


Canadian companies can claim tax refunds on business expenses related to research and development via government tax incentives. SR&ED financing is a tax incentive specifically geared to encourage businesses to invest in research. Many businesses may be eligible to take advantage of this tax incentive and submit an application Businesses that need to develop new manufacturing processes or improve upon products are eligible for the tax incentive. They may also claim a refund on payroll, business leases, material costs, equipment costs and other costs.

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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