Let’s kill two birds with one stone actually … should you consider financing your sred sr&Ed claim, and, how do you do it once you have made that decision.
As a Canadian business owner and financial manager your recognize that cash flow is king, and for many companies ‘ unlocking ‘ the cash flow they have tied up in CRA tax credit research claims is a solid business financing strategy . We are all familiar with the age old expression… ‘Pay me now or pay me later ‘. In the case of sred financing it becomes a similar question ‘ should I wait for my cheque from the government, ( which could actually take a year or more ) or should I finance that claim and put that cash back to work now . Your sred research keeps you competitive, so why not re invest those funds and get them working as quickly as you are able to.
When you finance your sred claim you are in effect discounting, selling, or we can even use the word ‘factoring ‘the claim. You may or may not have chosen to book the sred as an account receivable, that’s your call, but we can assure you if your claim is valid that it is a true receivable and can be monetized for cash flow and working capital now.
In general in Canada banks and tier one institutions do not finance sr&ed claims, so you should seek the advice and assistance of a experienced, credible, and trusted sred financing advisor who will assist you in monetizing your claim . The entire process can be completed in a matter of a couple weeks , and we often liken the sred financing process to any other business financing that you would contemplate – meaning simply you apply, you supply documentations on your business and the sr&ed claim, and if you qualify then your claim is financed.
We hate to hit you with another age old cliché, that being ‘time is money ‘, but quite frankly the essence of our info focuses on that statement. By that we mean that if you have a sred claim, and you have filed it already, and you are days, weeks, or perhaps a month or so away from getting your cheque, well… clearly it might not make sense to fiannce your claim. However if you haven’t filed your claim yet, or you have just filed it and haven’t had a technical or financial audit on the claim then clearly if you need the cash flow back from your r&d investment then consider financing the claim .
A ‘how to ‘for financing your sr&Ed couldn’t be easier – let’s cover off the simple basics chronologically.
They are as follows:
Determine you are eligible for the sred program
Prepare a claim
File a claim
Do some math around how long it will take you to get your money and what you could do with 70% of the claim funds being in your bank now. ( Claims are usually financed at 70% loan to value)
If the math makes sense work with a sred finance partner to submit an application with back up on your claim, who prepared it, and other very basic info on your firm.
It’s as simple as that. Weigh the cost of the financing against your opportunity cost of capital and how you would employ those funds to generate sales, profits, and greater return on capital.
The SR&ED program is probably the best government support program out their for Canadian business and industry. Take advantage of your share of the billions of dollars that go out to you in the form of non repayable grants for your investments. If it makes sense finance the claim and accelerate your cash flow and working capital.