We won’t bore you with the 4 Billion details. We are of course talking about the CRA Sred program and the billions ( around 3-4 Billion dollars annually ! ) of sred grant funds that are of course non repayable and distributed to Canadian privately owned firms on a yearly basis .
If you know the program and you know what we are talking about as a Canadian business owner or financial manager then you’re ahead of the game already. The real basics are of course that the program is technically called the Scientific Research and Experimental Development Program – aka SR&ED, providing those billions of dollars we talked about back to firms such as yours in the form of non-repayable grants to literally all sectors of Canadian business.
So we are focusing on your decision as a claimant to wait for your refund on your expenditures, or consider the option of financing the claim to accelerate your working capital and cash flow. We’re all familiar with the cliché that size isn’t important – but in the case of your CRA Sred claim it plays a bit of a role in the overall ability to finance your claim.
We have to backtrack a bit and first of all answer one of our clients typical first questions, which is simply – is a sred financing achievable and who actually finances these claims. In Canada we are aware of one of the chartered banks that finances sred claims, we have a strong opinion that the overall financing of your claim with a bank is subject to many other bank criteria. We think you know what we are getting at, so the reality is that sred claims are financed 99% of the time by the private sector via boutique firms. Therefore we encourage readers to seek the services of a trusted and credible and experienced sred financing expert who can guide them thru the process.
So once you have found your sred partner firm in this area we again circle back to size. In general Canadian claims in excess of 250k tend to be financed more efficiently and economically for both the lender and yourself. Claims are financed as a general rule at 70% of the LTV relationship, referring of course to loan to value. So on a 250 claim you would net 70% of your combined federal and provincial claim.
You would consider financing your sr&Ed under the following conditions – as a first time or previous filer you have confidence your claim was prepared by an experienced party. You also should be in need of the cash flow (who isn’t) as sred rates are typically higher than traditional financing rates. Timing is everything and typically a sred financing can be achieved in 2-3 weeks, with the usual due diligence around your claim, the collateralizing of the claim, and any related paperwork and applications.
If your company can put the cash flow to use to retire term debt or payables, increase sales, or, dare we say, to start the R&D re investment process all over you are a strong candidate to finance your sr&Ed.