How To Finance Your Business With an SR&ED Tax Credit Secured Loan
Cash Flow your R&D Tax Credit Today With SR&ED Debt Finance
YOU ARE LOOKING FOR INFO ON AN SR&ED TAX CREDIT SECURED LOAN!
FUNDING ON YOUR SR&ED ( SCIENTIFIC RESEARCH & EXPERIMENTAL DEVELOPMENT ) CLAIM
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WHAT IS A SRED TAX CREDIT LOAN?
SR&ED credit is treated as a future receivable and businesses are provided with an advance loan (a cash flow facility). Businesses can draw down on this funding, to provide themselves with general working capital within their business.
This means they have the opportunity for improved liquidity at crucial moments of need; such as during periods where there’s too much fluctuation in available funds, or when companies are experiencing sudden growth due to increased market demand.
To qualify your firm should have an eligible claim, typically prepared by a ' sr&ed consultant', and be a private company that is in a pre-profit financial status.
The biggest upside that comes from SR ED program tax credits being treated like a pre-payment option? It offers better protection against fluctuations in revenue streams.
In today's quickly changing and highly competitive business environment, the key to success is innovation. And when you're an innovative company with a great product or service that could be so much more if only you had enough money for it - then our SR&ED financing just might be your answer!
The Canadian government has invested in research & development (R&D), which means they are willing to support innovators like yourself who want their products developed further but don't have the cash needed for investment tax credits.
This funding will allow businesses of all sizes and stages better access to reliable capital at affordable rates while providing them complete flexibility by not tying up any collateral or equity stake from investors
Research and development (R&D) is a huge part of a company's success. Canadian businesses can take advantage of the SR&ED tax credit program to help conduct research, develop new products or processes, and improve existing ones. The SR ED refund tax credit loan in Canada provides funding for companies that are conducting qualifying R&D activities such as:
Product development & testing;
Process improvement including automation;
Designing equipment needed for production such as machines or computer software
Companies can also apply this money towards owner salaries who are responsible for the work being done on these projects. If you have questions about how to claim your SR&ED expenses under the tax credit program contact 7 Park Avenue Financial!
CAN YOU UNLOCK THE VALUE OF YOUR SR&ED CREDIT?
Can you actually finance your Canadian business via the monetizing of an SRED tax credit secured loan? Absolutely, positively... maybe. We say maybe because if you don’t have an SR&ED tax credit then it is of course not possible. However, if you participate in Canada's primary R&D tax credit refundable tax credit program then you're potentially on your way to increased cash flow and working capital.
WHAT IS SR&ED FINANCING?
One of the biggest problems in small businesses is that they accumulate SR&ED tax credits over a long period, but there can be months or years before you submit your return to CRA CANADA REVENUE AGENCY.
This means it's difficult for companies with tight cash flow issues and operating costs to access this money while waiting on potential refunds from the government because some funds are tied up until returns are submitted. Let the 7 Park Avenue Financial team show you how a company like yours can access advances against their accrued, or filed! .. SR&ED credit investments as collateral instead of having all this key receivable sitting idle- not making any interest gains!
HOW FAST IS IT TO RECEIVE YOUR SRED FUNDING?
SR&ED Financing can be structured in several ways.. It can come as a bridge loan from the time you file your SR&ED claim until you receive your refund check back from CRA. However, you are also able to get an advance on cash as early as 3 months into your tax year - more than a year before filing for most claims if you have some historical claim experience.
Recent articles in the Canadian business press have criticized the need for the government to even further increase these tax credits. Typically most Canadian business owners and financial managers think that the SRED tax credit applies only to manufacturing, which is the farthest thing from the truth. A recent article in the Globe and Mail, one of Canada's premier business publications, stated clearly that firms in the resource, services and technology sector also participate vigorously in the program.
If your firm in fact innovates and spends money on R&D the last thing you can be criticized for is under-investing in your future. Therefore monetizing your tax credit after it is filed (it can also be cash flowed prior to filing in certain circumstances) makes great financial sense.
Is monetizing your tax flow credit risky in any sense of the word? Our clients hardly think so, as you are simply 'cash flowing', or 'discounting' your claim today, and you are not even adding debt to your balance sheet. Think of the SRED credit as a current asset, in fact it’s a receivable, and you are simply collateralizing a bridge loan against your SR&ED claim.
SR&ED tax credits are more often than not prepared by an external consultant, although some firms choose to prepare the claim itself - we suspect it's because they think that they have a better handle on the nature of the claim. The reality is however that you gain an additional 'brownie point' - if we can call it that by having the claim prepared by a professional SRED consultant.
Many firms in Canada aren’t aware that these consultants will even prepare your claim on a contingency basis - so if they are prepared to take the risk of time and expense on your claim you can quite rightly assume they feel it will be approved, as professionals rarely choose to work for free!
While the Globe and Mail survey indicated that 70% of Canadian business thought the tax credits currently in place were not as generous as they thought they should be, let's be honest and can't we agree that receiving 40-50% back of every dollar you spend on R&D isn’t that bad of a start! And if you can turn your spent funds into instant cash flow by monetizing your claim doesn’t that give you a leg up on your competition? We certainly think so.
THE SRED APPLICATION PROCESS MOVES QUICKLY
Cash for research tax credits is not a complicated process. A short overview is as follows - have your claim prepared in a manner that suits the government’s current filing process. File your claim with your tax return.
MANAGING YOUR CASH FLOW THROUGH THE SR&ED CYCLE!
If your business has an investment in research or technology, SR&ED funding can act as a continuous positive cycle. As you grow and continue to invest in R&D, the financing will flow back into more innovation and help your competitiveness around the commercialization and monetizing of your products or services - so if your company hires an additional programmer, as an example, with SR&ED loan approx. 33% of their wages are added to a larger tax credit at the end of the year! At 7 Park Avenue Financial, we think that's good business!
Speak to 7 Park Avenue Financial, a trusted, credible and experienced business financing advisor who will work with you to complete an SRED financing application - it is not dissimilar to any other business financing application you have ever filled out. Include your SRED claim as additional back up, as it is in effect the collateral for your SRED loan. Claims can be financed in two to three weeks after some basic due diligence.
Financing SRED puts you in line with other firms to get your share of the 3 Billion (yes that’s billion!) dollars of non-repayable cash grants. Turning your claim into a cash infusion makes great sense if you are a small to medium-sized firm with a need for additional working capital.
Monetizing your claim will drive cash flow which will no doubt inspire your firm to further innovation.
A FINAL TIP?
Be proactive about SR&ED to avoid headaches.
SR&ED is a lot of work and a commitment - and if you proactively track your expenses, then it becomes easier when filing taxes because you can get quarterly advances on accrued SR&ED instead of waiting for the CRA's refund checks that can take up many months from the start date or often 9+ months from the fiscal year-end filing of your claim and year-end tax filings.
FAQ: FREQUENTLY ASKED QUESTIONS
What is the Canadian R&D Tax Credit
For many Canadian companies, the SR&ED investment tax credit (commonly also referred to as shred credits) is a cash flow saviour. With 35%+ of eligible expenditures reduced in taxes or paid out in cash for Canadian-controlled private companies ( CCPC’s ) - the combination of federal and provincial programs allows firms to recoup up to 55% of r&d capital spent.
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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